Secret Network is the first blockchain with data privacy by default, allowing you to build and use applications that are both permissionless and privacy-preserving.
This unique functionality protects users, secures applications, and unlocks hundreds of never-before-possible use cases for Web3.
Secret Network pioneered private smart contracts (called Secret Contracts). Essentially, the Secret Network chain is comparable to Ethereum, just that all transactions are made private.
As a chain built using the Cosmos SDK, Secret Network will also be highly interoperable with other high-value blockchains such as Crypto.com, Osmosis, and the Cosmos chain itself (once its Stargate upgrade is complete).
They have released their upcoming Ecosystem Roadmap with various protocols launching from swaps to money markets creating a more complete ecosystem:
Privacy is one of the core tenets of the crypto industry. Multiple privacy-focused chains already rank in the top 100 coins by market cap. These include Monero ($4.7 billion Mcap), Zcash ($1.6 billion Mcap), Dash ($2.2 billion Mcap), and Horizon ($1.2 billion Mcap). Based on the valuations of these assets, it seems clear that there already exists significant interest in privacy-focused projects.
Secret Network seems to be the natural extension of this interest in privacy - a privacy-focused smart contract platform.
Secret Network aims to be the go-to privacy chain that is also highly interoperable with all other chains and ecosystems. As a chain built using Cosmos SDK and Tendermint, Secret Network can easily attract users and capital from large protocols like Terra or BSC. Secret Network is also expanding its scope of interoperability beyond that of the Cosmos ecosystem. A combined total of over $62 million worth of assets has already been bridged from Ethereum and BSC to Secret Network.
Additionally, the Terra team has expressed their enthusiasm for Secret Network, having jointly announced the Secret Terra Bridge which is scheduled to go live on mainnet in November. Once the Terra bridge hits the mainnet, we can likely expect to see much more capital flowing in from the Terra ecosystem as well.
Given its popularity and the amount of capital it has already attracted, Secret Network seems to be well-positioned to claim its place as the top private smart contract platform.
How It Works
On the Secret Network chain, two types of assets exist: the native $SCRT coin, and Secret Tokens (SNIP-20 tokens). $SCRT is used to pay for gas fees and can be transferred from one wallet to another (similar to $ETH on Ethereum). Transactions involving $SCRT are available for anyone to view on-chain.
The ‘secret’ functionality exists in the form of Secret Tokens (SNIP-20 tokens). Secret Tokens are a powerful concept - they’re programmable like ERC-20s and usable in applications, but they remain private-by-default like Monero and similar coins. They can represent off-chain assets, or they can be fully native to Secret Network. Anyone can create a token, which can then be transferred between wallets and used in smart contracts.
SNIP-20, is a specification for private fungible tokens based on CosmWasm on the Secret Network. The name and design is loosely based on Ethereum’s ERC-20 & ERC-777 standards, and a superset of CosmWasm’s CW-20. Key additions to this spec over the CW-20 specification are mostly for privacy focused features, and as such will strive to maintain compatibility.
Secret Network dApps
At the time of writing, Secret Network has 4 main dApps running on its chain that we could find.
1. Secret Auctions - an OTC marketplace
The Secret Auction web3 app allows users to create or bid on auctions for any SNIP-20 token (Secret Token) trustlessly and privately with minimal fees. Since bids are completely secret, bidders would not be aware of any other bids and sellers would only know that there are bids but not exactly how many. Once the auction is closed, only information about the winning bid will be shared and no other price info of the other bids will be revealed.
Currently, the main use-case for Secret Auctions is to serve as an OTC marketplace for larger transactions. However, the Secret Network team hopes to add many more features to the app in the near future. This includes the support of custom tokens, better filtering and sorting, and a closed auction page to serve as a price discovery tool. Further out, the team also aims to expand their application to welcome all types of auction applications which includes auctions for NFTs. They also rule in the potential for ICOs, partial split winner auctions, proportional participation pricing models and so on.
They have also been actively engaged with their community members to get suggestions about possible future features to add into the application, making their future roadmap much more exciting.
2. Secret Garden - a token creator and manager
Secret Garden is a new community-built tool which provides a platform for users to create, manage and explore Secret tokens on Secret Network. Using this application, users have the option to mint, create and burn SNIP-20 tokens easily.
3. SecretSwap - a swap dex
SecretSwap is the first AMM to be launched in the Secret ecosystem, unlocking new liquidity for Secret tokens. Secret tokens are any native or off-chain (e.g. Ethereum assets) that can be bridged over by e.g. Secret Ethereum Bridge or the upcoming Secret Terra Bridge.
SecretSwap allows users to trade any of these Secret tokens for another Secret token. It essentially works the same as Uniswap and Sushiswap, but with lower costs and higher user security. For instance, all smart contracts on the network have encrypted inputs, outputs and states. This means that miners would not be able to front-run any orders that have been submitted to SecretSwap.
