"Privacy Might Be the Only Thing Left That Makes Web 3.0 a Viable Alternative:" Tor Bair of Secret Foundation

In this week’s podcast episode I interview Tor Bair, the founder of Secret Foundation, an organization which promotes privacy-preserving technologies, with a focus on Secret Network. Secret Network is a proof-of-stake, Cosmos-based blockchain, which has the capacity to process private transactions and, notably, private smart contracts.

The ability to transact with decentralized finance privately has the potential to draw in institutions who have stayed at the sidelines of DeFi. Increased liquidity and depth in the ecosystem, spurred by larger players, would improve the experience for all users.

Still, privacy seems to be an afterthought in the blockchain space. And in a world where everyone is willingly giving up all their information to internet giants it seems that not much value is given to privacy in general.

Tor says that for Web3 to develop into the open and permissionless system its builders want, privacy should be at the core. His biggest fear is that in a Web3 future, intead of having single corporations control our data, governments will have the same access too. Without private blockchains, Web3 could devolve to enable surveillance capitalism, where auditability is weaponized. Tor talks about the technologies that are being built today to stop that from happening.

🎙Listen to the interview in this week’s podcast episode here:

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🙌 Together with Zerion, a simple interface to access and use decentralized finance, Sorare, a fantasy football game with officially licensed cards on Ethereum, and Near, a high-performance proof-of-stake blockchain that interoperates with Ethereum.

Tor Bair: I got into it, it's a few twists and turns. I would say that the first time I started paying attention to blockchains and cryptocurrencies is when I was still, in a past life, I was an options trader in Chicago for about five years, so I had a markets background. But as an undergraduate, I was a game theory major, I studied economics with a concentration in game theory and auction theory. So coming out of trading, I guess my initial interest in cryptocurrency was that I loved volatility. I loved anything that moved. There was hardly anything more volatile in 2013 than Bitcoin for those who are still around at that point and trading it. So my initial interest had nothing to do with the foundational technology, and I would say that that primarily changed.

“I loved volatility. I loved anything that moved.”

When I got to grad school in 2014, it was super, super lucky timing. I was starting my graduate studies at MIT right as they were starting all of the initial blockchain courses, they were the first universities to offer blockchain courses. I was basically skipping my MBA classes. I could cut out and go to the Media Lab and learn from people who were actually teaching there, which is how I met Guy Zyskind, who's the CEO of Enigma, and at the time, he was writing about privacy and blockchain and all of these really cutting edge topics that were probably years before their time and I was hearing about them on the ground floor.

One of the first people who came to talk to our class at MIT was Joe Lubin presenting from an empty warehouse in Brooklyn in 2015. I remember all these conversations and thinking well, but this is years down the line. But my initial interest in blockchain was less when I started looking at the technology versus the cryptocurrency, I was actually really interested in digital rights management for music because I'm a musician. I thought, well, what if blockchains could solve this? They're great for correctness. They're great for all these other properties. Then I realized that the problem wasn't so much blockchain, but the music industry.

“I was actually really interested in digital rights management for music because I'm a musician. I thought, well, what if blockchains could solve this?”

There are all kinds of reasons why it won't work, none of which has to do with the technology, everything has to do with the fact that the music industry is probably a couple of decades behind. But it did get me thinking a lot more deeply about the possibilities of the underlying technology. So fast forward now, from those years 2014 to 2016 to today, I've been working the last three years full time in the space, originally at Enigma, but now here at Secret Foundation.

Secret Foundation and Enigma and dozens of other organizations are all supporting Secret Network, which is a privacy-preserving blockchain, as you said. We're really excited to be exploring for the first time, I would say, some of these privacy-centric applications for the public blockchain ecosystem, and trying to find ways that we can work together with the Ethereum community to build new types of applications that haven't existed, maybe some of the types of applications that back in 2014-2015 I was really hoping would exist for digital rights management and access control and things like that.

Here we are five years later, not necessarily closer, but maybe for the first time, I really sense that not only is the technology ready for primetime, but users and developers are also ready to bring the stuff to production. There's a real demand in the market for these kinds of permissionless technologies, and maybe that's more of a result of the way the world has gone than the way blockchain has gone. We can get into like all the ways in which the world has kind of demanded permissionless, borderless applications. I think it's very clear, there's demand for that. But it's just great to see everything coming together at once.

Camila Russo: Those are super interesting, big questions. But first, I want to get back to the basics, just to be clear on exactly what we're talking about. Can you explain the difference between Enigma, Secret Foundation and Secret Network? How are these all connected and what does each do?

Secret Network

TB: Let's start with the network. So in the same way that Ethereum is a protocol, Secret Network is a protocol; it's a standalone blockchain. The cool value proposition that Secret Network brings is that smart contracts deployed on the network provide privacy by default. So smart contracts in the network utilize encrypted inputs, encrypted outputs, encrypted state, effectively, the entire blockchain is encrypted.

“The cool value proposition that Secret Network brings is that smart contracts deployed on the network provide privacy by default.”

