HGR: Deciphering Enigma (ENG)

HGR: Deciphering Enigma (ENG)

Apr 23, 2018

Enigma’s overarching goal is to implement 1) a scalable off-chain smart contracts that preserves privacy of all data that flows in and out and 2) a decentralized data warehouse + marketplace.

In a previous article, we covered the privacy coin landscape. We believe that as cryptocurrencies and blockchain start to gain traction in the business world, there will be an increased need for privacy.

Enigma (ENG) aims to be a blockchain agnostic privacy protocol. This means that multiple blockchains such as Ethereum and NEO can utilize Enigma for private calculations and transactions. Enigma’s utility goes beyond privacy coins such as Monero and Zcoin, which only serves the singular purpose of being a currency that keeps your transactions private.

While Monero is commonly compared to a privacy-centric Bitcoin, Enigma is somewhat akin to a privacy-centric Ethereum. Using ENG’s “secret contracts”, developers can launch decentralized applications that preserves privacy of data on the blockchain. Enigma’s prime directive is to revolutionize the way data is shared, aggregated, and monetized through its decentralized protocol.

Enigma Overview

Enigma’s overarching goal is to implement 1) a scalable off-chain smart contracts that preserves privacy of all data that flows in and out and 2) a decentralized data warehouse + marketplace.

“The Enigma protocol is a second-layer, off-chain network that aims to solve the two biggest problems for blockchains: scalability and privacy. By enabling secure, decentralized data computation and exchange, Enigma allows blockchains to truly fulfill their powerful promise.”

Enigma is a very ambitious project that aims to solve the privacy issues facing blockchain technology. They are promising a revolutionary privacy-enabling protocol along with a suite of products to accompany it. The scope of Enigma’s projects is rather big (protocol, Catalyst, data marketplace, etc) and each one could almost be a startup by itself. That said, Enigma agrees that tackling privacy is their top priority right now and other issues like scalability and data storage will solved in a later stage. Enigma is a project in for the long run and, if successful, could change the landscape of blockchain technology.

Enigma’s Roadmap

Discovery: 2018 Q2 — Q3

To introduce the concept of “secret contracts”. Developers will be able to create smart contracts with all data and computation encrypted. Smart contract development going from Ethereum to Enigma should be seamless and require no change to the code, exception for a line to indicate the contract will be run privately.

Voyager: 2019 Q1 — Q2

Release a distributed VM that can run general-purpose secure multi-party computation (MPC). Enigma will also launch its own chain and allow dapps to transition to run on their network instead of Ethereum’s. This should increase scalability greatly while still using Ethereum as a parent-chain.

Valiant: 2019 Q4–2020 Q1

Further strengthen decentralization and scalability of the network. Network should be fully open and secure consensus at this point.

Defiant: 2020 Q3

Achieve complete chain-independence and potentially move the Enigma token off of Ethereum where it’d become a native coin in Enigma. Here Enigma does not need to rely on any other network for its backbone. Further security and decentralization improvements will continue to be made.

dApps

Catalyst

Catalyst is an open source tool for backtesting trading algos and can help execute trades on exchanges like Bittrex based on trading algos. Users write Python to create and test their trading algos. Catayst can also tap into datasets on the Enigma data marketplace. An example use case would be for a trader to continuously stream data, paid with ENG tokens, from the marketplace directly into training his/her machine learning model.

It is worth noting that Catalyst is not an entirely original product, it was forked off a popular backtesting tool called Zipline. That said, Engima’s continuous work on Catalyst is differentiating it from Zipline daily.

Data Marketplace

The Enigma Data Marketplace is a decentralized smart contract to coordinate the buying and selling of data sets. Through the smart contract, sellers register their datasets with details such as how often the data is updated and the subscription cost. Consumers can then gain access to datasets by paying a subscription fee. The contract essentially acts as a gateway to authenticate paid users to the datasets they subscribe to. The actual data lives off-chain.

As of right now, when consumers “ingest” data that they have subscribed to, the data is directly downloaded onto their machine. This means the paid data can be nefariously redistributed to non-payers. Until data on the marketplace can be consumed in an encrypted and private manner, the marketplace is currently unfit for distributors looking to put their data for sale.

It is currently deployed on the Ethereum mainnet, users can interact with the marketplace using ENG tokens.

ENG’s Highlights

Pedigreed team

Enigma boasts one of the more accomplished teams within the crypto universe. Co-Founder and CEO Guy Zyskind has a Master of Science from the Massachusetts Institutional of Technology (MIT) and has over 10 years of software development. Co-Founder and CPO Can Kisagun has an MBA from MIT and has worked at McKinsey. Other developers all have extensive and relevant work experience.

Enigma also has an all-star advisor team with individuals who have backgrounds from prominent hedge funds, budding startups, and incubators. Among them include world renowned computer scientist Alex Pentland (in 2011, Forbes named him one of the world’s seven most powerful data scientists along with a founder of Google and the CTO of the United States), and Kevin Zhou, co-founder of Galois Capital and former head of trading at Kraken. Enigma also has solid backing from institutions such as the Digital Currency Group and MIT.

