Garbled circuits represent one of the many proposed solutions aimed at addressing the confidentiality challenges faced by blockchain technology. Prior attempts have included zero-knowledge rollups, fully homomorphic encryption (FHE), and trusted execution environments, each coming with its own set of vulnerabilities. The COTI team identified several advantageous features of garbled circuits that set them apart.
### Breakthroughs in Garbled Circuits for Blockchain
Garbled circuits have been utilized for some time within secure multi-party computation (MPC), but their initial designs were not compatible with blockchain applications. Recently, advancements in garbled circuit technology have significantly enhanced communication efficiency, reduced computation time, and made it feasible to implement this protocol within blockchain networks for the first time. Compared to alternatives like additive homomorphic encryption (AHE) and fully homomorphic encryption (FHE), garbled circuits offer lower computational complexity and reduced latency. Performance benchmarks indicate that garbled circuits not only improve computation speeds but also require considerably less storage, with a ciphertext size of just 32 bits, making them more efficient than FHE.
### Unique Benefits of Garbled Circuits
Garbled circuits possess capabilities that are not found in other technologies. They function as an MPC protocol that effectively manages interactions among multiple parties, making them ideal for privacy-focused applications such as confidential voting systems and privacy-centered decentralized exchanges (DEXs). Additionally, with decentralized sequencers, garbled circuits benefit from a resilient and distributed network, minimizing risks associated with censorship and single points of failure (SPOF) that have been identified in alternative solutions. This remarkable performance enhancement has positioned garbled circuits as an optimal choice for COTI V2’s privacy solutions.
### Enhancing Privacy Protections with Garbled Circuits
The privacy guarantees offered by garbled circuits parallel those found in traditional banking systems, where financial data remains confidential and is only accessible to the bank. However, this model has been compromised by frequent security breaches and unauthorized access to sensitive information, revealing the vulnerabilities of centralized systems. Unlike Web2 solutions, which struggle with data privacy, blockchain technology offers a decentralized alternative where users have ownership of their own data. Yet, the challenge remains that sensitive information, such as bank details or transaction histories, cannot be openly stored on a public blockchain without risking exposure. As it stands, individuals must choose between data ownership and privacy.
### The Necessity of Data Protection in Business
Individuals are understandably reluctant to disclose sensitive information, including banking details, purchase histories, and medical records. Businesses also require secure infrastructures to safeguard their confidential data—be it commercial, legal, or sensitive information—before they can confidently adopt new technologies. This necessity for enhanced data protection is precisely why COTI has taken the lead in deploying garbled circuits, developed by researchers from Soda Labs. This technology enables selective privacy in multi-party transactions, allowing developers to determine who can decrypt data or engage with encrypted processes. This balance of transparency and data security opens doors to numerous potential applications in Web3, including confidential transactions, artificial intelligence, decentralized finance (DeFi), and decentralized identification.
### Adapting to the Evolving Crypto Landscape
COTI, established in 2017 as an “Enterprise Layer 1” provider, has accumulated valuable insights over the years. Initially, scalability and throughput were major obstacles for many crypto projects. While various solutions, such as Layer 2 solutions and sidechains, have alleviated these concerns, public blockchains still face inherent limitations. Ethereum, despite being the leading network in terms of liquidity and user engagement, also grapples with transparency issues—every transaction and wallet address is publicly visible. What was once perceived as an advantage has become a barrier as industries increasingly require privacy solutions to protect sensitive information.
### Challenges in Regulatory Compliance for COTI V2
COTI faces significant hurdles in ensuring that its V2 development aligns with regulatory standards. Regulators often scrutinize projects that use anonymity as a cover for illicit activities. It is essential to differentiate between anonymity, which completely conceals identity, and confidentiality, which allows for controlled information sharing among authorized parties. By designing a blockchain that supports confidential data management, COTI helps businesses comply with regulations like GDPR and HIPAA while safeguarding user privacy.
### Collaborations and Ecosystem Growth
The COTI Foundation launched a $50 million ecosystem fund in January, with Soda Labs being its inaugural recipient. The partnership with Soda Labs has been pivotal in the development of COTI V2, as their advancements in garbled circuit technology have enabled its integration into blockchain for the first time. Their ongoing collaboration is expected to play a crucial role in COTI’s future. Additionally, COTI is exploring partnerships with organizations like CIVIC for decentralized identity services and Dojima to expand its privacy solutions across multiple blockchain ecosystems. Interest from developers, banks, and governments in COTI’s Builders program is also on the rise, with discussions taking place for over 50 different projects in various development stages.
### Developer Community Engagement with COTI V2
Since the launch of the COTI V2 Developer Network on May 20th, a wave of new developers has joined the COTI ecosystem. The Builders program is actively engaging with potential partners to develop specific tools that enhance privacy across various decentralized applications (dApps). Currently, more than 400 smart contracts have been deployed, showcasing the vibrant participation within the network. Ongoing discussions with over 50 projects across 14 different development categories highlight the expansive potential of COTI’s platform. The increasing number of formal grant requests further indicates the growing interest and confidence in the ecosystem being developed.
### COTI’s Vision for the Future
COTI envisions that the protection of privacy and sensitive data on public blockchains represents a significant opportunity in the crypto space over the next decade. Prominent figures such as Vitalik Buterin, co-founder of Ethereum, and Brian Armstrong, CEO of Coinbase, share this belief. Following the successful implementation of garbled circuits on the blockchain, COTI aims to promote freedom of choice while progressing towards widespread adoption. Key milestones include launching the Testnet in Q3 and transitioning to Mainnet and COTI V2 migration in Q4, aligning these developments with the $50 million Builders program aimed at incentivizing and funding innovative projects. COTI is strategically positioning itself to lead the next wave of Web3 innovation and adoption, focusing on areas such as confidential DeFi, decentralized identity, artificial intelligence, and central bank digital currencies (CBDCs).
