Obscuro is a decentralized Ethereum Layer-2 privacy-centered rollup designed to achieve scalability and prevent maximal extractable value (MEV). Unlike other L2’s, it’s completely trustless and decentralized. Using Ethereum Layer-1 processes allows lower transaction costs while keeping all transactions encrypted and hidden for a specified time period. Developers can move their Ethereum dApps to Obscuro for virtually no cost. Obscuro’s Trusted Execution Environments (TEEs) offer smart contracts, decentralization, scalability, and privacy, all the while rendering MEV obsolete.
Obscuro represents the convergence of enterprise and DeFi. R3, a privacy-centric blockchain platform for financial institutions, banks, and regulated assets, observed an opportunity to apply their privacy platform Corda to a truly permissionless DeFi tokenized network which they aptly named Obscuro.
James Carlyle (CEO), Gavin Thomas (Co-Founder and COO), Mike Ward (Head of Strategy), and Cais Manai (Product Manager) from Obscuro joined us for an AMA on September 19th.
vVv: Can you give us a quick introduction about Obscuro? What are you building and which team members are joining us for this AMA?
Cais: We are building a Layer-2 on top of the Ethereum blockchain. Similar to other L2s, we are providing scalability and cheaper transactions, but what is crucial to our L2, is that we also provide privacy. Our vision of privacy is special. We not only provide transaction privacy but also computational privacy. It goes a lot deeper than privacy to enable tokens to move from user to user. We will talk more about this throughout the course of this ama.
The team we are building this with, almost all came from a company called R3. We all had various positions at R3. Mike Ward, for example, was the head of product. James Carlyle, was a chief engineer and helped design Corda, the blockchain that R3 built. Gavin Thomas was COO and Tudor Malene was one of the lead engineers for the platform. We all met there about five years ago. Having built and delivered Corda, one of the most successful enterprise blockchains in the world, we decided we wanted to deliver something in the public space, where we felt our hearts were. Thus, we founded Obscuro, as we knew Ethereum was the place we wanted to be, and we spotted an opportunity in the L2 space to bring privacy.
Also, we added some amazing other people outside of R3 to our team. We have Pedro, who will not be joining us today but was one of the core engineers of Avalanche, and Matt who joined us from Goldman Sachs brings a lot of financial knowledge.
vVv: How many people are on the team?
Cais: Today we are working with a team of nine but will be expanding soon. In addition to who I previously mentioned, I also want to cover Moray Grieve, who recently joined us. Moray is an incredible guy who has a PhD in physics, was a researcher at Cambridge University, and spent time researching in Antarctica as well. He is an incredible engineer.
vVv: What is the different strategic goal between Corda and the Obscuro team?
Mike: Corda had a different goal in the sense that it was a permissioned blockchain. The purpose was to have a known set of participants and their origins. We followed up on a known set of citizens who for example rob banks. We later expanded it broadly to finance and then insurance, and other industries, so it’s a different problem domain.
Another thing we focused on with Corda is regulated assets, so you fundamentally end up with different requirements.
One thing that was important at Corda was privacy. It was mandated for all transactions on the chain. When we move this over to the public blockchain space, we are looking into a different problem domain. In the public space, there is much more to include.
vVv: Do you think there’s an inherent risk in providing anonymity when you’re talking about regulated industries? When you think of some different platforms and software which allow you to obfuscate sources of funds, that is always a red flag and a lot of implications could stem from that. Do you think that is a big hurdle to overcome?
Cais: Yes, ultimately, I think the regulated space comes with regulation. Parts of those regulations are knowing your customer (KYC), anti-money laundering (AML) checks, and adhering to sanctions. There is no real way of getting around it.
Anonymity is one thing; you could be anonymous at the point of the transaction.
You don’t need the whole world to be able to see what transactions you are making and remain anonymous. But, at some point, it must go on record that you are the owner of said assets, or that you’ve sold some of them, and that you owe taxes because of this. You need to abide by the regulations that apply in your country.
A comparison is banks, where they apply cold trading, a specific zone where they can trade in private without the rest of the world knowing. This is because they could be solving a specific problem, which can not be influencing the market. But, at the end of the trading cycle, they must record everything in what is known as the consolidated tape.
This is the thinking behind Obscuro, we have this idea of revelation, where you can trade in private and do what you want in private, but at some point, make it public.
”This is the thinking behind Obscuro, we have this idea of revelation, where you can trade in private and do what you want in private, but at some point, make it public.
vVv: What would you say is the true advantage of Obscuro versus the other ZK blockchains?
Cais: When we think about ZK blockchains, we can see them as two distinct groups. On one hand, we have the ZK rollups, and on the other hand, we have privacy chains.
