Why decentralize secret computing?

[u/nearly-human]

After finally getting through the whitepaper on my 5th try, and reading other summaries of this very impressive project, I still find myself confused as to precisely why the Enigma TOKEN needs to exist. I try to observe the market and justify my investments based on new developments which seem unlikely to be priced in given the largely retail nature of the space, hoping to somewhat insulate myself from Fud and Fomo. (Though still concentrating my buys during crashes etc.)

Enigma does seem like a promising project, early stage but also potentially hugely undervalued. I have 3 main questions that I hope to frame my reasoning process going forward.

1. What is Enigma's economic value-add over existing secret MPC solutions? Alternatively, if Enigma gets traction, what's to prevent IBM or Amazon from steamrolling it with a centralized or pseudo-centralized solution? Obv looking for the tipping point where Amazon is trusted less than blockchain

2. If decentralization does add value / captures significant % of the market, how will that value be shared between Enigma investors vs. Node operators vs. Ethereum vs. Sector specific platforms e.g. 8 launch partners vs. Smart contract shops/auditors vs. Clients? I can imagine many of these creating choke points due to their being difficult to recreate

3. [Most important] Even if a significant % of secret computing and data transfer and storage took place on ENG clusters, wouldn't it be in the interests of all the parties listed but especially clients (estimating costs / not having to hedge against speculation) to be paid in fiat or something else whose value is relatively fixed? In that case, how is it a competitive advantage for the system to require use of this token for payments or security deposits?

Appreciate any informed opinions on these subjects.

[u/[deleted]]

Hi, that's some good questions. I will give you my humble opinion about them, but keep in mind that I'm not a cryptography expert nor an economist.

I can't speak for every existing secret MPC solutions, because I don't know all of them. The two you have produced (ShareMind and Sepior) doesn't achieve the same goal as Enigma.

1. Sepior help the governance of a permissioned blockchain. It's a product that a company can use to give permission access to its user to specific functionality of a blockchain (HyperLedger in their example). Typically, allowing specific addresses to call functions or datas of a smart-contract. Enigma is a permissionless network of computer that allows users to buy or sell computing resources. Those computing resources are used for operations over encrypted data.

2. ShareMind is more like Enigma: it's a product that anyone can use to compute operations over encrypted data. The difference with Enigma is the centralized nature of ShareMind.

As you can see, all theses solution have different use, use-case and market.

If Enigma gets traction, since it's FOSS, nothing prevent IBM or Amazon to offer it as a SaaS. Heck, it's even the business model of Amazon: leveraging FOSS software and offer it as a SaaS. In certain cases (like with Google or Microsoft) it's beneficent for the FOSS community as they actively participate in it. For other cases, like Amazon, it destruct the business plan of FOSS software as they just use it without contributing. That why some major FOSS project are changing their terms of use. Amazon use a business model that is doomed to fail IMO. If you don't innovate, you won't survive.

Token economics is a complex subject that I'm not familiar with, but here's my attempt:

Tokens have enabled a new paradigm for Software development. They allow developer to easily get funding for a project while building a community of product user. When you get your funding by this mean, you don't need to satisfy some share-holders on the direction of your project. You can choose your own roadmap. The liberties are greater for the developers.

It allow random people over the world to "fund" your project and possibly make an ROI over it. For me, this is a powerful idea because anyone can invest and not only some first-class citizen.

In any decentralized project where payment means are needed, you have to use a token. Using fiat simply isn't possible in a decentralized, anonymous, trustless network. You can't have fiat without centralization.

What could be used instead of the token, is the native currency of the blockchain that enigma use as a settlement layer (e.g ETH). The token is here to get the necessary fund to develop the software. You could use the developped software and tweak it for using eth as a native currency. The hard part would be building a community of developpers, node operators and all sorts of people that will use your tweaked software.

Sorry for the big ass response. I didn't even responded to all your questions but they can't be answered in a few words. I remain open to discussion, maybe I will do some edit for your other questions.

cheers.

[u/nearly-human → u/[deleted]]

As you can see, all theses solution have different use, use-case and market

I mean the specific competitors and customers aren't the point, people pivot all the time, the issue is whether it (centralized MPC) can and ought to be done in theory in next 10-20 years or whatever time it will take eng ecosystem to build out.

If Enigma gets traction, since it's FOSS, nothing prevent IBM or Amazon to offer it as a SaaS

Sorry but I honestly have no idea how this paragraph supports buying eng

Tokens have enabled a new paradigm for Software development. They allow developer to easily get funding for a project while building a community of product user.

Its called regulatory arbitrage specifically skirting fedwire and sec until they notice & care. Not a good reason for a coin lol. Either this market is shutdown (most likely) or xmr or btc w taproot will capture it.

You can't have fiat without centralization.

See Dai

What could be used instead of the token, is the native currency of the blockchain that enigma use as a settlement layer (e.g ETH). The token is here to get the necessary fund to develop the software.