Network fees incurred for interacting with the dApp are paid out in $SCRT, just like all other Secret dApps. Eventually, as more bridges are built in the Secret ecosystem (e.g. the IBC integration, Binance Smart Chain Bridge, Plasm Network bridge to Polkadot, Monero Bridge and many more), SecretSwap will be an AMM to look at, providing a cross-chain, privacy-first, front-running resistant liquidity hub.
4. Secret Heroes - a NFT game
Secret Heroes is an NFT-based card battle game on Secret Network. Players will first have to purchase and mint a pack of fighter cards (NFTs) in packs of 3 for only 1 $SCRT. Each hero will come with a unique skin and 4 randomly-generated skills with different randomized stats: Weapons, Engineering, Biotech and Physics. There will be endless combinations to be collected.
Thereafter, players will have to choose their hero and send it to compete against two other players. A skill will be randomly chosen during each battle and the hero with the higher stat for that selected skill will win. With every win, the stats of the winning hero will improve. This increase in stat will increase when a player defeats a tougher opponent each time. On the other hand, stats will be lost when a player loses a battle. However, heroes will never fall below the base stats at the time of minting.
The Secret Network team also has the following scheduled for launch in November: Launchpad, Lending protocol, NFT platform
5. Shade Protocol - a private algorithmic stablecoin protocol
The Shade Protocol team is developing an algorithmic stablecoin called Silk. 1 Silk will be pegged to the value of $1 USD. The Silk token is built using the SNIP-20 token standard, making it the first stablecoin to have privacy by default.
Having a stablecoin native to the Secret Network chain will help to solve the stablecoin liquidity problem that currently exists on SecretSwap. Slippage ranges from 10% - 1500% depending on position sizes, making it difficult for users to exit into stable value. As a result, the majority of large position changes are in the form of SNIP-20 -> sETH -> Binance -> stablecoin. The Silk token aims to significantly increase stablecoin liquidity within the Secret Ecosystem. This will allow users to execute large position changes whilst still remaining within the Secret Network chain, and away from prying eyes.
You can read more about the Shade Protocol and how it works here.
6. Sienna Network - privacy-focused DeFi platform
Sienna Network aims to create decentralized banking and financial services which are by default completely private, highly scalable, and easy to use. Currently they are building a swap DEX - SiennaSwap, and a lending platform - SiennaLend.
Sienna Network is built on the Secret Network, empowering the DeFi sector with fully private smart contracts. This means that Sienna can verify and utilize sensitive data, and feed it into smart contracts, while at the same time ensuring that the data remains encrypted and protected.
Sienna Network is therefore able to verify private data from the world of traditional finance without ever compromising the identity of the holder of that data. In this way Sienna can support under-collateralized loans by utilizing real world credit scores to determine the loan collateralization ratio.
The user’s credit score will be verified on the blockchain and assigned to the user’s decentralized identity, which then can be used to obtain a more favorable collateralization ratio. The Sienna community will be able to decide the parameters for the collateralization ratio based on credit score parameters, previous history and behavior on the platform.
The Sienna Network whitepaper is available here
Dubious Valuation analysis
We can draw the analogy that Secret Network is a private Ethereum, similar to how Zcash is a private Bitcoin. Based on this analogy, we can compare their market cap in this way:
Zcash (‘privacy bitcoin’) : Bitcoin
Secret (‘privacy ‘ethereum’) : Ethereum
Bitcoin’s market cap is $845B.
Zcash’s market cap is $1.25B.
Bitcoin Market Cap : Zcash Market Cap = 676x
Ethereum’s market cap is $366B.
Secret’s market cap is $300M.
Ethereum Market Cap : Secret Market Cap = 1220x
Comparing the difference between the two:
1220 / 676 = ~1.8x
Hence in a dubious way, Secret has at least 2x more room to grow to catch up to the valuation for its privacy feature.
However, being a smart contract enabled network rather than just a token, it is likely that the secret network is able to generate far more value, which potentially justifies an even higher premium on its valuations than simply matching Zcash.
As the crypto space continues to grow, it seems inevitable that privacy will become a key area of development. Clearly, there already is demand for privacy within the crypto industry. Monero has a market cap of over $4.7 billion, Zcash has a market cap over $1 billion. The Tornado Cash protocol on Ethereum currently has over $740 million locked.
A fully private smart contract platform seems like the next logical step in the development of privacy-focused protocols.
Secret Network has a variable inflation rate that ranges from 7% - 15% based on the ratio of bonded to unbonded SCRT in relation to the target goal % bonded rate which is 67%.
Secret Network has a twenty-one day unbonding period, with a circulating supply of approximately 70 million SCRT and a total supply of approximately 190 million SCRT. Validator nodes can charge a commission rate on delegated SCRT.
