When I first learned about smart contracts, I was immediately excited about the possibilities that this technology had to offer. I had learned that blockchains were more than just token transfer platforms; they were also platforms for smart contracts. This opened the door for decentralized exchanges, lending platforms, and NFT markets that didn’t previously exist.
However, as I learned more and more about the world of smart contracts and the blockchain as a whole, I learned that there were some inherent issues that made smart contracts difficult to execute. The main problem I saw was that most smart contracts were run through platforms that were inherently transparent. This means that most smart contract interactions were publicly visible and were often recorded in a public blockchain ledger.
Transparency can be beneficial for public blockchain systems because anyone can verify any transactions that have been made within the system. However, this can also make it difficult for smart contracts that need this information to be private. This can be for several reasons: businesses may not want the operational data of the blockchain publicly available, users may want their personal financial information private, or decentralized systems may need information that should be private.
As I was exploring the Midnight network I saw that this was not the case for this blockchain platform. Instead of having to choose between transparency and privacy, the Midnight blockchain platform seeks to allow for both through the execution of privacy-preserving smart contracts that can process information and verify the results without the sensitive information that the smart contract uses.
The basic concept is based on the idea of zero knowledge proofs. In simple terms, it means a system can prove something is correct without revealing the underlying data. The blockchain is able to verify if rules have been obeyed without the underlying data.
When you think of it with regard to smart contracts, you can see how it would make sense. A smart contract would be able to verify if something is correct without revealing the underlying data. Transactions would be able to be validated without the underlying data remaining secret.
While it may seem like a minor concept, it has the potential to open up new avenues for decentralized applications. There are potential applications for financial systems, identity verification, governance systems, and so on. The potential of it is the fact it has the potential to increase the variety of applications developers can realistically build on top of the blockchain. For a long time, developers have had to choose between building on top of transparent public blockchains or moving the underlying data to an off-chain system. With the advent of privacy-preserving smart contracts, developers now have another option. As the underlying blockchain technology continues to improve, it is possible the underlying infrastructure for verification and privacy could become important. That is why a growing number of developers are becoming aware of the NIGHT ecosystem and the underlying privacy work being done by @MidnightNetwork