It goes well beyond just privacy for transactions, you're talking about privacy for every use case that's built on the network. So we refer to that as programmable privacy. The idea that things built on the network are programmable, like Ethereum, but instead of everything being public by default, you have privacy by default, and then users and developers can kind of choose to implement arbitrarily complex data privacy controls into their applications. So that's the Network.

Ecosystem of Contributors

Then the Network has actually a really awesome decentralized ecosystem of contributors. So at the protocol development level, you have companies like Enigma. Enigma is a development company, it's where I used to work, and they're still actively contributing at the protocol level for Secret Network. They created the code that's enabled secret contracts, the first iteration of which went live on mainnet in mid-September. That was the result of a lot of hard development work on their end.

But simultaneously, you have other development companies around our ecosystem such as Secretnodes.org, Chain of Secrets, Secure Secrets, Stake or Dai, Whisper Node, like companies that have been founded explicitly to provide services exclusively for now to the Secret Network ecosystem. In addition to them, you have established staking operators like Staked Figment, Chorus One, Dokia Capital who are running nodes, secret nodes, we call them in the network, they're running the validators for the network.

Secret Foundation

Then uniquely, at the end, we have Secret Foundation. So Secret Foundation was created in June of this year and it's a really an interesting model for an organization. Because we don't do currently any development work for the network, we don't build applications, we don't do protocol level tooling, or anything like that. What we do is we help steward community governance. We do a lot of educational work helping people understand globally, the value of privacy-preserving technologies. We help to ensure that the community is active in all aspects of protocol governance because we have on-chain and off-chain governance for the network. We do a lot of the marketing and awareness for the network so that people understand what opportunities are available to them, either as end-users or as developers.

So it allows us to really, really focus at the Foundation on adoption, which I think kind of gets left on the cutting room floor for a lot of ecosystems, because they're so overwhelmed with development work, they don't get the opportunity to take a step back and think, what is this going to mean to the end user. Fortunately, with the Foundation, from the moment we wake up to the moment we go to bed, that's our full focus. We get to focus on what it's going to take to get people hands on with products that are built on the Network, what it's going to get developers to build on the Network: that's our full focus. I think it's actually an interesting model that you're going to see embraced in more ecosystems over time.

“It allows us to really, really focus at the Foundation on adoption, which I think kind of gets left on the cutting room floor for a lot of ecosystems, because they're so overwhelmed with development work”

CR: So a little bit different from the Ethereum Foundation model, say, which is focused more on development?

TB: Right, or different from ecosystems where the Foundation did all of the fundraising so they've got these massive war chests that now maybe they're not doing development work, but they're just like handing out money directly to developers to build the things they could have built themselves. That's not our model. We didn't do an ICO for the Foundation or anything like that.

Unique Funding Model

We're actually funded in another unique model, we get a percentage of all block rewards generated by the Network. Currently, it's around 15% of all Network rewards flow to the Foundation and that's all reinvested back into either day to day operations or grants and other initiatives that are fully focused again on like marketing, awareness, educational initiatives, or community initiatives for the Network. So again, for the time being less development work, but in fact, we're currently funding the open-sourcing of the Secret Network website so that's going to be governed and extended by the community in perpetuity. That's a project that the Foundation has helped steward, but again, it's now going to be held really in the hands of the community. That's kind of where we concern ourselves more so.

CR: Did the Secret Network itself have an ICO? How was it funded?

TB: So Secret Network has not had a public fundraising or private fundraising event, there was no ICO. So Secret, the native coin of the Network, is the native coin of the blockchain; the blockchain has actually been live since February. We have a decentralized ecosystem of contributors, all of whom are sort of self-funded, or have their own funding models. You know, whether we're talking about Enigma, or any of the other validators, or development companies that I've mentioned.

The Foundation is the only entity that's directly funded by the Network itself. We have a very strong alignment with Secret Network. But that said, our mission goes beyond the Network. We would love to see the global adoption of open source privacy technologies, regardless of how they're implemented, we just think that privacy is a public good. I see Secret Network, definitely, the ethos of the network is very aligned with the ethos of the Foundation and the ethos of the community.

CR: Secret Network, I guess, is a proof of stake network and it doesn't have an EVM like Ethereum, so how does it run smart contracts?

Future-Proof

TB: Smart contracts on Secret Network are written in Rust, and they compile to Wasm. We work very closely as a community with the CosmWasm team. So Secret Network is an independent blockchain, it has its own consensus, so as a result, it's based on Tendermint. It's delegated proof of stake, like other Tendermint chains. That's currently where we've focused its Rust-based smart contracts.

But it's very similar to what other smart contracting efforts that have been done elsewhere in the Cosmos ecosystem. A fun fact is that Secret Network was actually the first Tendermint-based network to introduce smart contracts on mainnet of any kind and ours are privacy-preserving by default, as I said.