Currently, the commission rate floor is 0%, with a maximum rate of 20%. The commission rate of validators is only capable of changing by up to 1% every twenty-four hours.
Separate from commission rate, there are two additional sets of fees on earned block rewards: the community fee (2%) and the Secret Foundation fee (15%).
The annual approximate ROI for Secret Network staking ranges between 22% to 27% depending on the validator of choice.
Staking $SCRT helps secure their network and lets you participate in community governance. With rewards currently above 20% annually, which is worth considering. Visit this webpage to learn more about staking: https://scrt.network/blog/staking-secrets-guide-to-staking-delegating-scrt
Some competitors of Secret Network include Aleph Zero and Phala Network.
Aleph Zero is a peer-reviewed DAG-based platform with private smart contracts. The ecosystem allows users to securely develop dApps driven by the speed and power of distributed ledger technology. Their privacy framework is compatible with all major chains, ensuring that all smart contracts can be synchronized and run seamlessly. Thanks to their trustless hub-and-spoke model, the security of a private network can be bridged with the accessibility of a public network. This ultimately helps to bring the internet towards a decentralized state in the future, ensuring that all networks are permissionless, shared and reliable.
Aleph Zero Roadmap: https://alephzero.org/#roadmap
Phala Network is a privacy-preserving cloud computing service built on Polkadot. Based on TEE-Blockchain Hybrid Architecture, Phala is securing smart contracts for dApps and DeFi against system-level attacks. The network seeks to provide strong guarantees of confidentiality without having the need to compromise on cross-contract interoperability. As a Polkadot parachain, this means that cross-chain interoperability of smart contracts within the network can securely and confidentially operate with assets on another blockchain.
Phala Network Roadmap: https://medium.com/phala-network/phala-parachain-roadmap-one-pager-a297441c1b10
Comparing Key Stats:
*Figures correct as of 1st October on CoinGecko.
As a new smart contract blockchain, there are many growing pains that the Secret Network must overcome. A recent example would be the incident on 13th September 2021, in which one of the smart contracts on the SecretSwap platform (one of the key protocols on Secret Network) was exploited. The vulnerability was exploited in a single smart contract out of the 250+ associated w/ SecretSwap. This allowed an attacker to drain funds that were locked in $SEFI staking contracts.
In order to minimize risk of loss of funds, multiple actions were taken:
1) bridges were disabled to prevent funds leaving the network
2) SecretSwap UI was disabled
3) CEXes disabled withdrawals and deposits
4) validators & devs began discussion of mitigation options
As demonstrated by this most recent hack, a single exploit could affect a significant proportion of users or funds on the network. Although no funds were lost, such exploits can also greatly reduce the market’s confidence in the Secret Network blockchain and team.
Full post-mortem is here: https://forum.scrt.network/t/earn-contract-exploit-post-mortem/4426
Given the ease with which the team was able to fully halt the chain, questions regarding the chain’s level of decentralization could also be brought up.
(Screenshot taken from https://secretnodes.com/ on 18 September 2021)
With almost 50% of the $SCRT supply bonded, and an unbonding time of 21 days, the potential sell-side pressure for $SCRT is somewhat limited.
Full roadmap with hyperlinks can be found here.
Overview of $SCRT from the start till 1st October 2021.
Based on fib retracements from the October 2020 rally to February’s 2021 top, $SCRT has likely bottomed out by bouncing off the 0.618 - 0.65 golden pocket.
Looking at the fib retracements from the current top to local bottom, it is also facing resistance in the golden pocket and will need to break through this level around $2.50, which would likely lead to a reversal into new all time highs.
Looking at fib extensions from 2020’s October rally to the local high back down to local bottom, it is likely to face resistance from 0.618 to 1.0, between $4.90 to $14.20.
Looking at a shorter time-frame of 1 Day charts, the Mayer Multiplier Band (the different colored bands), it is likely that the top is around $14, about 7x from here. This would bring the market cap around $2.1b ignoring additional inflation.
In terms of momentum indicators on the weekly timeframe, the RSI is above 50 and is in bullish momentum as long as it stays above the bullish level (>50). Stochastic RSI on the other hand looks toppish as it has started to point down.
In terms of Risk / Reward ratio, using the previous local low and speculative top, it gives an R/R of about 10 which is favourable.
The Secret Network project seems to be a natural extension of the overarching crypto-ethos. The progression from pseudonymity to anonymity increases freedom and privacy for users. It seems perfectly in line with the crypto ethos to give users the liberty to decide upon their own level of privacy, and what information they are willing to share with the public.
Secret Network has a first mover advantage in its quest to become the go-to privacy-focused smart contract platform. If the team continues to execute and build out its roadmap, it is quite possible that they continue to outpace any competition and achieve their goal of increasing privacy and freedom throughout the crypto industry.