Shaping Multichain Data Protection

Data-protection protocols and applications in the space are rapidly growing, but this horizontal growth doesn’t lead to better guarantees for users in the multichain ecosystem. This article explains what’s missing, and how Namada’s architecture can change the landscape and facilitate significantly better multichain data protection.

Shielded sets are fragmented

Data protection guarantees are fragmented by tokens, applications, and platforms. In cryptocurrency protocols like Zcash, the shielded set is disjointed from other protocols and platforms. This is a result of data protection being bound to a specific currency, ZEC – individuals cannot use its shielding features without using its native currency. Plus, the size of the shielded set is limited to the interactions of individuals that want both the guarantees and the monetary policy that Zcash offers.

On platforms like Ethereum (L1s and L2s), where individuals use dApps that support different fungible tokens (ETH, USDC, DAI), the shielded sets are fragmented by application and by asset. Users of both dApps would obtain strictly better guarantees if the sets were combined. Shielded sets are also bound to the platforms: shielded USDT on Ethereum cannot be combined with shielded USDT on Near (or any platforms on which Tether is issued). This also applies to L1s with private execution environments like Aleo or Espresso, where the applications within these platforms share a shielded set, but not across platforms, for example, between Aleo and Espresso, or Aleo and Ethereum.

As the sets are fragmented, the data protection guarantees are limited to the size of their respective user base. The smaller the size, the easier it is to correlate personal information and interactions to and from the set. So the larger the shielded set, the stronger the data protection guarantees for every interaction. However, as visualised above, shielded sets in the multichain are fundamentally isolated (they cannot be combined), not to mention that the sets are limited to fungible assets and not combinable with non-fungible assets.

What if there was a way of "combining" all shielded sets?

Unifying shielded sets

A key feature of Namada is that all currencies, fungible, and non-fungible tokens share a single unified set:

Namada is designed to solve the segregation of shielded sets. First, it creates a single asset-agnostic shielded pool for any token fungible and non-fungible token. Second, the fragmentation by platforms is removed by decoupling the assets from the platforms and enabling them to move to a unified set.

• The unified shielded set is enabled by the MASP/CC circuits
• Users can move assets into the shielded set through IBC

Seeding & retrofitting data protection

On programmable settlement platforms that support both transparent and shielded dApps, users need the native asset to pay for fees and gas. In these cases, Namada can be used to seed new accounts on Ethereum, which can later on be used to interact with the diverse dApps and pay for the necessary fees and gas.

Even if the ETH is seeded from the Namada shielded set, they should be sent to new addresses and use distinct new addresses to interact with each dApp.

Namada can also seed data protection to users who want to use an asset originating from one base chain on another chain.

Namada retrofits data protection to assets that were created and already used in transparent chains. Someone who wants to use shielded ATOM can transfer ATOM from the Cosmos Hub to Namada’s unified shielded set and perform the transfers within the shielded set or transfer them back to a new account on the Cosmos Hub – thereby breaking linkability. For application-specific chains, like Penumbra, Namada can act as a shielded bridge between transparent and shielded chains, where users keep assets shielded in Namada, and then bridge them to Penumbra for shielded DeFi.

Shielded actions

You can use Namada to directly interact with other chains and their respective dApps with shielded actions.

On application-specific chains like Osmosis, users can trade ATOM for OSMO while remaining shielded. On Namada, the user signs a sequence of actions that get triggered automatically:

• Transfer ATOM from the shielded account on Namada over IBC to a transparent account on Osmosis.
• Trade ATOM for OSMO on Osmosis (this interaction is transparent).
• Transfer the OSMO from Osmosis to the user's shielded account on Namada over IBC.

This way, the user has traded ATOM for OSMO while remaining shielded, as there is no correlation between the identity of the source ATOM from the shielded set and the resulting OSMO to the shielded set.

Start game and end game

Data protection as a public good

To bootstrap the largest unified shielded set in the multichain, Namada’s cryptography has been upgraded to enable shielded set rewards. This is an incentive for users to choose shielded transfers over transparent transfers and to incentivise users to retrofit data protection to assets that were created on other chains.

To receive rewards, users must simply transfer to and keep different assets in the shielded set. These assets are not locked in any way – users can freely transfer them around, and as long as they are within the shielded set, they will receive shielded set rewards. The protocol allocates a portion of inflation directly to those shielded accounts, retaining data protection. The rewards in the shielded set compound automatically and can be claimed within the shielded pool (or by unshielding them, if need be). The mechanism requires governance to determine what assets it should reward and the target volume of those assets in the pool.

At Namada, data protection is treated as a public good and this is why the protocol allocates a portion of inflation directly to subsidise contributions to the shielded set. In addition to shielded set rewards, Namada features retroactive and continuous public good funding mechanisms stewarded by a council elected through targeted liquid democracy.

• Opening nominations for the Namada RPGF Program
• Specifications of Public Goods Funding mechanisms

How is Namada shaping data protection in the multichain

Without Namada, data protection will continue to grow horizontally with more and more L1/L2s deploying data protection schemes – but due to the segregation of shielded sets, it will not result in better guarantees for their user bases.

Namada provides the largest possible unified shielded set in the multichain, complementing other chains by seeding/retrofitting data protection, and enabling shielded actions. This removes their need to make drastic architectural changes to integrate cryptographic schemes in the base layers.