Midnight: Cardano’s Privacy-Focused Sidechain
10/12/2023
On October 11th, 2023, Charles Hoskinson, CEO of Input Output and Founder of Cardano, was joined by Midnight CEO Eran Barak in a X (previously twitter) space to discuss Midnight. Eran was brought onto the Midnight team to help lead and build out the business unit creating Midnight, a new data protection protocol announced at Scot Fest 2022 in Edinburgh, Scotland.
Cardano’s commitment to innovation has reached new heights with the introduction of Midnight, a privacy-focused sidechain that has been in development for five years. Midnight leverages Cardano’s Layer 1 (L1) blockchain as a settlement layer to ensure privacy, thus inheriting Cardano’s strengths in security, scalability, and decentralization.
What is Midnight?
Midnight is a 4th generation blockchain designed to address the privacy concerns inherent in blockchain technology, offering a comprehensive solution for individuals and enterprises. It utilizes Zk-SNARK technology which is an Acronym for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” A zk-SNARK is a cryptographic proof that allows one party to prove it possesses certain information without revealing that information. This proof is made possible using a secret key created before the transaction takes place. Midnight plays a crucial role in protecting the identities of protocol users, ensuring that transactions remain confidential. The midnight blockchain is built to be regulation-friendly and GDPR compliant, thanks to Kachina, a next-generation virtual machine that facilitates private smart contracts.
Focus on Enterprise
Traditional industries, such as Enterprises, have been hesitant to embrace blockchain technology due to the lack of data privacy. Midnight, with its privacy-centric approach, aims to break down this barrier and offer a solution that goes beyond current market offerings. Enterprises face several challenges when adopting blockchain technology, and Midnight has taken these concerns into account.
Eran Barak, Midnight CEO, emphasized that the confidentiality of sensitive data is a top priority for enterprises. He explained, “No enterprise in their right mind is going to deploy dApps in the public sphere; they have to be protected.” Midnight not only safeguards data but also metadata, ensuring that the identities and transactions of participating parties remain private. The sidechain provides both public and private ledgers, allowing users to choose their level of disclosure.
In addition, Midnight prioritizes service availability to ensure that users can always access their data. For enterprises, this is vital, as downtime can be costly. Barak highlighted this by saying, “Imagine if you build the fastest train possible, but if you can’t get a ticket to that train, then it doesn’t really matter how fast that train is. We wanted to make sure you have access to the resources when you need them.” Midnight’s focus on service availability over speed mirrors the approach that Input Output Global successfully delivered with Cardano, which has maintained over five years of uninterrupted uptime, reinforcing the dedication to providing reliable and always-accessible services.
Midnight also places a strong emphasis on providing businesses with cost predictability and flexibility, simplifying budgeting through transparent fee structures. Furthermore, enterprises have the convenience of settling payments with fiat, alleviating the necessity of maintaining cryptocurrencies on their financial statements. This approach seamlessly bridges the gap between conventional finance and the dynamic realm of Web3, offering enhanced accessibility for businesses.
Midnight aims to position itself as a catalyst for the mass adoption of traditional finance (TradFi) within the blockchain industry. By offering a seamless bridge between TradFi and DeFi, it not only seeks to break down adoption barriers for traditional industries but also to position itself and Cardano as industry leaders in this transformative journey. Catering to businesses in multiple respects, focusing on enterprise success, and making it easy for businesses will be pivotal in achieving this seamless transition.
Midnight’s Unique Features
Midnight has its roots in the research outlined in the Input Output whitepaper titled “Minotaur,” which delves into the concept of multi-resource blockchain consensus, forming the foundation for this innovative privacy-focused sidechain. Charles Hoskinson elaborated, “Midnight is the most sophisticated product that Input Output Global has worked on from a technological standpoint.” Midnight is designed to be the first fourth-generation blockchain, inheriting capabilities from the last three generations while introducing multi-resource consensus, identity protection, ZK Snark technology, and private smart contracts to the market. Charles also added, “I think this is the thing that is really going to supercharge our ability to move into completely new industries and be the preferred bridge between traditional finance and DeFi.” Midnight’s unique approach to combining proof of work and proof of stake, is represented by Charles’s analogy, “Why do you have to separate your peanut butter and jelly? It would be great to put them together. I like PB&J sandwiches. So how about we do proof of work and proof of stake at the same time?” Midnight’s distinctive feature lies in its integration of multiple consensus mechanisms, marking a pioneering stride in the blockchain realm and opening new horizons for what can be achieved in this technology sector.
“I think it’s one of the biggest upgrades and enhancements to the broader Cardano ecosystems to have this service layer available and for applications to be able to call that capability and use that capability” — Charles Hoskinson
Conclusion
Midnight’s innovative approach to blending privacy, security, and versatility, combined with its unwavering focus on enterprise success and accessibility, positions it as a transformative force within the blockchain realm. As it seeks to break down adoption barriers for traditional industries and lead the way in mass TradFi adoption to the blockchain, Midnight, alongside Cardano, appears poised to take the helm as an industry leader in this exciting journey toward a more secure, interconnected, and decentralized future.