But we've tried at every turn to build for interoperability, so we're embracing the standards that are emerging in the Cosmos ecosystem. As you're probably aware, there's a number of different projects out there who are looking at Rust as the primary language for smart contracting. So it's not like we've developed some sort of esoteric, standalone, smart contracting language.

It's a tough balance. You want to balance what you're already seeing in terms of adoption in the ecosystem, but you want to build future proof. You want to kind of sense, where is demand going, where developers going, and build to ensure that you're going to be compatible for years, potentially decades, in the future.

“It's a tough balance. You want to balance what you're already seeing in terms of adoption in the ecosystem, but you want to build future proof.”

It's always a mix of embracing existing standards, contributing to the development of new standards, but also taking a stand on what do we think are like the most performant languages, where are we seeing the greatest growth in developer communities and so on. There's a number of reasons why we embraced Rust for that reason, but at least we're in the blockchain space, definitely not alone in that regard.

CR: Would that limit your ability to be interoperable with Ethereum in favor of being more interoperable with the Cosmos ecosystem?

Ethereum Interoperability

TB: That's a great question. Not in the same sense. So it's not as though everything in the Cosmos ecosystem is similar to what's been built with Secret Network. The ways in which we're looking to interoperate with Ethereum, we can go into, I would say that, ultimately, we're looking to be interoperable with every ecosystem. The reason we've prioritized Ethereum is because that's where all of the developer and end user adoption is for the primary verticals that we've been considering for early focuses, which would be DeFi, but then also things around creation and access control, and NFT's. These are all really important to us as well, where we think privacy plays a critical role, and again, Ethereum is where you're seeing all of that early stage adoption.

We definitely want to be interoperable with Ethereum. But that doesn't mean we want people to be taking the smart contracts they've written for Ethereum and now porting those applications over the Secret Network. I don't think that that's really the correct sort of approach.

When we think about our relationship with Ethereum, I've said this on other podcasts, we definitely don't see it as adversarial. We think what we bring to the Ethereum ecosystem, we're not competing, we know what we bring, we know our value proposition, our value proposition is privacy. We also know what Ethereum brings, which is this massive development, community and user base, and all of the other incredible, composable applications that have been built in that ecosystem.

Just because we're using a different smart contracting language for applications that are built native to our network does not mean that interoperability does not exist. What it means is that we're less concerned about porting applications from Ethereum, and much more concerned about how do we interoperate with the existing applications. So if you want to talk a bit about that, we can talk about how we're trying to bridge this, what we're thinking about, from the perspective interoperability, not just with Ethereum, but every ecosystem.

“we're less concerned about porting applications from Ethereum, and much more concerned about how do we interoperate with the existing applications”

CR: I would love to get into that. But first, let's talk about what exactly Secret Network does to preserve privacy. You mentioned that these are the first smart contracts that preserve privacy, but what exactly does that mean? What is kept private, and what is kept public, and how does that impact everyday interactions?

Programmable Privacy

TB: That's a really important question, because just to say privacy doesn't really answer a lot of questions. There's a lot of people who when they talk about privacy in the blockchain space, they're just talking about transactions. They're just talking about Alice sends to Bob, but maybe you don't know it was Alice, maybe you don't know it was Bob, maybe you don't know how much but you're strictly talking again about transactions.

We talked about, as I said at the top programmable privacy. This means beyond transactional privacy, we're talking about is that anything in the smart contract is encrypted, the inputs and the outputs and the state of the contract. A transaction is really just a narrow, sort of trivial form of a computation. So in terms of the privacy that we're providing, it goes well beyond simple transactional privacy, which is usually what people think of, they're thinking about a Mixer, they're thinking about Monero. This is much more expansive than that. It's definitely a holy grail of private computation that's existed for long before blockchain says have existed. We're going back to the 80s as far people have been talking about this concept of privacy, preserving computation.

“… beyond transactional privacy, we’re talking about is that anything in the smart contract is encrypted, the inputs and the outputs and the state of the contract.”

The way that we achieve it, we've initially chosen to focus in terms of the production. What’s active in production with Secret Network is secure enclaves. This is the result of like, the evolution of a lot of research and development, because if you look at the vision of general-purpose, private computation, there isn't another technology that's ready for production. The things that are purely cryptography or purely software-based, people will talk about like fully homomorphic encryption or secure multi-party computation.

Actually, when Enigma was originally doing research, and I'm going back to like Guy's original research at MIT, that was focused on secure multi-party computation. In 2015, and the original white paper was about using MPC with the Bitcoin blockchain, this is kind of pre-Ethereum, so that's where the focus was. Obviously, the vision for Secret Network has evolved well past that. It's the same idea of bringing privacy to public blockchains, but the implementation is very different.

The reason is because MPC is not feasible in production, for general-purpose secure computation. There are individual instances where MPC is useful. If you're focusing on simple key management techniques or things like that, there's ways you would utilize it inside a single application. But the vision that we've always tried to embrace for Secret Network has been general-purpose private computation, like privacy for everything that would happen on the Network.

