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ARPA: a private layer two solution

While Reuters still reports that cryptocurrencies are all anonymous and frequently misused by criminals, the savvy crypto enthusiast is aware that this isn’t the case. One major appeal of Blockchain technology is that it hosts a public ledger that anyone can check.

However, this comes with a downside in regards to privacy. While all addresses consist of a long combination of numbers and characters, chain analysis companies are getting better at identifying the individuals behind the wallet.

One use case that blockchain was poised to serve incredibly well is the data economy. Who hasn’t heard the phrase that Data is the new oil? This phrase is used to illustrate how important data has become, and it’s feeding whole industries that make a living by just analyzing and selling data. Unfortunately, when doing so individual’s privacy isn’t always protected.

ARPA has built a blockchain-based solution that offers a way to process and analyze data without revealing it. This is made possible by the advent of Multi-Party Computation.

Multi-Party Computation

Multi-party computation is also known as secure computation or privacy-preserving computation. It describes a cryptography protocol that was first launched in the 1970s. MPC provides tools for multiple parties to compute data together — without revealing it.

Usually, when companies wanted to have their data analyzed, outsourcing it to a third party and giving that party access to the data itself, with multi-party computation that isn’t necessary anymore. It allows processing data privately and correctly. All parties only have access to the required outputs, while all other variables are kept private.

Any Multi-party computation setup is created with the assumption that a few parties might carry out malicious tasks to ensure that data computation will be correct despite malicious actors.

The benefits of MPC include that it decreases dependency on third parties, maintains data usability and privacy, encrypts all data, and is regulatory compliant. However, it does require high computational effort.

ARPA

ARPA leverages the tools provided by Multi-Party Computation to create a secure computation network that can function as a layer 2 solution on any blockchain system.

While many layer 2 solutions are limited in their utility to specific blockchain networks such as Raiden for Ethereum and Lightning to Bitcoin, ARPA is blockchain agnostic. The network uses proxy smart contracts that build a bridge between the blockchain and the ARPA ecosystem.

The network itself consists of two different layers:

  • Protocol layer: A permissionless network anyone can join by contributing their computing resources and running a node. Nodes are given economic incentives to stay online and, depending on the stake they hold, qualify to vote in the election of computing nodes. The protocol layer also hosts the credit system for MPC nodes and reports node behavior.
  • Computation layer: this is the layer on which the actual computation happens. It guarantees the security and privacy of the computation process while penalizing malicious nodes.

The usual flow for a computation is that first, the computation request will be received on the application layer (dApps, individuals, or businesses looking to compute a dataset). Once the smart contract receives a deposit — every request needs a deposit in ARPA to be processed — and all other required information, ARPA nodes will randomly select a quorum of computation nodes. Once the computation is complete, these nodes will pass the results to the proxy smart contract to report it back to the original chain or dApp requesting the computation.

A major reason for ARPA to create a network that works off-chain is the inefficiency and cost of running computations on Ethereum. As anyone ever having used the Ethereum blockchain has experienced, it can consume huge amounts of gas and resources to conduct small transactions — let alone bigger computations.

Participants in the ARPA ecosystem include:

  • Nodes are holding up the network. Anyone can run a node as long as they can ensure high availability, strong computing power, and a fast, reliable internet connection
  • Data providers are individuals and businesses who sit on under-utilized data sets.
  • Model providers are individual developers or institutions that have data models they want to monetize. By providing them through ARPA, they can easily monetize their models in return for tokens.
  • Data/Model backers can also be individuals or businesses that invest in public datasets and models. They receive a share of the revenue in tokens.

Potential Usecases for ARPA include industries ranging from finance to medicine and advertising.

In crypto, ARPA could alleviate the problem of exchanges not providing accurate volume figures. Arguably, exchanges don’t want to disclose all the assets on their balance sheets, but regardless traders want to see if exchanges have enough liquidity. WIth ARPA, it’d be possible for exchanges to report their data on liquidity without having to reveal it to traders, while traders would receive the information they were looking for.

ARPA token

The native token of the platform ARPA is used for payments to compensate computation nodes, as a deposit to request computation, put up as stake for nodes to ensure that they fulfill their job and for community governance. Holders above a certain threshold are eligible to vote on proposals.

As a blockchain-agnostic computation layer that doesn’t strain the main chain, ARPA has nearly endless potential platforms to function with. It also solves the dilemma of having a large data set that one can’t compute without breaching individual privacy — which could contribute positively in fields from finance to medicine. ARPA also enables developers to integrate their privacy-enhancing computing power without any knowledge of cryptography.

ARPA is now trading on Bitcoin.com Exchange with BTC and USDT pairs.

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