"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.

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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?

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Paid subscribers have access to the full transcript, including sections on:

• Programmable and composable privacy
• Driving liquidity and institutions
• Ethereum bridge
• DeFi roadmap
• Surveillance capitalism

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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.