By Kurt Nielsen, PhD, President of Partisia Blockchain Foundation
The lack of confidentiality and privacy on blockchains is obvious and hampers blockchain technology’s disruptive potential as a WEB 3.0 platform supporting value transfer. This blog post will explore this topic and examine how the Partisia Blockchain project combines MPC and Blockchain to solve this problem.
The decentralized internet, as a frictionless channel of information and basis for innovative business models, has created a digital economy that is centralized around a small number of successful platforms created and protected by built-in network effects. The tremendous success of the internet economy has created some of the most valuable companies in the world. However, the flip side of this is that these companies accumulate vast troves of individuals’ private data, which, in turn, has a profound impact on the global distribution of power and wealth. WEB 3.0 needs to tackle this by providing a more neutral platform or infrastructure that empowers the individual, particularly as the internet economy is rapidly expanding into all areas of value transfer, including sectors in which data security is an absolute prerequisite, such as banking, insurance and telemedicine.
Blockchain itself is currently deployed in an effort to provide a more secure and neutral platform for the internet economy. While existing blockchains make positive inroads towards providing truly secure infrastructure, one of the most critical trade-offs they present is an inherent lack of confidentiality. Without confidentiality, blockchain’s potential to disrupt middlemen or third parties will be limited by an inability to achieve compliance with established industry standards and best practices, thereby resulting in reduced uptake and ultimately, a failure to impact the balance of power or data control. This is recognised by many of the central actors in the blockchain industry. One strong indication of this is the widespread use of zero-knowledge proofs as a first important step towards adding confidentiality. Zero-knowledge proofs are, however, limited to a single party (the prover) entering a secret input to compute either true or false, which is very useful for simple operations such as confirming a private transaction. However, any collaborative solutions that involve more parties require generic encrypted computation technologies that do not rely on trust in any single person or entity.
Parallel to the release of the novel Bitcoin blockchain in 2008, the team behind Partisia Blockchain conducted the first large scale and commercial use of another type of distributed cryptography — Secure Multiparty computation (MPC). Unlike blockchain, MPC solves for confidentiality through a network of computation nodes that computes directly on encrypted data with zero-knowledge about the data. The opportunity represented by a potential merger of these two technologies has long been recognized and the Partisia Blockchain team has been working to solve this problem for the past 3 to 4 years. Today, we’re pleased to announce this solution to the world — the Partisia Blockchain.
The basic Partisia Blockchain architecture provides an efficient bedrock for zero-knowledge computations and a unique balance between transparency and confidentiality while using zero-knowledge computation such as MPC. The Partisia Blockchain achieves this unparalleled balance through an architecture with two separate layers and networks:
- A public and transparent blockchain layer programmable through public Smart Contracts
- A private zero-knowledge computation layer programmable through private Smart Contracts
The first commercial-grade version of the Partisia Blockchain was released in September of 2019, and functions as commercial-grade infrastructure for both data and market solutions. The newly established Partisia Blockchain Foundation, based out of Zug, Switzerland, aims at launching Partisia Blockchain as a global WEB 3.0 platform and as a second layer across existing blockchains. Another key part of the Partisia Blockchain is the Oracle that utilizes threshold cryptography to orchestrate value transfer across blockchains. This is delivered by Partisia Blockchain Foundation contributor, Sepior, a spinout from Partisia that has been constructing commercial threshold cryptography since 2013 and, in recent years, in close collaboration with the Japanese financial services giant, SBI Holdings.
The Story of Partisia Blockchain: It all started with a Decentralized Exchange
In 2003, I was working on a PhD on the design of auctions and studying the so-called “revelation principle”, when Jakob Pagter (now CTO of Sepior) introduced me to Ivan Damgaard (one of the early creators of MPC and co-creator of the Merkle-Damgaard construction), who could compute on encrypted information with no single point of trust. The “revelation principle” is the Nobel Prize winning insight stating that: “It is at least as good as any economic mechanism to rely on direct revelation where the parties involved tell the truth to an impartial mediator that uses the revealed information in the best interest of the parties.” Since the “impartial mediator” is a common construct in economics, it came as a big surprise to me that the concept has also appeared in computer science, where it is known as MPC. This was and is a perfect match, and it even turned out that computer scientists and economists have been working completely separately on these two sides of the same coin since 1979.
By combining these two impressive strings of knowledge, we convinced the Strategic Research Council in Denmark to invest in this potential of improving allocation of resources and collaborative work in general. As part of this work we brought in industrial partners including Danisco, one of the largest Danish companies at the time. We knew they had a problem that we could solve but we had no idea about how central of a role we would end up playing. Danisco was a conglomerate that was planning to sell off its sugar division (half of the company’s revenue) that was significantly challenged by a large drop in prices. These changes required an immediate reallocation of production contracts among the farmers delivering the raw inputs as sugar beets. Although most thought that the market would solve the reallocation — it did not. It was clear to all that the inefficiency in the market grew, but no one could agree on a price and nothing happened. The farmers lacked trust in Danisco (a monopsonist) and they were not willing to share any information that could reveal the true value of the contracts. This was the core problem that we have been preparing to solve with MPC by replacing the auctioneer with an MPC based decentralized exchange. The locked market situation became a growing concern as the split-up of Danisco approached, and they finally gave us the chance to solve the reallocation problem. 1,200 farmers participated in the initial auction and the market clearing price turned out to as close to zero as possible. No wonder that the market was locked, however, now the price came from an impartial planner — a decentralized exchange — and no one questioned the legitimacy of the result. A few auctions later the production contracts were reallocated and the sugar division was sold to North Sugar in Germany.