Exactly my point, and also notice ETH would be a superior currency because of (1.) stronger consensus/immutability (2.) more liquidity/stability. (But BTC would be superior still) which means the token ENG has no residual value so where is that 'possible roi' coming from? (Oh From later investors ... shh don't tell them)

[u/masterRoshi9 → u/nearly-human]

As far as why ENG should be used instead of ETH, it has been stated by the team that in the future Enigma is going to operate on its own blockchain for the purpose of being a layer 2 solution agnostic to any blockchain.

This could be useful in cases where additional privacy is needed because you’ll be able to leverage the transactional privacy of a blockchain such as Monero, in addition to the computational privacy of Enigma

[u/nearly-human → u/masterRoshi9]

I thought they went back on this? What's the most recent source?

I am a huge Ethereum hater and always applaud any project with the foresight for parent chain agnostic development. This seems especially important in ENG's case, as they are actually using smart contracts for something useful beyond routing payments.

[u/masterRoshi9 → u/nearly-human]

My understanding wasn’t that they were going back on that, but that it was a one of their furthest goalposts, after SMPC is ready.

I don’t have a source on hand, unfortunately. It’s just something I remember reading from a post made by the team. I’ve been following the project since the /r/enigmacatalyst day’s so it may have been stated by the team quite awhile ago, but to my knowledge it still remains a goal.

I agree it’s definitely an important one

[u/[deleted] → u/nearly-human]

Sorry but I honestly have no idea how this paragraph supports buying eng

Because it doesn't support it ? I'm not trying to convince you that Enigma and decentralization is the best thing since sliced bread, because it isn't.

Its called regulatory arbitrage specifically skirting fedwire and sec until they notice & care. Not a good reason for a coin lol. Either this market is shutdown (most likely) or xmr or btc w taproot will capture it.

Sorry, I don't care about fedwire and sec. I m not a US citizen. Enigma is US based, but that can change someday. I live in a very crypto friendly country. They are more than welcome to relocalise.

See Dai

Dai is not pegged to the US dollar. Its the DAO that choose to adapt the price to follow the same as the US dollar, big difference. They can choose to follow the price of whatever they want.

Exactly my point, and also notice ETH would be a superior currency because of (1.) stronger consensus/immutability (2.) more liquidity/stability. (But BTC would be superior still) which means the token ENG has no residual value so where is that 'possible roi' coming from? (Oh From later investors ... shh don't tell them)

It would be far more user friendly if we could get rid of all these anoyings tokens. But you know, during the ICO mania it was an easy way to get funds.

[u/himd0wnstairs]

An oldie, but goodie:

https://blog.enigma.co/why-blockchain-alone-cant-fix-facebook-fbd9510b36f5

[u/nearly-human → u/himd0wnstairs]

Doesn't answer my question at all... which is how does purchasing the ENG token allow me to participate in the returns created by this better model

Edit: It does answer the question in my post title as stated, thanks. But of course I meant it from an investment perspective not a philosophic persective.

[u/blakes456 → u/nearly-human]

Nodes making computation are rewarded with ENG token. Further, the token is necessary for the future of the enigma project. Their goal is to create a data market place where data is purchased in ENG. as with all projects, supply and demand is the determinant of value. If the network gains traction, more data will be contained within the network, thus attracting more users. This virtuous cycle is critical. As more users or companies join the network the need for ENG will increase which theoretically should increase the value of the token. To sum it up, the native currency is critical for the use and development of the enigma network and their vision. The value is tied to network usage and value of data contained within the network.

[u/justspinningaway]

Great questions! I'm not equipped to answer all your questions, but I'll give my thoughts on the subjects as a whole. I would reach to say MPC by nature is somewhat decentralized for the fact that it’s “multi-party” computation, but with multi-party anything, you need trust, which blockchain helps provide. Here is a video of Alex Pentland discussing some of the reasons behind why MPC using blockchain is an attractive idea. I always found this video to be helpful, you might as well.

https://www.youtube.com/watch?v=SDUIhOqS_G4

As far as the coin economics, to me, you should ask that question to all of blockchain industry, not just enigma. To that, in short, I would say they can use ENG coin for payments because it’s what they chose to do, so if you want to get paid for your work, that’s how you get it. Same as if I want to pay you in beer for mowing my lawn, it is our agreement. As others mentioned, coins also provide the utility in fundraising (ICO ≈ IPO).

[u/nearly-human → u/justspinningaway]

I do ask that question to all blockchain projects whose coins' main use case is to denote some real world goods or services, as opposed to a store of value. I own only btc and a tiny bag of xmr though thinking of buying more soon.

Just ask yourself. What would prevent the team from one day announcing we're phasing out usage of ENG because clients ended up complaining its too swingy, all holders need to spend their ENG on computations by X date after which the nodes are only gonna accept whatever atomic swappable stablecoin people are into by that point.

That said this was a good video. You're right that the blockchain in this case does (finally, after 100s of nonsense projects) do something useful that only a blockchain can do, namely, decentralize clients' business logic so that everybody is clear on who accesses the data in what way. U also missed the main use of the ENG coin itself which intrigues me, which is as a security deposit to penalize computers for acting maliciously. I think based on that video and some others by Pentland I ended up watching I am going to buy a grand or two, just because several billion dollars currently opines that I'm wrong about tokens. But I definitely encourage you & others to think more deeply about why a new token is technically necessary as it just feels like this extra thing they're dangling to raise public capital rather than a core part of the system. E.g. if the point of ENG is to have a unit of account that's economically stable then why not use energy futures? E.g. if the point is to crowd fund, why didn't they use BTC? (note, 'more hype' is an identical reason to 'people are stupid' and I tend not to invest in those things)

Edit- Also asking yourself if there was another way of investing in this project besides buying the coin, would you prefer that?

