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Incognito launching private versions of leading Ethereum decentralized finance platforms

Incognito is a new privacy and interoperability project that seeks to anonymize the tokens of any blockchain. As part of its goal, the organization is releasing private versions of Ethereum’s leading decentralized financial platforms.

Announced on April 24, the pKyber initiative is the first part of the Incognito initiative to make DeFi private. First theorized in October, pKyber began large-scale testing on April 24. The team plans to launch this to the Incognito core network on May 7.

Functioning of Incognito

Incognito is an independent blockchain that focuses on private transactions. Its privacy technology is based on the same technologies used by Monero, including ring signatures, hidden addresses, and confidential transactions.

Unlike Monero, Incognito focuses on interoperability with other blockchains and supports private tokens. Andrey Bugaevski, ecosystem leader at Incognito, told Cointelegraph that the goal of the project is to create a universal sidechain for public blockchains to take advantage of privacy features.

Bugaevski emphasized that while Incognito does not support full smart contracts, it still allows the creation of tokens and a limited set of scripting instructions. These are enough to create trustless bridges with other smart contract platforms.

The pKyber platform uses Incognito’s smart shield contract to interface with the decentralized Kyber exchange on the mainnet. Users transact with pEthereum , a private token, to initiate a transaction with pKyber. Incognito’s “Broker” contract on Ethereum reads that data and initiates an Ethereum transaction on Kyber using your shared public ETH group.

Especially, Incognito acts as a trustless proxy for private trading instructions, allowing a person to exchange ETH for stablecoin DAI without directly interacting with the Ethereum blockchain.

Incognito’s roadmap also includes integrations with 0x, Uniswap, and the Compound loan platform.

Although the DeFi integration is the latest update to Incognito, the project achieved many milestones since the launch of its mainnet on October 31, 2019. The project now offers a functional way to protect Ethereum, Bitcoin, USDT, DAI, BAT, ZIL and other tokens more.

It should be noted that this system, like any optional privacy blockchain, must be used with care when “mixing” funds.

Most functions can be accessed through an Incognito wallet focused on mobile devices, available for both iOS and Android. The wallet includes dedicated features like Incognito decentralized exchange, stakeout services, and token protection.

There is a proprietary token called PRV, the main purpose of which is to be used for transaction fees. But fees can also be paid with the token used for the transaction. This was done to maintain usability, with Bugaevski stating:

“We are not trying to build a new privacy coin. No one needs a new Monero or a new Zcash.”

The PRV is used as a block reward for validators since Incognito uses the Proof of Stake (PoS) model. Unlike many other PoS blockchains, it doesn’t run an initial token offering or air-launch as a token distribution mechanism. Although there is an initial “pre-mine” of 5 million PRVs reserved for development and equipment, an additional 95 million is expected to be created as rewards in the block.

This creates a problem for distribution since a pure PoS model would simply make the team have almost 100% of the supply.

To address this, Incognito employed an innovative solution in which bettors can borrow 1,750 PRV (about $ 700), as their share, and get some of the rewards on that loan. Stakeout can currently only be done on dedicated node devices, which simulate the acquisition of a mining rig.

Therefore, the system is “manipulated” to function as a Proof of Work system for the initial distribution.

Bugaevski explained:

“The issue here is that each node on the network has the same power. So there is no way for you to put more chips, and you have more betting lots.”

The project also proposes an innovative solution to the problem of the bridge without trust in Bitcoin: decentralized custodians. Unlike the custody bridge systems currently used for tokenized Bitcoin, the Incognito bridge would use a system based on economic incentives and reduction of guarantees, similar to MakerDAO, to fully decentralize custody.

The system is thus “rigged” to work like a Proof-of-Work system for the initial distribution, with Bugaevski explaining:

“The theme here is that every node in the network has the same power. So there is no way that you put more tokens, and you have more [staking] lots.”

The project also proposed an innovative solution to the trustless bridge problem in Bitcoin: decentralized custodians. Unlike custodial bridge systems currently used for tokenized Bitcoin, Incognito’s bridge would use a system based on economic incentives and collateral slashing — similar to MakerDAO — to completely decentralize custody.

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