The rollups are about scaling, and not about privacy. For example, StarkNet or zkSync, are leveraging the fact that zero-knowledge proofs give you the ability to take a lot of transactions, validate them, generate a single proof, and overall validate them much quicker.
The other ZK chains are the ones trying to achieve privacy. But, they focus on the kind of privacy where Bitcoin ended, giving people the ability to truly keep their transactions private. It gives the users the possibility to exchange certain assets without anyone else ever knowing what was exchanged and who the parties were.
What we are doing is leveraging a technology called “Trusted Execution Environments”, which is a technology we worked with for about five years at R3. It makes it impossible to take any information from the back end. It gives us the ability to deploy the EVM in its entirety. So it’s not about being EVM-compatible, or EVM-equivalent, it’s literally the EVM, which you get in complete privacy.
We are not only talking about the transactions here but also the contracts themselves are shrouded in privacy. Everything is encrypted, whether it’s the processing inside the contract or a transaction, it’s all kept private. It’s like the switch between HTTP and HTTPs, which is inevitable and which Obscuro provides. It’s our true competitive advantage that we get computational privacy.
As developers, you get access to the entire EVM, so you don’t even have to change your dApps. It’s possible to migrate an Ethereum dApp today and redeploy it to Obscuro and you’ll get a privacy-preserving version.
If you are an end user, you can continue to use Metamask, nothing changes there. You can read more about this on our blog post series called the “Privacy Trilemma” (https://obscuro.substack.com/p/the-blockchain-privacy-trilemma-part), where we talk about how Obscuro is uniquely positioned to solve these issues, being able to have privacy, but with smart contracts, and at the same time still being decentralized.
”Everything is encrypted, whether it's the processing inside the contract or a transaction, it’s all kept private. It's like the switch between HTTP and HTTPs, which is inevitable and which Obscuro provides. It’s our true competitive advantage that we get computational privacy.
vVv: For TEE’s (Trusted Execution Environments) are there already a bunch of vulnerabilities? Is Obscuro really as safe as the team advertises?
James: Like any tech, it is not bulletproof. There’s no bulletproof software or hardware, perhaps zero-knowledge proofs. Although we don’t know yet, that is a tech that is evolving constantly. So it’s been going through many iterations. There’s been hacks and fixes by manufacturers all the time, it’s a constant battle. We are very aware of this battle and if you look at our white paper, we actually embrace this.
In case someone hacks an STX, and tries to do something nefarious, like steal funds or alter the state, anyone on the internet with an attested CPU can challenge that roll-up data and will be rewarded. It’s the same as optimistic rollups; basically, the state cannot be altered.
Another way to look at it is if these get hacked during Obscuro’s lifetime, it’s not the integrity of the ledger, nor the user funds that can be stolen. It’s the actual privacy that gets compromised. So, the hacker might be able to see the data of other users basically like a public blockchain.
”if these get hacked during Obscuro's lifetime, it's not the integrity of the ledger, nor the user funds that can be stolen. It's the actual privacy that gets compromised. So, the hacker might be able to see the data of other users basically like a public blockchain.
vVv: Thank you, and that also leads to the next question for you, which is ZK EVM are traditionally very centralized. Can you walk us through how yours is decentralized?
James: Decentralization was one of the main goals we had for building Obscuro. Generally, for rollups, people define two stages. One is a block or rollup production and the other is a block or rollup verification.
The smart contract verifies the signature that it came from a tested STX enclave, this is a valid rollup so it gets published. But then there is a mechanism of challenging, similar to optimistic roll-ups. Anyone from the community can say “Yes, I agree” or “No, I disagree with this” stating they recevied a different result. Stating “I think there’s an invalid transaction in this roll-up” launches a special procedure.
Currently, all the roll-up solutions that we are aware of have a centralized block production phase. Obscuro on the other hand doesn’t. Our protocol features a decentralized block production stage. So we can generate a fair and simple algorithm for assigning a leader for each round by actually generating random numbers, which is the luxury that the other roll-ups don’t have. In that sense, our block production is a bit more decentralized
vVv: With the recent Tornado Cash news, is there any fear your blockchain could be blocked?
Mike: Well, when questioning what we are trying to build, and what problems we are trying to solve, we have no intention of becoming the ultimate mixer platform. That is just not what we’re setting out to do. We think privacy has very practical purposes and unlocks a whole new set of use cases, and brings a whole new set of asset classes on the Ethereum network. For us, privacy is kind of a baseline for doing a lot of things.
We do think about regulators a lot. As we come from a regulated background, it’s in the back of our minds and we are quite familiar with what the regulations are and how to apply them.
That being said, it’s a very new space, anything I am saying here is our current view, and it’s a view that we’re going to have vetted by our lawyers.