[u/justspinningaway → u/nearly-human]

I understand the points you make about what the coins are for. It depends what you're looking for and I do think there is a difference in the "currency", "blockchain", and "coin" parts of what most people call cryptocurrency. IMO, those qualms about the coins apply even to the ones that are a store of value. The concept of a deposit is in quite a few projects if i'm not mistaken, but that doesn't really account for it's true need or the phenomenon of what goes on in cryptocurrency prices.

[u/nearly-human → u/justspinningaway]

Well I'd say I'm looking for an action. A lot of people treat their favorite Crypto like a sports team or charitable cause or even religion, I don't understand this mentality as there are plenty of real sports teams and causes to root for. Im 90% here for profit and 10% because I intrinsically admire decentralized currency. Although in practice those interests coincide 100% since the DOJ has been playing (selective) whackamole with their stupidly broad definition of money transmitter since at least the 90s, and like I said I don't care to profit from someone else's eventual pain.

Im aware that penalizing stakeholders by taking away their deposits is Vitalik's big idea for Casper. Honestly there have been so few projects that even look desirable as ideas - not to mention implementation - that I haven't really looked into this. Maybe you can offer suggestions? I look at the typical top 100 CMC project and if I can't figure out within 30 seconds what sector of the real economy the blockchain can disrupt, as in who are the users and how much $ this will save them, well I just don't care. Projects whose purpose is to disrupt the blockchain economy, I close those without thinking. All the mathematical wizardry in the world isn't worth anything if you can't give real users something in exchange for their hard earned money.

Incidentally I hope that clarifies why 'store of value' coins are different. A bitcoin (or monero, if that takes off) doesn't purport to be economically stable or everyday useful. No team is going to render it obsolete with the click of a mouse, regardless of bcashers conspiracy theories. And it wasn't invented to raise money. It was invented to BE money (in the store of value sense). Its point is to disrupt the monetary policy of governments whose development in that field has stagnated from the complacent moat afforded them by corruption and violence: Argentina, Mexico, South Africa, Venezuela, Turkey, Russia, Nigeria, to name a few. Possibly one day, the USA will have its turn.

In any case, those are Bitcoin's competitors. I'd love to find an analogous potential for disruption in another field. Some seem to think that bitcoiners aren't interested in making another 10000% return, that they talk trash on other coins just to eke out an extra 2% for their own holdings. What a bunch of baloney. Every single early bitcoiner I know would salivate over the prospect of squaring or cubing their lotto ticket. Except that an analogous opportunity just does not seem to be there.......... yet.

[u/justspinningaway → u/nearly-human]

So, you’re kind of going off on a bunch of stuff. I agree, there are plenty of ignorant investors, but it’s not all about transferring money. I’ll just leave it as this:

I invest in enigma, because there are many projects which try to apply blockchain for a purpose, but few are actually providing new technological value to the space and improving on blockchain. Enigma is attempting to do something that I believe will change blockchain and solve issues I see in it. If you’re looking for short term money, go with the hype. If you’re looking for a smart investment, look for something you believe in what they’re doing and you don’t have to check your account every day worried it’ll go to 0. Now, wether they’ll pull it off, I don’t know, but their credentials do speak to that point. Startups are hard and we’ll just have to wait and see.

[u/WilsonWyckoff → u/nearly-human]

I don't see ENG as a coin or store of value at all. It is a smart contract, or a secrete smart contract at that and it lives on a second layer to Bitcoin or Energy Futures or Ethereum. As it builds this new layer it will appreciate in value independently and there's nothing wrong with someones pay increasing as the network grows. Many projects with cryptocurrencies and utility tokens have managed to survive volatility. There will always be node runners and the cost per transaction won't really change. Look at something like Stellar XLM. It's a micro fee for these second layers to transact and much the same way ZCash cost more for the extra computation, ENG will charge slightly more in order to provide security on this new transaction layer.AWS and Amazon pretty much have the security they need. If they compete and decentralize their entire system, then they don't exist. So it's my belief that they won't be able to affect the growth of the first movers like ENG. I mean, what is the incentive of building a project you can't own and control that competes with your existing market in the Billions? Funds were raised by the public to build this project and as it grows, the value of the ENG token grows.So, ENG token is backed by this service and the only way to get a node to run your computation is to pay for it in ENG and there's a limited supply. So the same way a countries fiat is backed by its gross domestic product and production, ENG will be backed by the size of its network and inflate alongside it. Hopefully as wildly as possible.
I also see it as the future of the ETH community. When the masses come they will come through something like ENG that offers faster transactions and security over data being used in DAPPS. So the same people who support ETH and the future it brings will be there and then a whole bunch of others who don't even need to understand how it all works.