Background

Most crypto protocols are merely pseudonymous, where transactions can often be de-anonymized by firms like Chainalysis or on-chain sleuths. There are many protocols focused on bringing more privacy to crypto; however, the general privacy landscape is limited by fragmentation. Fragmentation levels include:

• Asset level (e.g., Tornado Cash has separate shielded pools for ETH and DAI; can only gain privacy through Zcash by using ZEC)
• Application level (e.g., Aztec and Tornado Cash both exist on Ethereum but have disjoint privacy sets)
• Network level (e.g., Aleo has native privacy built in for the entire programmable network but is isolated from other ecosystems)

The privacy strength of a shielded pool is proportional to its size. In the current landscape, privacy protocols are directly competing with each other for assets.

Namada is an upcoming Layer-1 blockchain that aims to offer a single, unified shielded pool for any asset type (fungible or non-fungible) created on any platform. Namada is IBC-compatible and plans to build bridges to many ecosystems, beginning with Ethereum. The bridges will at first be transparent but will later be privacy-preserving. Namada considers privacy to be a public good and will incentivize liquidity to grow and sustain its privacy set. If successful, Namada will bring greater privacy to crypto through its multichain, asset-agnostic shielded pool.

About Namada

Namada is the first fractal instance of Anoma, an intent-centric, privacy-preserving protocol for decentralized counterparty discovery, solving, and multichain atomic settlement. Namada focuses on bringing the best privacy to the immediate multichain user, while Anoma’s architecture will enable privacy-preserving applications that cannot be built on existing architectures. The development of Namada, Anoma, and other self-sovereign technologies is led by Heliax, a software development company with a focus on privacy and public goods.

Heliax was founded by Adrian Brink, Awa Sun Yin, and Christopher Goes in 2021. Before Heliax, Goes led the development of the Inter-Blockchain Communication protocol (IBC) at Tendermint, Sun was a data scientist at Chainalysis and later a researcher at Tendermint, and Brink was a core developer and head of partnerships at Tendermint. Aside from their work together on the Cosmos stack at Tendermint, the trio also founded Cryptium Labs and Metastate and are board members of the Swiss non-profit Anoma Foundation.

Namada launched its first public testnet on Dec. 20, 2022. A day after, it completed its trusted setup to generate parameters for Namada’s shielded pool with over 2,500 participants. Mainnet launch for the open-source network is planned for Q2 2023.

Technology

Namada’s technical architecture is aligned with Cosmos technologies in both consensus and interoperability. As far as privacy goes, Namada offers multi-asset functionality via a novel Multi-Asset Shielded Pool (MASP) and programmable asset conversions via the Convert Circuit (CC). The technology section of this report covers features that will be live upon mainnet launch. For future upgrades, see the roadmap section further below.

Namada’s Consensus

Mechanism

Namada uses a unique Bonded Proof-of-Stake (BPoS) variant called Cubic PoS together with Tendermint BFT for consensus.

Like with Cosmos BPoS chains, validators are selected proportional to their stake (self-staked and delegated) to produce and sign blocks. Stake is bonded to increase security: validators and delegators must wait 21 epochs (1 epoch = ~1 day) after their un-stake request before they can receive their tokens.

Namada plans to launch with around 257 validators.

Rewards and Penalties

Most of the novel features of Namada’s consensus revolve around its rewards and penalties systems.

Namada’s rewards mechanism is an upgraded variant of the F1 fee distribution mechanism developed by Tendermint. Validators receive block rewards proportional to their amount of stake. Validators set a commission rate, which is the percentage of rewards they keep for themselves, before passing on the rest to their delegators proportional to stake. However, Namada’s variant automatically compounds all rewards, removing the need for validators and delegators to withdraw rewards and re-stake them.

Cubic PoS gets its name from Namada’s penalties mechanism. Instead of slashing validators linearly, Namada is implementing cubic slashing. The percentage of stake slashed is proportional to the cube of total stake (whether from one or many validators) that misbehaved at the same time. Once 33% of stake misbehaves, 100% of that stake is slashed.