We feel like we are a transport layer. An analogy could be Swift. Regulators do not expect Swift to operate their network and have transaction records out in the public. They have a simple expectation that privacy, for the purposes of conducting transactions is necessary, and that the records of those transactions are something that should be accessible by regulators, but not by anyone else in the world.
So, we very much want to create an environment where we’re providing a secure way to perform transactions, but also provide some tools so that the contract that is right on top of the platform, can adhere to regulation. We are providing tools to these contracts to be able to report transactions through their contract on demand to an investigating authority, but that’s their choice at that point.
”We think privacy has very practical purposes and unlocks a whole new set of use cases, and brings a whole new set of asset classes on the Ethereum network.
vVv: What is the current state of the ecosystem and development? What is the progress you made regarding your roadmap and how much more time do you think is required before you are able to go to market?
Mike: We are currently at our seed stage and pretty early into this. That being said, we do have some partners we are working with, but the official agreements are yet to be signed, so I won’t mention any specific names. What I can say is that we have a handful of partners who have committed to launch contracts when we go live, and hopefully, we’ll have more formal announcements on that soon. As an example, we should have swaps up and running when we go live.
Other than that, one of the key things at Obscuro is keeping the threshold very low to get into our environment. On the developer side, we don’t have SDKs or APIs to learn and there is no rewriting of contracts. Any existing contract can be directly published into Obscuro. This means partners will have very little to potentially no work in moving to us. This is very important to us as it’s very difficult to grow an ecosystem, and is a very strong USP to onboard these projects.
We are hoping dApps will be joining us first. It’s very easy for them to join and they will bring in the users.
Gavin: The testnet is live now and there’s good stuff on there already. We have a fairly impressive extension that really makes a very good user experience with Metamask, when you compare it to other privacy solutions. We also have a fork of Uniswap DEX up there as well. You can easily demonstrate that we have been able to bring over something significant already running on the Obscuro testnet. It’s possible to bring your EVM dApps over right now and start using the testnet. Over the next few weeks, we’ve got things like gas mechanics and event subscriptions, so you can use those events as a much easier way to update your dApp UIs.
Obscuro AI nodes will be set up once we get the event subscription out and connectivity to the Ethereum testnet. Then we’ll be starting to look at supporting a limited number of user-operated nodes. That’s going to be coming in weeks, not months. The main net will also be coming on for the first half of 2023. And of course, you’ll be able to run Obscuro nodes on the Mainnet from the release date.
vVv: How does your approach compare to something like Aleo for example? They are offering their own programming language, which is easy to learn and adapt, and use that as a competitive advantage.
Mike: How we are going to the market is that you don’t have to learn anything new. I know there may be some advantages of other languages, as I’ve used them and seen them come and go over the years. I think that EVM is here to stay and the languages that support EVM are the ones that will stick around.
Solidity seems to be the dominating one and has so much momentum. A lot of people listening have maybe experienced this; it can be fun to play around with a new language, but past that, it’s quite an investment of your time, and we don’t want to ask this of our users. I think where some platforms struggle to gain adoption, is the fact that it requires a big investment on the development side.
Cais: I’ve had a look at Aleo, and it is a really strong language, but there are so many solidity developers already out there. As good as another language might be, it’s not better than the language you already know, is already accepted, and has loads of tools, and frameworks with tutorials available. There’s already so much out there, that it’s difficult to try and bootstrap an ecosystem around a new language.
”How we are going to the market is that you don’t have to learn anything new. I think where some platforms struggle to gain adoption, is the fact that it requires a big investment on the development side.
vVv: Can you give us some general statements about how your raise has been going so far? And whether or not the current market conditions have influenced either the decision-making of potential investors or your own decision-making and where you see the trends currently shifting in terms of strategic partners and capital.
Mike: The raise has been going fantastic, actually. Obviously, with valuations and the value of crypto going down in this market, a lot of organizations were affected by that. However, we’ve had some investors who have stuck with us, which is fantastic. In addition to that we picked up some really good names along the way.
If you’re not familiar with fundraising, a lead investor will typically not only use their brand to showcase the investment, but also do some of the paperwork, help build a cap table, and make introductions. Then they will also provide an element of due diligence that they’re willing to share with other investors who may not have that capability. That’s been incredibly helpful and really increasing the momentum.
We expect to close a round in the very near future. But, we slowed down a little bit recently, because some of the leads wanted to go back through the cap table. All in all, we got really good feedback and it has been exciting the last six weeks or so when things really picked up a ton of momentum.
vVv: Regarding tokenomics, the public sale is allocated 2.6% and the allocation to the core team and seed/pre seed investors is half of the total circulation. Isn’t that too high?
Gavin: I think tokenomics in this space is still very much a learning curve, there’s a degree of maturity but we still have a long way to go for tokenonomics to be fully realized over a long period of time.