Secure enclaves, the way that they work is that there's essentially a black box inside every node that operates on the Network. Inside that black box, the data itself cannot be accessed, and that's where the actual execution of the smart contracts takes place. When we've taken the current state of the art research, everything has pointed us towards this.

So you have this efficient frontier of what's performance, what's cheap, what's secure. As far as we can tell, secure enclaves today are definitely on that frontier of most performant, most generalizable while still providing some security guarantees. Especially in a decentralized network, and especially if you have a very high barrier for how you enforce hardware requirements, you actually end up with something that's ready we feel for production, for the use cases that we're seeing in the blockchain space today. I don't see that for like just purely software-based privacy solutions.

All of that said, it's still an active area of research for our community and all of the teams contributing in our ecosystem. Because if something better comes along, and we can implement it in our network, especially in tandem with the hardware privacy solutions that are already implemented by every mainnet node, then we've built something even more secure, we've provided even more choice to developers and end users. As far as we stand on the issue, we will just do whatever is best usable in production today. Our entire commitment is to privacy and usability more than to any specific implementation.

CR: Say there's a user that's taking out a collateralized loan, in the case of using the Ethereum network, all of that transaction end to end is public. People will know how much collateral was put in, how much was lent, what the person did with the loan afterwards, all of that. In the case of Secret Network, would somebody know that user, say that the collateralized loan was taking a note on Maker, would it be known that the user is it using Maker or not even that, like how much is actually obfuscated?

TB: That's a good question too. So if we're talking about like a Maker equivalent that's built on Secret Network, or if it's Maker itself that now also has some features that are built on Secret Network and take advantage of programmable privacy, you will see that an address interacted with a secret contract (that's what we call the smart contracts deployed on the network) so you will see that an address interacted with the contract, you won't see how, you won't see in what way, you won't see funds move necessarily.

“you will see that an address interacted with the contract, you won't see how, you won't see in what way, you won't see funds move necessarily.”

The only time you would actually see funds come out is if, let's say, you've wrapped an asset on another network. But if you wrap ether on like the Ethereum main chain, and you mint a secret version of ether on Secret Network and now you're lending that on Secret Network, the only time you actually see the individual users interaction with whatever DeFi product built on Secret is in the end if somebody then burns their synthetic, secret ETH, and then can withdraw effectively the ETH back on the main chain.

Composable Privacy

We've talked about programmable privacy, this is what we're calling composable privacy. The idea is that the more things that you do on Secret Network with your secret assets and your whether it's your secret ETH, your secret DAI, or even secret versions of Secret, like the native coin, then it gets a little meta and confusing. But you can kind of see where I'm going with this.

Every additional interaction, every additional application, everything that you're doing on Secret, everything feeds back on itself creates a privacy network effect. Then every user who's utilizing the same applications as you on Secret Network, is gaining privacy proportional to that usage.

If you think the way anonymity sets currently work in the Ethereum space, a lot of things are application-specific, and they don't transfer from application to application. In this case, we're talking about composable privacy where every application that touches these secret assets or utilizes secret contracts, they all gain from that shared privacy. So when you're asking what is actually seen, you're seeing that interaction with an address in a contract, but because you can't see what's happening.

“we're talking about composable privacy where every application that touches these secret assets or utilizes secret contracts, they all gain from that shared privacy.”

you don't know, did somebody opens some sort of leverage short position. Generally speaking, you don't want that to be public information. If you're trying to hedge exposure that you already have, but somebody knows you have this under collateralized short, that then they can attack.

Or something we talk a lot about is also the front running issue that you see with AMMs. If all of that information is public on Ethereum, Secret Network effectively has an encrypted memepool so you don't run into the same issues, that's how we try to prevent this front running issue that you constantly see in a lot of these DeFi applications.

We think of it as being a much fairer ecosystem for an end user, where you're less vulnerable to attack by malicious actors just because the things that are meant to be private remain private. In the lending use case, if you want access to loans and you don't want to reveal which address was yours to every other user of the Network, there are ways to build like a secret lending app on Secret Network where you could prove that this is your on-chain transaction history and you also qualify for some sort of under-collateralized loan. It's provable that you had control of these addresses, and this was your user activity. But you're not revealing that to every other user of the Network, you're only revealing it to the secret contract.

CR: That's an interesting point. Because these applications like lending protocols, they need to know what's in your wallet in order to lend you assets. You need to provide collateral in order to take out digital assets. So I guess that's an interesting point that on Secret Network, these verticals actually are able to access this information while other users of the network can't see it, right?

Compensating Security

TB: That's effectively what we're saying. Because what it comes down to is, we don't introduce privacy because we think everything that happens on a blockchain needs to be hidden. We introduce privacy because we don't think that everything that happens on the blockchain should be public. The problem to date is that there just hasn't been any choice. Certain things should be public, certain things should be private, and to date, the way the technology has worked is it's just all public by default, and there's no good, cheap, usable way to make anything private.

