The second wave of blockchain technology emerged the moment Ethereum introduced the concept of Smart contracts, which are used by several non-cryptocurrency based blockchain platforms. Smart contracts, otherwise known as digital contracts, blockchain contracts, or self-executing contracts, allow for decentralized applications (dApps) that work on a blockchain, which means that everyone can read the code, know when it is being executed, and to inspect the results. Smart Contracts also allow dApps to run autonomously without the need for a central server, company or middleman to handle running costs and administration, which allows a service to exist without any maintenance costs or administrational responsibility. Also, the code is run everywhere, on every node in the blockchain, at the same time, so you don’t have to trust the entity running the code. This means that an invalid result will be noticed and invalidated by the network itself.
However, the problem with Ethereum Smart Contracts is that they are severely limited. Every Smart Contract has to be stored on the blockchain, which could quickly take up a lot of space. In addition, since executing a function of a Smart Contract takes up CPU time, and the total amount of CPU on any given node is limited, developers must pay in ether (called “gas”) to build applications and smart contracts on the Ethereum platform (blockchain), and users have to pay in ether to run them.
It should be noted that another restriction exists – the limits to the size of a Smart Contract itself. There are about 1,000 lines of code to work with. However, this number can vary depending on how complex the contract is.
The price of Ether has risen dramatically since inception from under $10 in 2016 to almost $690 in March 2018. This means that you can expect to spend about $40 to deploy a Smart Contract, and anywhere from $0.30 to $1.00 to execute a function. It’s important to note that these prices are just estimates. However, you can see how those costs can add up quickly.
One more thing worth noting is that Smart contracts are completely public and transparent by design (like everything else on blockchain), which is the final aspect that’s limiting their adoption. Every function called, along with its input and output, can be seen by any Ethereum node, meaning anyone can read the codebase of every public Smart contract. The potential use cases for these types of contracts are limited because most companies want to keep both their algorithms and their data private and secure.
The Enigma Protocol
Enigma is a crypto platform that’s trying to solve the problem of privacy on the blockchain by giving them access to much-needed storage, privacy, and scalability.
Enigma wants to extend Ethereum Smart Contracts by introducing secret contracts, a brand of smart contract that gives users an element of privacy that’s not intrinsic to current blockchain protocols. These contracts operate off-chain, meaning the execution of the Smart Contract doesn’t occur on the Ethereum blockchain itself. This is how the Enigma protocol works: it breaks up the Smart Contract and any related data into pieces, encrypts those pieces, and distributes them redundantly among Enigma nodes.
Enigma will use secure multiparty computations (MPCs) and an off-chain distributed hash-table (DHT) to ensure data privacy. The MPCs distributes data between nodes on the network, splitting the encrypted information into separate pieces to ensure its safety. Using advanced cryptography techniques, those nodes are able to perform calculations described by their piece of the Smart Contract on the encrypted data and return valid results – all data is split between different nodes, and they compute functions together without leaking information to other nodes. As smaller parts are executed, the results are combined and fed onto the next part of the Smart Contract on other nodes. The process continues until the final result is known. The results from each node can be checked along the way in order to ensure correctness, but at no stage does an off-chain node receive a full view of the complete computation at hand.
In the image below you can see how computations are passed along in Enigma:
Enigma Smart Contracts can be more complex than standard Ethereum Smart Contracts due to the fact that the computations happen off chain. Also, it will be far easier to scale the network because they only execute on a subset of Enigma nodes.
Integration of Ethereum
With Enigma, users can enjoy the full-proof certainty of an immutable public ledger (the blockchain) with the security and secrecy of an off-chain, encrypted storage option (Enigma), which gives Enigma the ability to store data privately while also providing public proof that a transaction was executed on the blockchain.
