Privacy in Cosmos: Live in Amsterdam Recap
Privacy in Cosmos: Live in Amsterdam is the final event in the Privacy in Cosmos series hosted by ZKValidator and funded by the Cosmos Hub. The event took place on 15th April 2022 in Amsterdam and was the grand finale to the four-part Privacy in Cosmos series, with the previous three events being virtual. The event was recorded and all the talks and panel discussions can be viewed through the link here.
Follow ZKValidator on Twitter to hear about future events and to support the validator directly, you can stake your ATOM here, Evmos here and OSMO here.
Event Summary (TLDR)
- The architecture of Cosmos chains separates the network, consensus and application layer. This gives a platform to add privacy to each layer.
- For privacy tools to be effective, each layer should be considered. Solutions offered by Anoma and Nym have been designed to cover privacy in each layer.
- It is insufficient to implore people to care about privacy, instead as a result of privacy, the user should get a tangible economic benefit. This is the design philosophy behind Penumbra where keeping a trading strategy private delivers such a benefit.
- Interchain security and accounts, features recently deployed in the latest Cosmos Hub upgrade will enable blockchains to use the Hub validator set and transact on a separate blockchain through an account on a different blockchain.
- Such features are underpinned by IBC which has many new developments planned including the implementation of relayer incentives, cross chain queries, NFT transfer, multi-hop routing and improved connection and channel upgradability.
- Light clients suitable for implementing IBC on other blockchains outside of the Cosmos ecosystem are also in the works for chains including Polkadot, Celo, Near and Algorand.
- Beyond privacy in Cosmos, Evmos are developing the first EVM compatible chain in the ecosystem, Axelar are expanding interoperability with other blockchains including Avalanche, Polygon and Ethereum, and Quicksilver are implementing liquid staking with retained governance rights for Cosmos assets.
Introduction
Throughout the Privacy in Cosmos event series, the events have been designed to showcase projects implementing privacy and zero knowledge technology within the Cosmos ecosystem. However, to build a better understanding of the context these privacy projects exist within, we recognised that it is important to also showcase high profile projects that are innovating within the wider Cosmos ecosystem. Accordingly, the themes within our virtual events moved beyond privacy alone straddling DeFi and blockchain scaling to paint a clear picture of the landscape Cosmos privacy projects operate within. In this final event, we incorporated all of the themes from the previous events. We invited privacy projects that were previously showcased alongside other projects that are developing new functionality for the Cosmos ecosystem. With this in mind, this event summary is split into three subject areas: 1) The broader Cosmos context, 2) Privacy focused innovations within the Cosmos, 3) Non-private innovations in the Cosmos ecosystem.
The Broader Cosmos Context
Content for this section was drawn from the following talks and panel discussions: Billy Rennekamp, Zaki Manian, Carlos Rodríguez Vega , validator panel
The core philosophy behind the Cosmos ecosystem is to have sovereign interoperability meaning there are application specific blockchains that do not have dependencies and can upgrade independently. Through separation of the network, consensus and application layers of Cosmos chains, there is a platform to innovate and add privacy to each one of these layers. For example, projects on Secret Network are adding privacy to the application layer, Osmosis to the consensus layer through threshold decryption and projects such as Nym and Penumbra are innovating at the network layer.
Beyond the architecture of Cosmos blockchains, the Cosmos Hub has developed features that provide ecosystem developers with new innovation opportunities. Interchain Security enables blockchains to use the Hub validator set rather than bootstrap their own, leaning into the already established security of the Cosmos Hub. This also creates the possibility for validation and governance roles to be separated between the Hub and consumer chain that is using the validator set. The recently launched Interchain accounts enables users to transact on a different blockchain through their account on a separate blockchain. For instance, this could open the door to use cases such as depositing your UST into Anchor protocol on the terra blockchain with one click from your Osmosis account. Both of these features are underpinned by IBC, which has certainly been the cornerstone of Cosmos interoperability.
IBC is the trustless cross chain messaging protocol that uses light clients to track the consensus state of the counterparty chain a message is sent from. Relayers transmit the data packets and submit merkle proofs to light clients. The IBC roadmap also has many exciting new developments planned including relayer incentives, cross chain queries, NFT transfer, multi-hop routing and improved connection and channel upgradability. There is also much work in progress to develop light clients suitable for the consensus mechanisms of other blockchains including substrate based chains, Celo, Near and Algorand so the protocol can be adopted by chains that do not have tendermint based consensus. Although still in the early stages of development, zero knowledge proofs could be applied to the IBC protocol. For instance, zkSNARKs could be used for compression to update light clients on chain or for merkle proof generation and zkps could be used for shielding transactions over IBC.
With a plethora of new features in the Cosmos ecosystem, it is encouraging to see that in 2021, Cosmos had the third largest developer community behind only Ethereum and Polkadot. Yet onboarding into the Cosmos technology stack does not appear to be trivial despite extensive documentation. The highly decentralised nature of the Cosmos ecosystem, where research, implementation and go to market are often separate, has resulted in there being no central entity responsible for onboarding new developers. Knowledge transfer appears to be difficult with most successful projects in the ecosystem having some inherent connection such as being a prior tendermint employee. For new developers, a successful path to onboarding has been through leveraging people in the space with domain expertise. Beyond mentors, schemes such as the Interchain developer academy should also help to ease the transition into developing in the Cosmos ecosystem.
