In the Web 3.0 privacy race, Secret Network is making strides in the DeFi and NFT ecosystem

This article is from Techcrunch, authored by Mike Butcher, and compiled by ChainCatcher.

In the real world, on which the global economy relies, not all aspects of financial activities are disclosed publicly. We want to choose which parties can access our financial data and under what circumstances, such as our credit records or bank transactions. The problem in the blockchain world is that this financial privacy does not truly exist, leading to quite a bit of abuse, such as "front-running," where malicious traders can immediately exploit your transactions after seeing them on a public blockchain. What is needed in this case is a genuine infrastructure reform on this issue, because without it, the crypto dreams of "DeFi" will never have a hope of taking off.

Recently, the privacy public chain Secret Network announced the completion of a $11.5 million financing round, led by Arrington Capital and Blocktower Capital, with participation from Spartan Group, Skynet Trading, and others. Secret's previous investors include Outlier Ventures, Fenbushi Capital, Hashed, Secret Foundation, and Enigma MPC, as well as node operators like Figment and Staked.

Tor Bair, founder of the Secret Foundation, stated, "The addition of these valuable and experienced partners to the Secret ecosystem marks an important turning point for Secret Network, which is focused on expanding and supporting the rapidly growing application layer."

The Secret mainnet launched in September 2020, being the first blockchain with privacy-protecting smart contract capabilities, previously known as Enigma. (The first version of this blockchain was called "Enigma Mainnet," but the brand was renamed to Secret Network through a governance vote in the summer of 2020).

By 2021, the Secret Network ecosystem had launched several native applications, including a privacy-protecting cross-chain AMM platform called SecretSwp. Currently, the project is also developing NFT products.

So, why does this matter? The reason is simple: without privacy, DeFi cannot become mainstream.

If there is no privacy in transactions, the traditional economic system will not bother to pay attention to passwords and blockchains, except for the fluctuations in Bitcoin's price.

Indeed, Secret is not the only player addressing this issue. It competes in the same arena as blockchain projects like Phala (not yet built on the mainnet, built on Polkadot), Oasis, and Aleo, the latter of which recently raised funds through a16z.

What these projects have in common is that they are all moving towards what is called "application privacy" in Web 3.0. They are once again trying to recreate the financial privacy we all hope to gain from traditional financial systems, but which remains difficult to achieve in the blockchain world. This approach should not be confused with privacy tokens like Monero and ZCash, which are tokens and fundamentally different from the aforementioned projects that aim for so-called "programmable privacy."

Bair told me, "Transaction privacy coins simply mean hiding the simple aspects of transactions from other parties, which is a narrow form of privacy. Smart contract privacy (also known as 'programmable privacy') is a more powerful idea, allowing developers to build complex, decentralized, permissionless applications while protecting data privacy, thereby having a significant impact on the security and usability of Web3. To illustrate, imagine building a decentralized Facebook. A typical blockchain exposes all data by default, which is a worse outcome for user privacy and security. Only smart contract privacy allows users to build these types of complex applications without compromising user experience and threatening their security."

Front-running transactions are typically described as trading ahead of known future transactions. Bair claims that Secret protects against this at the protocol level, as all interactions with smart contracts are encrypted, and even network validators cannot view them, "therefore, by default, all DeFi applications built on Secret Network can prevent front-running."

That said, Secret will still have to compete with numerous privacy projects that are already operational. Secret Network is an independent blockchain that still requires a developer community to succeed, while Ethereum and Polkadot have a certain technical head start. However, these blockchains expose data by default, so Secret's high focus on privacy issues may make it a major player in this field.

Bair commented, "In the world of DeFi, only programmable privacy can give users and developers this level of control. Without programmable privacy, DeFi will never achieve mass adoption beyond pure speculative activities. Secret Network intends to be the foundation for new types of DeFi applications that can better protect users while allowing traditional institutions to participate securely and protect sensitive data. Furthermore, blockchains do not need thousands of developers to succeed in the short term; they need the right developers to build early key applications."

Additionally, Secret advocates for the fact that due to the inherently decentralized nature of blockchains, the blockchain space is not a "winner-takes-all" environment like typical internet platforms, which would contradict the decentralized perspective. As Bair told me, "Secret's vision is to become the data privacy hub for all public blockchains, and rather than competing with networks like Ethereum, we prefer to collaborate with them (we have already built a real-time bridge with over $100 million in fixed assets for Ethereum)."

Michael Arrington, founder of Arrington Capital, commented on this investment, saying, "Secret is the first blockchain ecosystem that prioritizes privacy. Financial privacy is crucial for individual freedom. The rapid development of decentralized finance makes solutions like Secret Network a timely addition to the DeFi ecosystem."