Enigma tokens (ENG) are the native currency of the Enigma ecosystem and they will be used to pay for Enigma nodes, with a value based on the complexity of the Smart Contract executed and the amount of data stored. Enigma will also make use of the Ethereum blockchain for access control. This means that a user will be able to determine who can call their Smart Contract and what functions they can execute.
It’s important to note that not every node is responsible for storing information sent to the network and that the Enigma’s network reduction technique selects nodes for any given project based on its performance ability and reputation. This ensures that only the right nodes take on a task based on its computational demand and that the network is being optimally utilized.
Check out our guide on the next big cryptocurrency.
Node operators will receive fees – not mining rewards – for their efforts. To keep them honest and ensure that the nodes’ computations are accurate, full node operators must make a security deposit that each must pay in Bitcoin in order to join the network, and will be penalized for bad actions as determined by the Enigma network.
The first application built on Enigma’s foundation is a crypto analysis and trading platform called Catalyst, Enigma’s flagship dApp. The term “Catalyst” is chosen in order to accelerate the adoption of the Enigma platform.
Catalyst makes use of a marketplace where users can curate, share, and swap data to build crypto investment strategies. The main goal of this platform is to serve as a one-stop shop for developers who can use it to design trading algorithms, back test their strategies with real data hosted on Enigma, and then let them lose on live markets.
Over time, Catalyst will become a market itself, where users can subscribe to the best trading algorithms and developers can market their algorithms and earn a ‘royalty’ fee when their algorithms are used without having to stake their own money. It’s important to note that the algorithms run on top of Enigma. This means that the developers won’t have to reveal their algorithms and run the risk of copy-cats.
Catalyst will also help the Enigma team to build a next-generation data marketplace, where sellers could offer niche data that can be incorporated into the trading algorithms. The data will be hosted in Enigma, which means that trading algorithms will be able to make use of it without actually seeing the data. Thanks to this, the data brokers won’t have to worry about it becoming publicly available.
Enigma’s general data marketplace will serve the same function as Catalyst for anything from healthcare institutions to tax records. The application/usability of this data is only limited to the imagination of those who choose to use the marketplace.
The Enigma Team
Enigma has a team of MIT graduates, and they’ve been working diligently to ensure Enigma’s success.
Guy Zyskind, Enigma’s CEO and cofounder, helped start the project while he was still a student at MIT. He has more than a decade of software development experience with an M.S. from MIT. Enigma’s chief product officer is Can Kisagun. He has experience with a handful of tech startups, and worked at McKinsey & Company as a business analyst after completing his MBA.
Sandy Pentland, a well known MIT data scientist who gained fame for his work in data-mining social interactions, is Zyskind and Nathan’s adviser on Enigma. With other advisors such as Alex Pentland, who sits on the Advisory Boards for Google and Nissan, CEO of Abra, Bill Barhydt and director of MIT media lab, Prof. Alex Pentland, it is hard to difficult a fault in the team.
Overall, it’s pretty clear to see that this is a highly capable team.
Where to Buy and Store Enigma?
You can’t purchase Enigma with a credit card. This means that you’ll have to use one of the crypto exchanges – Enigma’s dominant markets are on Binance, Bittrex, and Huobi. You can trade Enigma for both Bitcoin and Ethereum on all three of those crypto exchanges.
Before owning any Enigma, you need somewhere to store them. Enigma is an Ethereum-based token which means it can be safely stored on any ERC-20 compatible wallets (e.g., Ledger Nano S, MyEtherWallet, Trezor, Parity, MetaMask, etc.).
Enigma is an enormous protocol that is addressing two of the shortfalls of current blockchains – privacy and scalability. This will make them far more attractive to large businesses.
But the protocol isn’t implemented yet. However, the project is incredibly ambitions and the Enigma team sees a plethora of applications and use cases for their project, “including finance, health, identity, and credit.”
It’s rare to come across such a unique project with a dedicated, vetted team, mostly from MIT, striving to make conception a reality, but they have a long way to go before they’ll be able to fully realize their vision.
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com