Privacy in Cosmos
Content for this section was drawn from the following talks and panel discussions: Penumbra, Nym, Anoma, bridging panel, privacy panel
A recurrent theme when discussing privacy was the notion that it is not enough to use a single privacy tool in isolation, instead an end-to-end solution considering network, consensus and the application is required. Some existing privacy solutions do not cover all of these elements or have other inherent drawbacks. For example, off-chain payment solutions such as lightning network or plasma cash don’t prevent timing correlation, Monero has 1 member from a group of 8 signing a transaction which also does not hide timestamps and is a small group size. Zcash uses zk proofs to hide the sender, receiver and transaction amount but time signatures are not hidden and the application isn’t integrated with network level privacy.
Solutions developed by Anoma and Nym and have considered privacy at each layer from network through to application. Anoma, still in development, will launch a multi-asset shielded pool with end to end privacy, IBC and private bridges. Nym, which launched mainnet this month, uses an enhanced mixnet for network level privacy, where transactions go through multiple hops with cover traffic and timing obfuscation at each hop. As well as the mixnet, Nym implemented a cryptographic signing scheme, Coconut, that allows third party applications to anonymise key value pairs enabling selective disclosure. The scheme was designed to move away from the question typically asked in secure systems of who is making an action towards whether this entity has the right to do the action. The system uses blind signing, with message contents hidden using zkps. The final element of Nym is the Cosmos blockchain that has IBC enabled and cosmwasm smart contracts.
Simply telling people they should care about privacy does not convince users to care and instead privacy solutions should provide a tangible benefit to users. Penumbra is building a private proof of stake network with cross-chain shielded pools, a private DEX and private market making and staking functionality. Because there is an economic incentive to copy successful traders’ strategies, Penumbra views the privacy that the blockchain enables as a direct economic benefit to users. In developing Penumbra, the biggest challenge has been the state model. For a shielded blockchain, rather than each transaction updating a global state, a state fragment applies a transaction and a zkp of a valid state transition is submitted. A batching technique is used to group together multiple encrypted transactions as illustrated in the flowchart above. As there is no transaction visibility prior to processing there is effectively no opportunity for MEV (miner extractable value).
Recent Developments beyond Privacy in Cosmos
Content for this section was drawn from the following talks and panel discussions: Evmos, Axelar, Quicksilver
Beyond privacy, projects in the Cosmos ecosystem have been working on a variety of applications. Evmos have been working towards EVM compatibility, Axelar are enabling interoperability with other L1’s including Avalanche, Polkadot and Ethereum, Quicksilver are implementing liquid-staking in the Cosmos ecosystem and Stargaze are creating the first NFT marketplace for Cosmos.
Evmos designed their EVM compatible blockchain to align token incentives for all stakeholders in the ecosystem. They observed a conflict between developers and miners when EIP-1559 was introduced. EIP-1559 aimed to change transaction fees to make them more predictable for users. Previously miners would receive transaction fees and block rewards, after EIP-1559 the transaction fee is burnt and replaced with tips instead. Evmos saw an opportunity to incentivise validators and developers by splitting fees from the dApp store between both groups. 25% of the genesis token supply is also committed to user and developer incentives. A governance proposal can be created and once approved it would reward users and developers with the gas fees from specific transactions. This incentive structure is in contrast to alternative layer 1 incentive programs, such as that on Polygon or Avalanche where it is an unsustainable finite amount which rewards total value locked rather than active users. However, a criticism for the Evmos incentive scheme was that it could incentivise developers to not optimise for gas but this behaviour could be managed through governance.
Axelar is a proof of stake blockchain with tendermint consensus that enables users to transfer assets and execute transactions on other blockchains from any wallet. Currently Axelar provides interoperability with Ethereum, Avalanche, Cosmos and Polkadot. Messages are translated for each of these chains at the network layer and users pay fees at the source chain. The aim is to go beyond risky bridges with one to one connections and enable users to have a simple multi-chain experience with one click.
Quicksilver, a liquid staking zone, identified that there is a competition between staking and DeFi in the Cosmos ecosystem because the staking APY is relatively high. At the same time, only 5% of staked assets in the ecosystem are slashable meaning liquid staking with qAssets is possible and these qAsstes can be used in DeFi applications, eliminating the competition between staking and DeFi. Another feature that is planned for launch is to retain your governance rights through using the Quicksilver protocol.
Event Metrics
408 people registered for the event and 218 participants attended throughout the duration of the event. Feedback from the event was positive with all respondents rating the event 5/5 and considering privacy to be either 4 or 5/5 in terms of importance. In terms of budget, 3350 ATOM was allocated for the event using a 30 day moving average price of $29.72 the expenditure is detailed in the table below, 3248 ATOM was spent on the event.
Conclusion
The final privacy in Cosmos event showcased privacy projects in the Cosmos ecosystem and gave a broader context of the environment these projects exist within. With Cosmos blockchains having separate network, consensus and application layers, there is a lot of opportunity for projects to innovate and add privacy to each layer. Recent developments and upgrades to the Cosmos Hub, such as interchain security and interchain accounts are also enabling new functionality paradigms for Cosmos based chains. Although these features may not natively support privacy, we hope to see continued innovation in the realm of privacy.
To stay up to date with ZKValidator, follow us on Twitter and feel free to reach out directly to events@zkvalidator.com with any questions you may have.