“we don't introduce privacy because we think everything that happens on a blockchain needs to be hidden. We introduce privacy because we don't think that everything that happens on the blockchain should be public. The problem to date is that there just hasn't been any choice.”

If we just even introduce the choice to have certain interactions to be private, and in all of the use cases that I'm describing, the contract code itself is auditable. You want to know what the smart contracts do, you just don't want the inputs to be public. That helps protect users in two ways, right? You know what the applications you're interacting with do. There is still that aspect of auditability, but you're not exposing all of the input data at the same time, and then compromising user security, or in the case of front running, you're not compromising the security of the application itself.

CR: It's interesting, because I was thinking the downside of having smart contracts be private is that you take away this ability for users to, for example, track large protocols’ health. I think, this was highlighted as an advantage of DeFi versus traditional finance in that in DeFi, you're able to audit what kind of the equivalent of the big banks or big lenders are doing while in traditional finance you can't. I mean, are you still able to do that? For example, seeing if there's a risk of loans in Compound becoming under collateralized? Would you be able to see whether that's going on?

Driving Liquidity

TB: It really depends on the implementation. I guess the idea here is it comes back to choice. If the way that things are built is that you want certain things to be auditable under certain circumstances, like we want to be able to provide that option in the application, it's just about not making absolutely everything public by design all of the time.

I can definitely think of use cases where as a large liquidity provider, you would not want all of your activity to be public because it creates a massive risk to you. So the reason we're pushing for privacy, I actually just recorded a podcast where we got into this connection between privacy and liquidity. If more privacy means that we can have more liquidity, or tighter spreads for users, or better lending rates, then everyone wins ultimately. It's more about like you want enough auditability to make sure that the platforms are secure, and then you want enough privacy to protect the people who are taking the risks by providing liquidity on these platforms.

“If more privacy means that we can have more liquidity, or tighter spreads for users, or better lending rates, then everyone wins ultimately.”

Something that we heard a lot in our interviews with liquidity providers is this risk of loss from interacting with these platforms. If we can create better AMMs, privacy preserving AMMs that help them to provide larger positions because they're not so worried about taking these massive losses as liquidity providers, ultimately, our goal is just that better usability for users, better liquidity for users where the users win the malicious actors don’t.

CR: This brings me to the topic of institutions. It's often said that institutions don't deal with public blockchains because of the issue of privacy, they don't want their positions to be known. Is this part of the vision of Secret, to attract bigger institutions to be part of a DeFi because they have this privacy protection now?

Privacy is Necessary for Adption

TB: When we talk to enterprises, it's exactly as you say. They've told us that one of the biggest blockers is that they don't want everything to be public / they can't allow everything to be public. There are restrictions. Or when we've looked at use cases within the healthcare industry, for example, I know, we're going to be very DeFi focused on this podcast in particular, but obviously, there are hundreds of use cases for decentralized applications that are privacy-preserving by default. One of which would be like in the healthcare industry where you want to be able to do calculations over an aggregate data set of sensitive healthcare data but there are not only restrictions faced by the organizations, but there are legal restrictions on how this data can be shared and used. So they have absolute restrictions in that regard.

Because they have those absolute restrictions, there are only so many choices when they look at the public blockchain ecosystem. So I don't know necessarily what it's going to take to get the largest banks in the world to embrace DeFi, I could see a lot of reasons why they don't like DeFi because they can't just sit on top of it and be rent seekers anymore. If you tell a bank that their primary business is going out of business because we've democratized so many aspects of finance, they're going to be slow to embrace it no matter what. JPMorgan might be slower or faster to embrace it no matter what.

But when it comes to what it would take, at the very least, what's necessary, if not sufficient, it’s definitely, definitely privacy. When we communicate with enterprises about the value of Secret Network, again, we don't tell them, come build on Secret Network we're way more private than Ethereum. We tell them come build on Secret Network, we interoperate with Ethereum, we take what's already working in the ecosystem, and we can help you find ways to build applications that work with ethereum, with Secret Network, with Cosmos, with all of these different ecosystems.

The through line for us, the way that we interoperate is via privacy by providing privacy to every public blockchain. That is the vision. When enterprises hear that vision, I think they're excited because to them that sounds like more sustainable. We're not asking them to commit to one particular technology until the end of time. We're just communicating privacy as the core value proposition, and to them, that's exactly what they wanted to hear in the first place, because that's what they need to even get started.

CR: I think now is a good time to actually get into interoperability with Ethereum. So how does it work?

Secret Token Standard

TB: There are a few ways that initially, we've thought about interoperability with Ethereum. But the first and most important is this idea of a bridge to Ethereum. People talk a lot about bridges, here's the kind of way that we've thought about it working with Secret Network. So you would have a bridge by which you could lock your Ethereum in a smart contract on the ETH main chain, and it would mint on Secret Network a secret ETH token.

“you would have a bridge by which you could lock your Ethereum in a smart contract on the ETH main chain, and it would mint on Secret Network a secret ETH token.”