Maybe in some people’s opinion, it’s too high. But it’s worth remembering that the opportunity to gain access to the Obscuro network, doesn’t only come through public acquisition of tokens (OBX, obscuro tokens) but also the contributor whitelist. So there’s an allocation of tokens available there, for those that contribute to the Obscuro project. They can gain access to the Obscuro Main net through those OBX tokens as well. It’s not just restricted to the public sale, and it’s important to also know that a large chunk of the tokens (50%) are available to the foundation and to the ecosystem. Because we want to be able to make sure that other members of the community can gain access to Obscuro using that utility token, and they can run their dApps. They can benefit from the privacy capabilities of Obscuro as soon as possible, and that’s also reflected in how quickly members taking part in the public sale can gain access to the main net, using that OBX token. Just to clarify, there is going to be further work done to improve the tokenomics, As of now all the tokenomics that have been out there at the moment are in a proposal phase. But they’ll absolutely be nailed down before the token generation event.
vVv: Can you maybe outline some of the use cases for the token? Is it only used for access to the network or are other use cases? And do you have any deflationary mechanisms in place?
Gavin: No, there are no deflationary mechanisms in place. The primary reason for OBX to exist is to gain access to the Obscuro network. It’s also worth bearing in mind that the token is also the means of staking as well for your Obscuro nodes. If you’re an aggregator it forces you to commit to sticking to the rules of the Obscuro network. This ensures that the aggregators and the network behave appropriately. If there’s an instance where you as a node operator place the network in a compromised state, your stake is taken away from you. That’s really the function of the token.
Mike: I have one thing to add and to be really clear we genuinely believe this token has real utility because it has use cases for transactions on the network. The validators are compensated for their efforts on the network using the token. The future is purely demand for that token to be used on the network. And we’re very focused on how we drive transactions which means that there’ll be a natural demand for the token, that’ll be used to pay for those transactions.
James: Some of the L2s that we look at, for example, some optimistic roll-ups, and ZK rollups and so on, don’t have a token. That’s because they’re running a centralized infrastructure. We on the other hand think a utility token makes sense when you have decentralized infrastructure because there has to be a way for users of a world computer to pay the operators of the world computer. That’s where we think a utility token makes sense to enable that in a more frictionless way.
vVv: Could you explain why certain privacy information should become public after some time?
James: I think there are two reasons. The first is we believe as a team, that probably no privacy solution is private forever. There’s always a sort of technology race to unearth privacy. We don’t want to make an eternal privacy guarantee, because we don’t think it’s feasible, so that’s one reason. The other reason is what links to something we touched on earlier about sort of criminal behavior. We think that privacy of information has a time value. And the value of privacy diminishes over time, at least for certain use cases it does.
There are areas for example, around corporate use cases where privacy matters for private transaction pricing. Also, the duty of care that corporations have in managing the privacy of certain data diminishes over time. What was suggested in the white paper as an approach to solving the issue of let’s say, preventing criminality is to have an ultimate revelation for information that is kept private as a way partly of recognizing that it’s not possible to keep things secret forever, because technology changes, but also as a way of signaling to possible bad actors that eventually law enforcement agencies will be able to catch up with you.
”Preventing criminality is to have an ultimate revelation for information that is kept private as a way partly of recognizing that it's not possible to keep things secret forever because technology changes.
vVv: How do you see Obscura in five years? Which app is the most popular? How has the tech evolved? Who are the users?
James: The view here, which I see is Obscuro providing the next leg up for widespread adoption of smart contract blockchain technology. It is possible that Obscuro starts to work with and integrate with other networks. But as we’ve already said, for various reasons, our prime focus is on the Ethereum network and the Ethereum community, which we’ve always felt that we’ve been part of it. Ever since we got into blockchain seven to eight years ago.
Our privacy enables adoption for the mass market. We’ve always believed that maybe the pioneers don’t need privacy. In fact, they want people to see what they’re doing. But the mass market demands privacy. Privacy will open up usage, new apps, new user groups, and so on. We are focused from a business development point of view on sectors which we think benefit greatly from this. But we don’t want to limit it to only certain use cases. I think the thing that I’ve learned in technology in the 30-plus years, is that if we can provide something that has utility, is easy to use, is performant and so on, people will pick it up and use it in ways that we could never imagine. And that in a way is the most exciting thing. We want to be surprised, constantly challenged, I suppose by people coming up with ideas that we can’t think of ourselves because we’re going to focus on one thing only, and that’s building a great platform. All of the use cases are going to come from everyone else. So we’re not going to pick winners. We’re going to support everyone.
”Obscuro provides the next leg up for widespread adoption of smart contract blockchain technology.
If we can provide something that has utility, is easy to use, is performant and so on, people will pick it up and use it in ways that we could never imagine.