The decentralized exchange case was a fantastic opportunity that allowed us to showcase the power of MPC in a fully fledged commercial setting. It worked, and solved a big problem for the customer who wanted to keep using the service — and Partisia was created.
This was right after the 2008 financial crisis — but similar to the ideas surrounding blockchain — we also saw a lot of weaknesses in the financial system that we could solve with MPC. It was, however, still very early in the life cycle of this new technology, but, despite the less efficient protocols, applications like auctions provided a natural time window for heavy computations. In working with auction solutions for production contracts, electricity and radio spectrum licenses, we naturally ran into the next big challenge — key management problems. Key management quickly turned out to be a field where MPC could provide scalable solutions and we decided to explore this further — and Sepior was created.
In parallel and over the past 10 years, a collective effort in designing better protocols and frameworks have reduced the computational overhead from MPC by 1/1,000,000th, which has gradually opened more scalable uses like advanced data solutions and real time matching services.
Now Partisia and Sepior join forces again bringing experiences and software from market, data and key management applications as well as many infrastructure components to Partisia Blockchain.
Partisia Blockchain: A neutral WEB 3.0 platform
We were replacing middlemen with MPC and building more trustworthy market and data solutions when Ethereum was launched, which really inspired us to think about combining blockchain and MPC. At an intuitive level it looked like the perfect match from the beginning. Blockchain was all about transparency and maintaining data in an immutable database. The transparency could create trust by shedding light on MPC as a black box without compromising confidentiality, e.g. information about who participates in an auction, who runs the MPC nodes and what is computed. The immutable database was, in many cases, an ideal place for the output of an MPC computation, e.g. the price and the winner of an auction. It was, however, only when we began to build blockchain solutions that we realized the full potential of blockchain as bedrock for orchestrating MPC.
When the blockchain ecosystem began to boom, we were approached by Insights Network and started to build a data exchange solution based on blockchain and MPC. Later we extended the collaboration with another customer, Tora, and moved the MPC based matching service we have been working on with them to blockchain — the Cyberian project. These two projects pushed us to think hard about how to move the boundaries for merging blockchain and MPC at a more fundamental level — and the Partisia Blockchain project began.
From an economist’s point of view, blockchain and MPC infrastructure and application is a gold mine of opportunities. The following three core components make it the ideal tool box for materializing solutions for more optimal allocation of resources and more valuable data collaborations:
- With the decentralized immutable ledger, blockchain removes the traditional middleman.
- With the decentralized zero-knowledge computation, MPC removes the traditional trustee as middleman.
- With smart contracts, developers and users can control and automate the use of the infrastructure.
Although the Partisia Blockchain provides all of these components, it is designed to function as a fully orchestrated second layer that adds privacy and more interoperability to existing blockchains as well as off-chain systems. To further strengthen the collaborative approach, Partisia Blockchain is designed to use any existing coin as a means of payment. This value transfer component is also showcased with the testnet that transfers EOS tokens back and forth to Ethereum.
The infrastructure has significant potential to solve problems in a new way by utilizing a variation of decentralized and centralized decision making. If we think back to “the revelation principle” for a moment, the basic trick is to centralize decentralized decisions, which allow for the most optimal allocation in general in an otherwise decentralized market-based economy. The Partisia Blockchain provides the tools to do so, and the potential to improve markets and negotiation solutions in general across most industries and applications.
When we talk about data solutions, one of the key challenges is control of data and algorithms, not least Artificial Intelligence. With the decentralized approach to privacy that comes with Partisia Blockchain, application developers can build solutions that keep the participants’ private data private while providing full transparency about the algorithms used. In the short run, this better data protection allows for more use (not sharing) of most valuable but sensitive data in a sound and regulatory compliant way. In the long run, this has the potential to change the power structures operating in the internet economy of today and allows for more competition on the application and service level.
The competition at the infrastructure level is built-in to Partisia Blockchain as a decentralized autonomous network operated by independent computation nodes. Also, the interoperability facilitates competition among alternative networks.
As pioneers in MPC, we see Partisia Blockchain Foundation as the next step in scaling up the adoption. Doing this in a collaborative and decentralized fashion by launching a blockchain ecosystem was inspired by the project itself.
The team behind Partisia Blockchain will use this blog to talk more about the Partisia Blockchain project as it evolves. 12 years on from the launch of our first commercial grade public use of MPC the enthusiasm inside our team to bring this cutting edge technology to the public is indescribable. We hope you enjoy the journey.