Charles Hoskinson, the founder of Cardano, recently presented Midnight, a privacy-focused project that functions as a sidechain for the Cardano network.
What is Cardano’s privacy sidechain? It is a sidechain intended to safeguard sensitive business and personal data. It uses zk-SNARKs technology, a breakthrough that protects private data and transactions made by its users. Hoskinson explained that privacy is by default but indicated that an individual can “open the door for regulators and auditors to review accounts in a secure and fully traceable way, without exposing third-party data as a result.” It is undoubtedly a great feature of Midnight, but projects like Monero or Zcash already offer this, except for the Smart Contracts part, as the goal of such networks is not the same.
The trace of Midnight’s development within IOHK, the engineering company founded in 2015 by Hoskinson and Jeremy Wood to support Cardano, can be found in Kachina Protocol, a well-known white paper in the IOHK library. Kachina Protocol is a theoretical development for building a blockchain network with advanced Smart Contract capabilities built on zk-SNARKs technology. The project stands out for its modularity and the high integration it can achieve with Cardano. Introduced in May 2021, Kachina gave rise to Midnight, from which it has taken much of its advances.
Thanks to the Kachina protocol, the data protection provided by Midnight will allow the generation of DApps (Decentralized Applications) capable of safeguarding their users’ data and relationships with other spaces within the blockchain. This feature is especially useful in developing DeFi applications and any other where personal information may be attractive.
You can create all these DApps using the Web3 technology that Cardano is already developing. In principle, you can code DApps using languages such as TypeScript, which developers will add to the project’s technology stack.
However, it is still too early to speak with conviction about the relationship between Kachina and Midnight. The reason is that Midnight still needs to be operational. There needs to be a software repository that shows us its source code to know how it works. It is fundamental if we want to audit the project and verify its true claims.
We all know what Charles Hoskinson has said and what’s displayed on the Kachina project’s official website. Shockingly, the official website skirts the privacy rules it claims to want to protect. It asks for private data (name and email) if someone wants to know more. Undoubtedly, this is a negative point that we hope Hoskinson will resolve soon, although there are others he is facing with this project.
The Monero community quickly attacked the launch of Midnight, whose members have called it “a Trojanized fake privacy project.“
The tweet from the official Monero account is no longer available, but the jab at the project has endured. Hoskinson’s response to the attack has been:
“Backdoor? We don’t have a backdoor. But they’re experts on unreleased products they found out about through Coindesk. Or do they mean my love of swag? We could always do an NFT deal with Mr. mix-a-lot…“
The “Mr. mix-a-lot” thing alludes to Monero and its operating scheme. It has bulletproof ring signatures and a ZKP (Zero Knowledge Proof) cryptocurrency scheme designed by Monero, which has proven to be the most secure and private one in the crypto ecosystem.
The scheme is so secure that even Chainalysis cannot track its operations, which makes it clear that Monero is in the league of cryptocurrencies with solid privacy. However, Hoskinson scoffs at it. For what reason?
Monero’s retort is not entirely incorrect; Midnight has a “backdoor” in that it allows an authority to request a review or audit and access the data required once permission is requested. In Midnight’s presentation, Hoskinson expressed that the person’s approval is needed to grant access. Without such consent, no one can see what is happening in an account within Midnight.
Lack of clarity from Hoskinson
The problem is that Cardano’s leader needs to bring more real clarity to the charge. While Hoskinson may be an authority in the crypto world, his word is not above the absolute truth that only the source code can bring: “The code is the Law,” goes the mantra. Since Cardano has not yet disclosed Midnight’s source, there is no way to corroborate the security of this project, at least for the time being. The only thing that exists is the word of Hoskinson, who, unsurprisingly, speaks highly of his project.
Midnight joins the long list of projects focused on privacy in the blockchain world. With Midnight, the ecosystem has more than 95 projects focused on privacy, according to CoinMarketCap data. Except for a few, most are in apparent decline and disuse.
Monero remains the strongest privacy project with the most organization, followed by Zcash and Dash. The other projects, such as MimbleWimble, PIVX, or Firo, have long suffered from a drop in markets and development levels. The latter represents an attack on their heart.
Simplicity is key to the use of privacy tools
The question is whether Midnight will be widely accepted and used. So far, the reality indicates that the opposite will be the case. Even privacy solutions on Ethereum have little acceptance and tangible impact on the ecosystem. Users employ day-to-day ecosystem solutions such as Bitcoin and Monero’s CoinJoin. The reason is straightforward: making them work without tools other than a wallet is possible.
Simplicity plays in favor of these privacy tools. First of all, they do not require a DApp. In addition, users can shield themselves beyond what the protocol allows (e.g., by adding connectivity through networks such as Tor or I2P). And finally, they do not require a central point. For example, developers deploy the interface of a DApp on a server, but in contrast, a CoinJoin lives within the Bitcoin network itself. In the end, when looking for privacy, less is more, and simple is much better than complex.