Partnerships

Over the past few months, Enigma has not only continued to develop its product but also formed key partnerships with other blockchain firms to build momentum and speed up Enigma’s adoption.

1. Ethlend

Ethlend is the first decentralized lending marketplace. ENG will bring computational data to decentralized lending, which allows Ethlend to devise collateral management strategies by analyzing private user data.

2. Aion

Aion is a platform that aims to solve the problem of interoperability and scalability of blockchains. A partnership with Aion will allow Enigma to become blockchain agnostic and able to interact with any blockchain. This mutually beneficial partnership will provide security for Aion and allow Enigma to freely transact across multiple blockchains.

3. KyberNetwork

KyberNetwork allows for an instant exchange of crypto assets with guaranteed liquidity. KyberNetwork’s partnership mainly revolves around Enigma’s product — Catalyst. The collaboration of the two firms will allow for a safe and secure platform for the transaction of crypto assets in the future.

Potential to disrupt multibillion dollar industries

Enigma has the potential to disrupt several multibillion dollar industries. The Enigma team comprehensively covers Enigma’s Total Addressable Market in the its blog post (link).

To summarize:

  • Data Marketplace for Personal Data: $100 bn +
  • Computations on Genomic Data: $50 — $100 bn +
  • Artificial Intelligence on Healthcare Data: $50 — $100 bn
  • Credit Assessment / Decentralized Lending: $50 — $100 bn
  • Identity: $10 — $50 bn
  • IoT: $50 — $100 bn

Enigma Token Use Case

  1. A security deposit to ensure the integrity of the network (proof-of-stake)
  2. Fees to store and buy data on the platform
  3. Gas — fees for any computations on the network

Enigma vs zk-SNARKs

zk-SNARKs is expected to solve some aspects concerning privacy since it allows privacy for computations on small data sets, but it is not practical to be used on large datasets without having a centralized authority which is privy to the data. On the other hand, Enigma’s encryption of data allows multiple parties to run computations off the large data set. This allows companies to analyze the encrypted data and make informed decisions.

With all these milestones and catalysts (no pun intended) coming to light in 2018, we expect 2018 to be quite the year for Enigma.

Scalability Technology

Many blockchains today face scalability issues. The Enigma blockchain is unique. Unlike a traditional blockchain, it doesn’t need every node in the network to replicate all the computations and data storage — only a small subset performs each computation over different parts of the data. This decreased redundancy in computation and storage enables more complex computations. But as previously mentioned, privacy will be the primary focus before moving onto solving scalability.

Masternode Incentives

Enigma also plans to allow ENG holders to stake their ENG tokens (Rumors range between 10,000 to 15,000 tokens).

Masternode holders will compute transactions on the network. In the process, the Masternode will periodically produce ENG tokens for the Masternode holder. To stake a node, one must effectively lock up a supply of tokens. As supply shifts to the left and assuming demand stays constant, the price of ENG will appreciate.

Macro backdrop and legal catalysts

GDPR legislation coming out in May 2018 will harmonize data privacy across Europe. GDPR is designed to bring companies into compliance with new laws that allow individuals to identify who has their data, determine what the data is used for, and remove personal data if the individual so desires. The Enigma protocol is primed to capitalize on this as the protocol allows users to own their own data and choose how it is shared.

Regulatory Risks

The events leading to Enigma’s ICO was tainted when a hacker was able to gain access to Enigma’s mailing list, website, and Slack account because CEO Guy Zyskind failed to change a previously compromised password for his email account. The hacker tricked token buyers into sending Ethereum to his / her wallet and left with around $500,000 worth of Ethereum. The Enigma team then decided to increase the hard cap by 50% less than a week before the crowd sale (to $45 million).

As regulatory bodies are starting to scrutinize ICOs and their practices, these two events could draw more attention than the average ICO from regulatory bodies due to a lack of oversight and bad business practices.

Summary

If Guy Zyskind and the Engima team can set out and create what they intend Engima to be, we could see the rise of a new protocol which will rival Ethereum and NEO. As mentioned earlier, the Enigma project is very ambitious and will require many years and overcoming multiple hurdles to achieve its vision. Fundamentally, Enigma plans to tackle two key issues, which currently plague the crypto scene — privacy and scalability. Even if Enigma can achieve just one of its goals, we could expect the valuation of this protocol to multiply many times.

While the vision is grand and the project has a lot of potential, there hasn’t been any code release on the protocol itself so we cannot verify the project’s progress. We believe the Enigma Project to be an ideal case study in analyzing a token. On the business side the project looks great, they have a strong team, great vision and recently released a clear roadmap. However, due to the intricacies and multi disciplinary nature of crypto currencies we also have to look at the project Github and code. For a cryptocurrency to truly succeed, it not only has to be viable from a business side but also from a technical perspective.


This article was written by Strategic Coin’s partner and client HGR Digital Asset Group. It was originally published in HGR’s Medium blog.