Enigma - Privacy For Blockchains

Why Are Blockchains Useful?

Blockchain technology is revolutionary. Its public and decentralized nature removes the need for trusting a centralized entity and removes business/political risks while guaranteeing transparency over how applications work by leaving an irrefutable record of activities.

Current Setbacks in Blockchains

However, current blockchain technology has its weaknesses. Platforms have suffered from two major issues (highlighted by Ethereum Founder, Vitalik Buterin here: https://blog.ethereum.org/2016/01/15/privacy-on-the-blockchain/):

1. Scalability - Currently, all nodes in blockchain networks are required to validate all transactions. While this helps ensure that transactions are correct, it severely reduces the speed of the network. For example, Ethereum currently validates roughly 15 transactions per second vs. Visa's 45,000 tps. (https://www.coindesk.com/information/will-ethereum-scale/).

2. Privacy - While the public nature of the blockchain increases the transparency for all end users - it poses a blindly obvious problem - everyone can see the data! This severely limits the practical applications of blockchains. What company wants to give away all of its personal data? Medical records, salaries, social security numbers, passwords etc.

"Ideal" Blockchain:

As one can see, the goal is to build a blockchain that:

1. Easily scales

2. Ensures correct transactions

3. Guarantees privacy

While the community has focused on improving the scalability issue (Plasma/Lightning/Sharding), there has been much less attention devoted to ensuring privacy.

Potential Privacy Solutions :

Partial Obfuscation: While "complete obfuscation" is known to be impossible (https://www.iacr.org/archive/crypto2001/21390001.pdf), "indistinguishable obfuscation" occurs when one cannot determine from the output which original source a piece of code came from.

Example:

y = 0....

y = (A transaction with data) - (A transaction with data).

Both of the above will return zero and leave the viewer unable to tell which equation generated the answer. However, this process tends to be inefficient and very slow.

Zero-Knowledge Proofs: Allows a “prover” to assure a “verifier” that the prover has knowledge of a secret or statement without revealing the secret itself.

Pretend Gaby is trying to convince color blind Joe that she knows that two balls of the same size and shape are different colors without revealing the color of either ball. She has Joe take both balls, put them behind his back and allows Joe to switch them if he would like. Gaby then notifies Joe if the balls have been switched or not. If this game takes place enough times with Gaby answering correctly, Joe can with a high probability determine whether Gaby actually knows the color of both balls.

However, while this technology works great at proving specific facts (ex. is Gaby > 21?, does Bill have > $250,000 net worth?) it does not allow for computations to take place with the data.

Multi-Party Computations (MPC):

Secure multi-party computation allows different nodes to receive pieces of data and compute functions together. Every node holds only a seemingly meaningless piece of data and the data is thus kept private. Zero-Knowledge proofs are actually used between nodes to ensure transactions were not done maliciously.

Additionally, because work is split between different nodes, MPC allows for much easier scalability than other privacy solutions.

The potential downfall is that one must trust the nodes. Nodes would hypothetically be able to save data and potentially collude with each other to determine the underlying private data.

Enigma:

Enigma is a second layer solution (is run complementary to existing blockchains: Ethereum, EOS, etc. ) that uses MPC technology to compute private transactions. Enigma will allow developers to use "secret contracts" (smart contracts with privacy) to build out applications. The protocol will appear similar to the current protocol for smart contracts and is thus very "user-friendly" to developers.

Use Cases

There are several industries where one cannot imagine blockchain technology to be available without privacy. A few are listed below:

1. Health care records

2. Financial data

3. Identity verification

4. Credential management

Meeting Deadlines:

As most people that have followed blockchain projects know, project timelines being pushed back is the absolute norm. Enigma is rare in that it has out-performed its deadlines for Catalyst and data marketplace releases by a full quarter.

Catalyst is the first application to be used on the Enigma chain. Powered by Enigma's financial data marketplace, Catalyst empowers users to share and curate data and build profitable, data-driven investment strategies. This running project shows that there is a "working model" for "privacy" where users can pay others to receive their strategies.

Upcoming Timeline:

Discover 2018: 2Q Testnet, 3Q Mainnet.- Use TEE's for Secret Contracts 1.0.

Voyager 2019: Q1 Testnet, 2Q Mainnet - Use MPC for Secret Contracts 2.0

Valuation:

There is a clear need for privacy on the blockchain for healthcare, identity, finance, and many more critical industries.

Because Enigma is a second-layer protocol (it can be run in conjunction with existing blockchains) and it is likely that several smart contract platforms will continue to exist in the future (https://medium.com/blockchannel/the-smart-contract-network-fallacy-7b4d27f4d149)), we will presume that all smart contract platforms may need to use Enigma.

Presuming that privacy needs account for just 25% of blockchain technology and there is a 10% chance that by 2020 ENG is the "go-to" technology for privacy then we can value the coin as such:

Market Cap of all first layer smart contract networks * 0.25 * 0.10 = $100B+ * 0.25 * 0.10 = $2.5B / 1.4^2 = $1.275B...

$1.275B / 150M coins = $8.50/coin.. roughly 3.4x its current valuation.

Risks:

1. Timing. There is no release of the entire platform until 2020 - with the mainnet MPC not released until 2Q 2019. Will this be delayed further?

2. No proof this solution is even actually viable... how do we solve the issue of collusion between nodes?

3. Is there a scenario where zero-knowledge proofs can be used for most blockchain privacy issues?

4. Can other projects not just implement the code into its existing platform?

Conclusion:

Privacy is an indispensable component of the future of blockchains and one that Enigma is trying to enable. With a history of meeting deadlines and a clear first-mover advantage, Engima is posed to be the "go-to" solution for privacy in the future. Valued at only 0.3 ETH, I believe that risk/reward says to BUY ENG.