Just like you have ERC 20s on Ethereum, we have a token standard for Secret, we were calling it Secret 20 for a little bit until we realized that that makes no sense in the context of Secret. It's not the 20th proposal of anything, so we just call it the Secret token standard. Secret tokens are programmable like ERC 20s, but they are privacy tokens by default.

As I said, encrypted inputs, outputs and state for Secret contracts on our network, like if you were to open up a Secret contract or a Secret token in Etherscan, for example, normally, you open up an ERC 20 in Etherscan, you see all the addresses, every transaction, every holder. For a Secret token, you would be able to see some of this in aggregate, you'd see the number of holders, the number of tokens in existence, maybe you could audit the contract code. But unless you were the user holding that token, you would only be able to see your own transactional history, you're your own holdings. So that's the power of Secret tokens.

If you lock your ETH on Ethereum, it would mint a Secret ETH token on Secret Network that would have all these properties. Or similarly, if you were to build a bridge for DAI or if you were to build a bridge for any other individual ERC20, it works the same way. As I was saying earlier, DeFi applications on Secret Network could then utilize this synthetic secret ETH token in any application that represents ETH back on the main chain.

If you want to unlock ETH back on the main chain, you would just burn the equivalent number of Secret ETH tokens that you hold on to Secret network, it would release that ETH to an address of your choosing back on the Ethereum chain. This is interoperability, but it's also scalability, because all these interactions are now happening off Ethereum, and it just releases the original asset back on Ethereum when you're done interacting with the secret DeFi ecosystem.

“This is interoperability, but it's also scalability, because all these interactions are now happening off Ethereum.”

From the perspective of Ethereum, the only thing they know is that you've released the Secret ETH, but the Secret ETH could have changed hands. It could have been used for lending. It could have been used in a Secret AMM. So it's actually a really cool way to get these ecosystems to interoperate. As I said, while we're starting with a bridge for ETH, it's actually fairly trivial to do the same for any ERC 20 provided there's demand. We're not talking about months of development work, we're talking about a couple hours. That I think is really powerful.

CR: I like that vision of Secret Network as also a way to scale Ethereum, is like a private side chain or something.

TB: I very much acknowledge like, I feel like there are so many people who are trying to say we're a Layer 1, and I say that because we have our own independent consensus. But there's so many Layer 1 protocols that somehow claim to have the same sort of security properties as Ethereum which is like a $40 billion protocol. There are a lot of security properties that Ethereum has as being this high market cap chain, especially with the transition now to a proof of stake network, like it's going to be really interesting to see how that transition impacts things in the ecosystem.

But there's no denying that there are some security properties of Ethereum as a network that make ETH good money in a lot of senses. Rather than trying to reinvent the wheel, it makes a lot of sense to think about what is the value proposition for our network in the context of already healthy economic ecosystems rather than trying to say, you have to abandon what you already think of as money in this ecosystem in order to utilize all the privacy gains of Secret Network. It would be kind of crazy for me to try to talk somebody out of that. Instead, it's so much easier to think about, take the best of Ethereum, like the security properties of the chain, and the best of Secret Network providing programmable privacy, what can you make with all of this together? That's where my mind starts to get really excited.

CR: How trustless is this smart contract that serves as like this bridge between the two networks?

“Completely Trustless”

TB: For an initial bridge implementation, it's operating as a multisig, so a number of different parties and operating the bridge. For that, we're sourcing from the existing Secret Network ecosystem, but also beyond. Our goal is, we want this to be relatively trustless, but as we're talking about, everything in this space is a tradeoff between like trustlessness, security, usability. I think you've already seen a lot of implementations, for example, for like wrapped Bitcoin in a lot of different implementations that are more trustless than others. It hasn't really seemed to impact adoption, but it's definitely one of those things that over time you look to improve.

Again, I guess I'm speaking from the perspective of the Foundation here more than anything else. Our entire mission is adoption. We will do whatever we consider to be as long as it's protecting users, as long as it's the best in class like privacy option to date, that's what we'll implement if it's going to lead to adoption. Then over time, we will iterate to ensure that things get more usable, more trustless, more private. We talk a lot about things like progressive decentralization, it's always going to be a balance in a tradeoff. The only thing I hate is when somebody says like, completely trustless because it's never, there is absolutely nothing that's completely trustless. Everything has its trust profile. The only thing I would ask is that people be honest about what it is.

“The only thing I hate is when somebody says like, ‘completely trustless’ because it's never, there is absolutely nothing that's completely trustless.”

CR: You said it was controlled by a multisig, how many people are holding that or controlling that multisig?

TB: So the bridge is currently in development. I don't want to give an exact timeline because it's supposed to be more of a surprise, but the GitHub is already public. At that point, when it launches, we'll have more information about exactly who's operating the bridge and across how many different signatures. So I don't want to commit to that right now, because it's still in progress. But we would like to find people who are experienced with operating these bridges because I think that provides the best usability, privacy and security guarantees to the users who’re then going to be relying on it. But it's a very fair question.

