IOSG Interpretation of Automata: Cross-chain Application Aggregator + High-performance Privacy Middleware

Original Title: "Automata: Cross-Chain Application Aggregator + High-Performance Privacy Middleware" Author: IOSG Ventures

IOSG has supported Automata through two rounds of investment. As institutional investors who have witnessed the project's growth, we have seen the rapid iteration of the product's technical path, while quickly identifying its development trajectory and becoming a shining new star in the Web3.0 wave. Today, we will use this article to discuss the product logic and technical roadmap of the Automata project, allowing more people to understand their story.

Privacy is one of the most important demands for users in the cryptocurrency field. Some of the biggest issues we encounter on Ethereum Layer 1, such as MEV (Miner Extractable Value), are partly due to a lack of privacy. Due to the inherent transparency of blockchain, users' identities and transaction information are broadcasted across the network, which gives malicious third parties (often referred to as attackers) an opportunity. They will try to obtain and exploit this information, sacrificing users' interests for profit, leading to value potentially being lost without users' knowledge.

Front-running attacks, sandwich attacks, and other examples are typical cases of MEV. For instance, when a user wants to buy a large amount of tokens on Uniswap, this action may cause significant price fluctuations. At this point, a third party (an attacker) notices this information by checking the mempool and, by increasing the transaction fee, front-runs the user to make the purchase. When the user attempts to buy again, the token price has already risen significantly. The third-party trader will then sell at a higher price after the user buys, profiting from the situation. This is a small example of how tracking others' transaction information can lead to profit, but this is just the tip of the iceberg of user losses caused by a lack of privacy; the real impact is far greater.

We look forward to blockchain applications and cryptocurrencies being adopted mainstream, from payments to DAO governance voting, from lending to more complex use cases like those we see in traditional finance, where privacy will become increasingly important. The emergence of Automata Network is timely, as it provides high-performance privacy middleware and seamlessly integrates into platforms like Ethereum and Polkadot, bringing privacy more effectively into the blockchain space.

Automata System Design

Automata Network is building a middleware layer that brings privacy and integrity computation to current blockchain applications. It provides highly private services by combining TEE (Trusted Execution Environment) hardware with Oblivious RAM algorithms, creating a secure space where user data cannot be viewed, altered, or accessed by third parties (including nodes in the system). The secure space is a network of nodes that utilizes trusted hardware (Intel SGX) and specific algorithms to obscure user activities (Oblivious RAM), ensuring that no third party, including Automata and node operators, knows the user's data.

It is well-known that Trusted Execution Environments (TEEs) provide a secure execution environment (such as isolated execution) with integrity for applications running in TEE, making assets more confidential. Before delving into Automata Network's products and use cases, it is important to emphasize that ORAM technology provides an additional layer of security on top of TEE and other TEE-based ecosystem projects. While TEE already offers a degree of security, malicious actors can still obtain information by observing the transaction execution process and accessing the mempool. ORAM prevents malicious actors from gaining information related to user activities by hiding hardware memory access patterns, which means it provides a concealment algorithm that avoids leaking additional information during computation. This is the first application of ORAM in blockchain projects, and the project team has published leading academic research on ORAM technology development in top academic journals.

Automata Network is built on the Substrate framework and consists of three different layers. The first layer is the control layer, responsible for state transitions, proof verification, and coordination between Geode nodes. The second layer is where computations occur through Geode nodes that provide a "secure space." Finally, the service layer is prepared for developers, allowing them to build applications using Automata Network's privacy features and integrate with other applications in the field without needing to run their own Geode nodes. Unlike other TEE projects in the field, the Automata team does not focus on enterprise use cases but aims to bring better privacy to existing blockchain applications. The initial two products of Automata, Conveyor and Witness, each focus on different aspects, with Conveyor addressing MEV-related issues such as front-running and sandwich attacks, while Witness focuses on another important use case: anonymous voting in DAOs.

Conveyor: Addressing the MEV Problem

MEV is a pressing issue for the Ethereum community, and Conveyor provides a good solution for it. MEV is closely related to blockchain privacy issues, not only affecting Ethereum Layer 1 but also being a common challenge for other POW or POS main chains and Layer 2 solutions. There are many reasons for the existence of MEV, with the two biggest being the public mempool and miners taking advantage of potential transactions by front-running them with higher fees to become the biggest beneficiaries.

From the user's perspective, the experience of processing MEV transactions with Conveyor is similar to trading on Uniswap. For example, a user deposits ETH and then exchanges ETH for various desired assets. In fact, Conveyor uses Automata Network's specific tokens, gtoken (gETH, gBTC, etc.), to help users achieve privacy-protected transactions. Before the transaction begins, the user's tokens are first packaged into gtoken. This allows the transaction to be processed using the private relayers of Geode nodes. The packaged tokens are processed through Conveyor, which does not alter the transaction order or reveal transaction content. Only after the transaction is executed are the tokens unpacked and restored according to the user's needs.

Another important feature of Automata is its compatibility with all current applications on various blockchains, making integration with these projects very easy. Existing blockchain applications can integrate into the Automata network through a simple SDK without requiring major modifications to their codebase. As a middleware layer, Automata can quickly and seamlessly link platforms with applications, aiming to provide privacy services for the entire Web3 ecosystem.

Witness: Privacy Voting through DAOs

In this bull market, DAOs have regained attention, with many well-known projects choosing DAOs as their governance method. Over the past few months, the number of DAO projects has been steadily increasing, and the amount of funds managed by DAOs is also growing rapidly. We expect this trend to accelerate, and other use cases for DAOs will soon emerge.

Automata Network provides a solution for off-chain governance based on privacy through its Witness product. Witness hides the identity and voting quantity of voters based on the level of privacy requested by the proposer. Since voting itself is conducted off-chain, there is no need to pay gas fees, especially compared to the current Ethereum transaction fees. Additionally, in future iterations, users can trigger on-chain execution based on voting results. Witness offers proposers different levels of privacy options. They can choose to be public or opt to hide their identity or voting count.

Conclusion

We predict that there will be more privacy solutions available in the future. Hardware privacy solutions rely on hardware manufacturers to provide privacy services to customers. Software privacy solutions like ZKP represent another approach, but this method takes a long time to reach the market and achieve the advantages of hardware solutions, namely providing the same programmability and integrability. Currently, ZKP solutions also lack programmability, making integration difficult.

Moreover, software privacy solutions may encounter scalability bottlenecks in the short or medium term, such as challenges related to data availability layers and the high computational costs of creating proofs for customers. The enormous demand for computational power leads to expensive transaction fees, which could be more costly than the current services of Tornado Cash. TEE solutions can provide privacy services to DeFi more efficiently and at a lower cost. We believe that with Conveyor and Witness, Automata will quickly meet the DeFi market's demand for privacy features at a lower access cost.

At the same time, we see that the Automata team's execution capability and technological innovation iteration ability are very strong, and we look forward to working with them to pave the way in the Web3.0 era. Currently, Automata has established partnerships with leading projects in the industry, and its two excellent products with clear application scenarios are also developing strongly. In summary, this is just the beginning, and we look forward to seeing more privacy-focused blockchain applications integrated into Automata Network.