NewsCrypto x Secret Network - Leading the way in privacy and interoperability Privacy has been one of the guiding principles behind cryptocurrency and blockchain from its inception, but it took a long time for it to be implemented in the core architecture of only a few blockchain protocols.
Unfortunately, privacy (and by extension data security) has often been incorporated as merely an add-on in the form of coin mixers and other similar protocols instead of a fundamental architecture design implementation. With the rise of DeFi, the need for privacy took an unprecedented new form.
Lack of privacy by default on a range of layer-1 blockchains meant new dApps and their users inherited not only security risks, but also direct economic disadvantages such as miner extractable value (MEV).
That’s why NewsCrypto is proud to announce that we’ve partnered up with Secret Network, the first protocol to enable not just transactional privacy (i.e. having your token balances and transactions hidden), but also computational privacy by default (i.e. executing smart contracts in an encrypted computational environment, but with all the verifiability that comes with blockchains).
This latter form of privacy isn’t merely something that you might want to opt in to for personal reasons and for data protections, but also because it’s the only way to avoid front-running and potentially losing money on every transaction on a decentralized exchange.
So what exactly is front-running and why is it so ubiquitous on traditional blockchains? The thing is, when you submit a transaction to buy a token on a decentralized exchange, all the transaction data is visible in the set of unconfirmed transactions called the mempool. An attacker can then see your transaction, and submit two transactions of their own: one to buy the same token, with a slightly higher gas price than your transaction, and another to sell it, with a slightly lower gas price.
That way, the attacker buys the token for the current price - the same price for which you intended to buy it - and by doing so, the price automatically goes up. Then, when you buy the token for this higher price, your transaction will drive the price up even more, at which point the attacker’s sell order will be confirmed. Overall, you get a worse price, and the attacker makes a quick profit. On a blockchain such as Ethereum, there’s simply no way to completely solve this problem. Since transactions are public and anyone can set any gas price they choose, front-running can only be partly mitigated through different mechanisms, but not completely eliminated. That’s where Secret Network comes in, as it encrypts not only confirmed transactions and token balances, but also the pending transactions in the mempool. This way, no one can see this data - not even the validator nodes that confirm them - which makes front-running completely impossible. The exact way this works is extremely fascinating, and that’s why we’ll cover it in a new and updated Fundamental Analysis report about Secret Network, which will be released soon, and we’ll also add a section in the upcoming NewsCrypto Academy 3.0 dedicated to explaining this and other advantages of computational privacy for DeFi and secret dApps. Another important thing to mention is that the Secret Network is built on top of the Cosmos ecosystem - a network that’s leading the way in scalability and interoperability between different blockchains. We believe that interoperability will be a crucial part of wider adoption and new use cases for blockchains, which is why we’ll also be working with Secret on bringing novel solutions in this exciting new area to benefit both our ecosystems. More on the different aspects of our partnership will be revealed soon, so be sure to stay tuned on our social media pages!