CR: What is live and usable on Secret Network right now? Can you also expand on what seems to be growing community of Secret applications?

Secret DeFi in the Roadmap

TB: What's live right now is first of all Secret contracts were introduced in a mainnet upgrade in mid-September, so now anybody can deploy a contract on the network. We just ran a Secret raffle this week, that was really fun. We had people sign up effectively for the Secret raffle by installing Kepler wallet, which is a wallet that's going to add functionality to interact with Secret tokens. But you can already like steak and hold your SCRT tokens in Kepler wallet. It's a web wallet similar to Metamask, but with more of a focus on the Cosmos ecosystem. We deployed the secret raffle on chain, and we picked our winners. Now we're going to have the code public, but you can already see it in the block explorer, so there's contracts being deployed and utilized.

“What's live right now is first of all Secret contracts were introduced in a mainnet upgrade in mid-September, so now anybody can deploy a contract on the network (…) beyond that, it's more around this roadmap for applications that are all DeFi-focused and interoperability focused.”

Now the focus is more like how do you increase the usability of these applications? One way is by introducing the functionality for people to interact with these things via a web wallet, like Kepler, so that's been a huge focus. They were actually funded by an on chain proposal via the community pool on chain to build this functionality, which we're really excited about.

Then beyond that, it's more around this roadmap for applications that are all like, DeFi-focused and then interoperability focused. So the ETH bridge, as I mentioned, is in progress. I'm not sure when this episode is coming out. It's possible that we'll have in much more public statement about it live when that happens [NOTE: Bridge is live at publishing time]. But the reason why we're excited to talk about it is because it's imminent in that sense.

After that point, we already have Secret tokens have already been active on our testnet, which effectively operates just like the mainnet. So that'll be ready for deployment really, whenever we give it the green light, and that can wrap anything that we've built a bridge for, or it can wrap Secret as a native coin on the network. Then our focus is going to turn towards Secret swaps effectively like a simple Uniswap, or AMM implementation but for Secret tokens. So again, you want easy liquidity between all of these Secret assets that are going to exist on Secret network. A simple one would be Secret ETH versus Secret DAI or Secret other stablecoin, or Secret ETH and Secret-Secret. I think that's really cool to see, that's something that's also been in development for the network.

Then beyond some of these DeFi applications, access control applications has been another huge one we've been looking at as an ecosystem, not to spin up like an entirely new topic for the end of this podcast, but we've been talking, for example, with Audius. So if you are a creator, and you want to be able to release your own music, but more as a subscription model, like you need to be able to gate some content for people who you would consider a subscriber and then people who would consider non-subscribers.

With Secret Network, it's really easy to implement that level of access control, and you can actually monetize your content. Whereas on Ethereum, a lot of these implementations end up being either impossible or really hacky, as a creator, where you're trying to say, we want a subscription model for certain content, and not others. We want the stream to be available to some and not others. I would love to see like a robust, decentralized Patreon alternative built on Secret Network leveraging the programmable privacy.

Then if you could use, let's say, Secret ETH to subscribe to one of these platforms, like then you wouldn't even need to publicize the fact that you have subscribed to one of these services, but you could prove to the service itself that you had. Now not everybody knows which artists you support or which NFT's you're actively holding. It's just kind of cool. Again, it's not about the fact that all this needs to be private. I love the openness of the Ethereum community, I love the openness of blockchain period and what that means for communities. It's just that we haven't had any choice and certain things.

Like that Apple ad, I keep talking about it on podcast, I hate to do it, but they did such a great job. It's like you don't go around announcing your credit card number to everybody. You don't go around announcing that you Google a bunch of divorce attorneys, right. Just certain things should be private if you want them to be and it's just about introducing choice. So that's where we're at. With applications, with the community people just really want to see choice emerge in all of these different public blockchain implementations.

“Just certain things should be private if you want them to be and it's just about introducing choice.”

CR: I wanted to touch on a broader topic of privacy and whether people actually want it, or whether there's demand for it, or if it's just this very niche thing that because we're in this crypto bubble we assume people want but they don't really. Because people still use Facebook, they're willingly giving away all their information to Google and Amazon and you don't see a big uprising against all these web giants. So what is your thinking there?

Fear of Surveillance Capitalism

TB: Well, I consider the entire public blockchain space to be a competitor to big tech, to the centralized Web 2.0 worlds. I would think that if we want to create a coherent alternative for users, to monopolistic Web 2.0 —I read your awesome post today on CoinDesk, “The Internet of value” — so I think about this a lot. If we're trying to create like an actual alternative, it can't be an alternative that's worse than Web 2.0 on the privacy aspect. So with Web 2.0, is like, yeah, you exposed everything to a single centralized entity, which then frequently misuses it, like Facebook, or Google, or leaks it like Uber, or Equifax in the worst case, right?

Web 3.0, the way it currently stands, you're just leaking data to everybody all of the time, not even just a single organization, just everyone. If we're saying, this is the future of the web, it can't be worse than Web 2.0 on privacy. We can't ask users to, give up even more than they've already given up.

