CoinEx Smart Chain (CSC) Academy | The Rise of Privacy Chains
Despite the crypto bear in 2022, the public chain race remained fierce. Instead of competing against one another in terms of scalability and TPS, emerging public chains created new service categories utilizing specific technologies. In particular, privacy chains have attracted extensive attention and earned growing popularity with ZKP technologies.
Building a Web3 Privacy Era
Privacy has always been a major concern in the blockchain space because blockchains are inherently decentralized and transparent, with traceable data. As the crypto user base expands, the demand for privacy grows. In real life, most people would like to keep their personal information, financial status, and activities confidential. By the same token, no crypto user wants to fully disclose his or her on-chain transactions and addresses, and privacy chains were born precisely to address such concerns.
Most privacy chains protect users’ privacy by leveraging technologies such as the trusted execution environment (TEE), zero-knowledge proof (ZKP), and secure multi-party computation (MPC).
Back in the early days, privacy chains were mostly enabled by a trusted execution environment (TEE), and iconic TEE-based chains included Secret Network and Oasis Network. As a separate “area” on chips, the TEE provides a safer place for code execution and data storage, thereby ensuring their confidentiality and immutability.
Secret Network, the first blockchain with customizable privacy, allows users to hide data from nodes. Users can control access to their assets and data with Secret Tokens and Apps, which secures consumption, savings, and transactions.
As a scalable privacy chain enabling low costs, the Oasis Network consists of two main layers: the consensus layer and the ParaTime layer. With the TEE, the Paratime layer gives developers flexibility to build private smart contracts that fit their needs — from fully confidential to fully public, or anywhere in between.
New privacy chains, on the other hand, mostly employ the zero-knowledge proof (ZKP) and secure multi-party computation (MPC), and iconic projects include Aleo, Aztec Network, and Aleph Zero. The ZKP allows users to prove their access to certain data or specific ownership without revealing their personal information.
Aleo, the first public chain to use ZKP technology, uses zero-knowledge cryptography to achieve both privacy and programmability. Let’s say a user wants to trade Token A for Token B on an Aleo-based DEX. First, the user will need to prove to the DEX that he has enough Token A in his possession to complete the transaction. Normally, this will reveal the user’s financial status, but since the information can be shown through a zero-knowledge proof, trading tokens via the DEX does not entail revealing the user’s wallet balance or trade history, thereby protecting his privacy.
Dedicated to protecting users’ privacy, Aztec Network is a scalable privacy protocol running on Ethereum’s Layer 2. The chain uses the ZK-Rollup solution to encrypt and hide users’ confidential transactions, which allows the logic of transactions to be validated while keeping the transactions anonymous.
Aleph Zero is a scalable privacy chain based on Directed Acyclic Graph (DAG), featuring a privacy structure developed based on ZK-SNARKs cryptography and secure multi-party computation (MPC). The chain mostly focuses on the creation of privacy-preserving distributed ledger technology (DLT).
Overall, the privacy chain category is thriving. With advanced privacy-preserving technologies, privacy chains offer features such as privacy protection and boast brilliant market prospects. As the demand for data privacy in the crypto space grows, privacy chains will become increasingly popular with both project teams and users. We’re confident that along with the advancement in privacy-preserving technologies, privacy chain ecosystems will provide better services for crypto users.