Sam has been running a node in Incognito for about two weeks now to see how it works and is a big proponent of privacy and this project.
How did Incognito come about?
We face the privacy issue at the beginning of 2018. We paid our first payroll to 18-20 people in a stablecoin. The first thing everyone did was check everyone else’ salary which is not helpful. This was the first time we started to think about how we could create privacy to make sure this did not happen again.
In the next 5 to 10 years, money and assets will be tokenised; so you will want privacy once everything exist is in the digital world. You don’t want your friends and colleagues tracking your wallet address. We know that other privacy chains exist like Monero and ZCash. We wanted to build something universal that could be used everywhere. I would like to highlight that Incognito is a privacy sidechain, and right now, it is implemented with a trustless bridge to the Ethereum chain. In the long term, Incognito will be privacy top and can power privacy for any digital asset. The original use case was for payroll. That was the first thing which we used in daily life. There is another thing which is more fundamental; your transaction history is linked to your wallet. The people who you do payment with link to your KYC. We don’t know how this information can be used against users in the future. It is my personal belief that there are bigger fundamental issues here in terms of privacy.
We are talking about token analysis companies who are building a complete picture of who we are transacting with using chain data analysis to determine if someone is a bad actor who needs to be cut off from the financial system.
How it works: Technically, Incognito works as a privacy side chain to the Ethereum network. It runs in parallel with the Ethereum network. To connect these chains, there are two smart contracts that connect to each other. If someone wants to send 5 ETH privately, you deposit this ETH onto Incognito. Then Ethereum network using a smart contract mints 5 private Ether on the Incognito sidechain. This private Ether is untraceable because we use ring signatures like Monero. No one check your wallet address or your transactions. We also implemented ZKP; there is a root-only key to show up manually to people you choose. Your private Ether in Incognito acts like Monero. So on the incognito wallet, you click withdrawal. Your 2 private ether is burnt in Incognito and the Ether is sent back via smart contract back to your public Ethereum wallet.
How do you secure against malicious attacks or burn contract attacks? Mint proof and Burn proof are public executions of smart contract, so they are on-chain and proveable to the community. Minting and burning information is public information. It is a series of validators that runs the network and they stake incognito as validators. It is a proof of stake network with a series of validators. Validators must stake 1750 Incognito tokens to be a validators. The network is three months old. Our token value is stable at about $.45. This means to run a node is about $750-800 dollars staked.
Another unique feature of Incognito is that we designed our own physical node device which powers our network, and you probably saw it on our website. Technically, it is a physical plug and play validation node. My grandma and mother can do this if she gets this as a gift even she can become a validator. If we believe this is the future, it must be used everywhere. We brainstormed how to get 1,000 validators. We found this device and our founder has a history of smart device production. His experience helped us to come up with this design and our technical team came up with the execution. This physical device is easy to use and it validates our network and has block rewards. You can earn any kind of currency including Ether, Bitcoin and of course our native token.
The idea to use collateral like DAI… minted tokens are backed one to one. Have you looked at Ren Project? They are creating RenBTC tokens and move them onto the Ethereum Network. These RenBTC ERC 20 tokens can be deposited onto Incognito.
If you receive all your Ether privately, but you think you need to trade it because the price is going to go down. You need to trade it; PDEX is a private swap like AtomicSwap. It is cross between Atomic Swaps and UniSwaps. It is also a cross-chain DEX that happened organically. We can be a sidechain to any protocol in the market. We can very easily make a swap for them. The PDEX is live and working now. The question of the liquidity pool exists and we are talking to Monero about DApps.
What is coming in 2020 for Incognito? We are three months old. There are around 970 validators at this moment. Half are physical node; half are virtual nodes. Our goal is to double the validators to 2000 this year. We also want to promote PDEX between chains like Monero, Ether, Bitcoin… it is like Ren Project but it will be untraceable. By the end of 2020, we are talking to ZCash to help them build the bridge to Ethereum chain. We would like to launch our mission to officially help any project to build privacy chains to any protocol and this can be the year of privacy 2020. We have got some great support from Constant. They accept PRV as staking and they run staking PRV validators on our network. Technically we have about 7,000,000 PRV in circulation right now. We are a fully self-funded team and we delivered our product by ourselves.
When you buy a node device, you don’t have to stake directly. There are pools for node staking which the physical device borrows 1750 tokens from. When the node returns 1750 tokens, it starts earning 100% of the block rewards. Return on investment should be around 10 months to 1 year (100$ a month on average return – it varies over time). We don’t want to promise too much.
When privacy becomes mainstream, I believe PRV will be everywhere. Our goal is not to make PRV tradeable everywhere; it is to bring all these assets into Incognito and be the leader in public chains for Privacy provision. Incognito wants to be privacy layer 2 network and bring assets onto their network.
Will there be a desktop client coming soon for Incognito wallet? We went to mobile-first. We are brainstorming the next development which will be Q2 desktop version launch. We are trying to listen to what users want. ZKP on Mobile before Incognito was super complex.
Two weeks ago ZCash team announced that they have ZKP on mobile finally. What did you have to do to enable ZKP transactions on Mobile? We built a ZKP library on C and Go which connects to Android/IOS framework.
We are going to build a trustless bridge to Bitcoin and Binance. We are going to build a bridge between privacy coins and public exchanges via Incognito. Our cross PDEX will make it possible to swap your Bitcoin or Ether to Monero without any trace.
Aren’t there regulatory issues with that? If we succeed, then regulatory attention will come. Privacy is a fundamental tool. There will be no way to keep your money transactions private and not just for criminals. Digital cash faces this traceability issue. Private ETHER, DAI or BITCOIN should be possible. It is both a challenge and an outcome Sam would like to see.
Privacy is a big issue in a cashless society. Most governments want to track everything and because it is easier for them.
The node design is open source too. The Node Pro is technically more advanced because you can power any network, not just Incognito. The Users can choose which network you want to power with your node; the idea of choice is really cool and the device design is open source so other projects that want proof of stake can use this for their users.
I think hardware is going to be a big thing and I don’t think it is something projects think about. It engenders more support and investment in the project. Even our parents could set one up and run a node.
What about DApps coming to Incognito soon? DeFi and Privacy are the most important topics this year in Crypto. You will DeFi tools and services in private mode. We are working on this integration with DeFi.
Shielding financial transactions from everyone else is necessary for DeFi and their projects. Even if you don’t care who is checking it, you don’t know who is looking at your transactions. An example – you pass KYC on an exchange, then they can link all your transactions and accounts. With the right databases, they can link your physical identity and your digital identity together and they will know everything about you. Isn’t this scary right now? It is important to have public transactions but there should be the option to have privacy for ourselves as individual.
When you get Incognito wallet, try to put $100 dollars into private ether. I am curious what Sam’s reaction will be.