My biggest fear has been that where Web 3.0 is going to evolve is into the perfection of surveillance capitalism, where everything must run through a central bank digital currency, which is perfectly surveillable by the State, and maybe only by the State.

“My biggest fear has been that where Web 3.0 is going to evolve is into the perfection of surveillance capitalism.”

If we allow Web 3.0 to become that where it's like, this is what we used blockchain for where now things are perfectly auditable, but only by the people that you don't want it to be, and all other forms of commerce or interaction are effectively outlawed, this is my fear about where the China digital blockchain is headed.

We can't allow that. If we as a space, in the Web 3.0 space, just let privacy not be one of our core guiding values, we're going to end up at the bottom of things. It's going to be a race to the bottom on this and we are going to lose. The States are going to— when I say States, I don't mean the United States— I mean, governments are going to win and not in the way that we prefer that they win. It's going to crush user choice. It's going to crush what I think to be the decentralized web even worse than Google or Facebook ever could.

I'm desperate for us to kind of as a Web 3.0 ecosystem embrace the value of privacy, not because users necessarily care about it on a day in and day out basis, but because it might be the only thing left for us at the end of the day that makes Web 3.0 a viable alternative to the what we already see. It's sort of already like a monopolistic race to the bottom. That's not the future I want to live in. I see a lot of builders who are deeply passionate about fighting that and at the same time, they're just getting sidetracked by the shiny carrots of overleveraged in DeFi.

“I'm desperate for us to kind of as a Web 3.0 ecosystem embrace the value of privacy, not because users necessarily care about it on a day in and day out basis, but because it might be the only thing left for us at the end of the day that makes Web 3.0 a viable alternative to what we already see.”

It's like, let's stay committed to the core principles of Web 3.0 and human empowerment, and privacy is so core to that I would hope that people listening to this, if anything, take privacy a little more seriously after this. Even if you don't take Secret Network specifically a little more seriously after this, please take privacy a little more seriously after this. I beg you, we need it to be a core guiding value for all of Web 3.0.

CR: That's such an important point. Because I think you're right, that maybe we can become a little bit too idealistic when looking at what this technology can do, and think it has the potential to solve so many of the issues with Web 2.0 becoming centralized on a handful of big companies. This does have the potential to decentralize that power and put it back in the hands of the individual and users, but it also has the potential of like you say, by having all the information out there, just giving more power to another set of actors that and we can end up in an even worse situation. Maybe privacy is the weapon to fight against that potential effect of turning to blockchain tech.

TB: Let's hope.

CR: You mentioned how it's seems like builders are just shifting their attention to the new shiny objects. What are your thoughts on the current state of the market? Are we entering a new bull market, and how do you think that can affect privacy-preserving blockchains? Do you think that's a good thing or a bad thing? I mean, if everyone's going, whatever coin go up, does privacy just take a step back?

Missing Massive Piece

TB: That's a great question. I mean, we've been building through a number of bull and bear markets, depending on how you measure them anyways. So I've seen it all. Narratives come and go, platforms come and go. Ultimately, what we've seen get borne out is the platforms that have been able to build real adoption, that have real users, real value locked in these ecosystems. So we only care about adoption ultimately. There are only so many things we can control.

If people want to speculate on meme coins, they absolutely can. If they want to speculate on privacy-preserving meme coins on Secret Network, they can go for it. I mean, that's not what I would consider to be a core use case. But plenty of things get built on Ethereum that people wouldn't necessarily think are like the core use case for Ethereum. But the real stuff gets built to and that stuff becomes valuable.

You look at what like Aave has been able to build, or you look at like what Balancer has been able to build, or obviously, Uniswap, there have been incredibly valuable protocols and applications built on this network, and we would love to unlock more of that and preserve privacy for users.

If we're going into a bull market for Bitcoin, for example, and attention comes away from the DeFi space for a little bit, it means we're able to just keep building in advance of the next wave of developer institutional retail interest. I would appreciate the quiet time, I think this stuff is really hard to build. It was kind of nice in the bear market that we got so much time to focus on shipping it.

But if the bull market means that we're also seeing renewed interest in this long tail of Ethereum-based or not Ethereum-based assets, and people are super concerned with composability and liquidity for those assets, I think we're perfectly positioned right place, right time to be a piece of this because what we've built has not existed to date. I would just love to see people get into the Secret sandbox and see what they can build with all of this. Because in either event, whether it's loud or whether it's quiet, I think privacy as a fundamental need is here to stay, we just don't realize it yet. If we're going to get to the trillions in value, again, either for DeFi or total market capitalization, you can bet that privacy is going to be a massive piece of that narrative, one way or the other.

The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

About the founder and editor: Camila Russo is the author of The Infinite Machine, the first book on the history of Ethereum, and was previously a Bloomberg News markets reporter based in New York, Madrid and Buenos Aires. She has extensively covered crypto and finance, and now is diving into DeFi, the intersection of the two.