Cubic slashing encourages diversity within validator configurations and infrastructure architecture by pricing into the incentive mechanism the risk to protocol security of correlated faults.

Cryptography

Multi-Asset Shielded Pool (MASP)

The MASP is an extension of Sapling, a circuit developed by Electric Coin Company for Zcash. It also has added support for arbitrary assets. The MASP handles the minting and burning of shielded assets, known as notes, as they move between shielded and transparent Namada accounts.

As is denoted by the name, Namada has one shielded pool for all assets (fungible and non-fungible) rather than separate ones for each asset. This increases privacy, especially for unique or low-volume assets, which could easily be de-anonymized by monitoring entries and exits if they had their own privacy pools.

Within the MASP, all transactions are indistinguishable from one another. The creation of notes is visible, but senders, recipients, asset type, and amount are all obfuscated. Outside of the MASP, everything is visible in transparent accounts, as it is on other chains such as Ethereum.

Within the MASP, all transactions are indistinguishable from one another. The creation of notes is visible, but senders, recipients, asset type, and amount are all obfuscated. Outside of the MASP, everything is visible in transparent accounts, as it is on other chains such as Ethereum.

A note in the MASP is minted by a zero-knowledge proof (ZKP) with three values:

• Asset type: the type of asset (e.g., ETH, NAM, or an NFT)
• Amount: the number of units of the asset
• Address: the owner of the asset(s) and note

The notes exist in a UTXO-like model as they record values of assets. Unlike UTXOs however, the notes are not part of the public chain state. This status is only possible because notes are represented on-chain by two Merkle trees: a commitment and a nullifier tree.

Convert Circuit (CC)

The CC is a separate circuit that works in tandem with the MASP circuit. It enables programmable asset conversions, which are facilitated through a predefined conversion table through a mint and burn mechanism. Conversions allow for added functionality that would otherwise require assets to first be withdrawn from the MASP (“internal programmability”).

The CC’s primary purpose is to privately reward MASP depositors with NAM. When an asset is deposited into the MASP, it is tagged with that epoch. When a user wants to reclaim their asset, the asset with the old epoch is converted to the asset with the new epoch. This system can then determine how long an asset was held in the pool and abstract everything away from the user. Users receive NAM rewards depending on the asset, amount, and duration they hold or use it in the pool. Unlike the bonded consensus mechanism used with NAM for the overall network, assets in the shielded pool are liquid and can be freely moved while still receiving shielded set rewards.

Interoperability

Namada is integrated with IBC, granting trustless interoperability with Cosmos and IBC chains.

Additionally, Namada is building a native light client-based bridge to Ethereum. The bridge is run by Namada validators as part of the core protocol. Namada validators will run Ethereum full nodes and monitor Ethereum bridge contracts to know when assets are transferred to Namada.

For transferring back to Ethereum, the design is a little more complex because Ethereum does not yet support efficient light clients. Bridge requests are compiled into a sort of “mempool,” which stores them as a Merkle tree. Anyone can then relay any subset of the requests in the pool to Ethereum. By pooling bridge transactions, instead of sending and verifying them individually, gas costs can be reduced. Pooling is similar in practice to a sequencer batching transactions for a Layer-2 (L2) network. It differs by allowing anyone to initiate the verification of pooled transactions rather than the process being owned by a centralized sequencer, as it is with most L2s.

Competitive Landscape

Privacy is heavily fragmented among pools on different protocols. Namada’s main advantages over its “competitors” in the privacy sector are that it supports multiple assets from multiple chains and incentivizes contributors to the privacy set. As a result, Namada is more of a complementary service to other shielded pools than it is a competition.

As far as multichain solutions go, such as THORChain and Axelar, Namada separates itself with its offering of native privacy. Penumbra, a private L1 and shielded DEX on Cosmos, is multichain, but is only natively connected to chains within the Cosmos ecosystem. Penumbra’s services of shielded transactions and swaps would be complementary to Namada.

Conclusion

Generally, Namada differentiates itself by being the only cross-chain privacy solution with a unified, asset-agnostic privacy set. It uniquely offers yield to users in return for adding to the anonymity set. If it can achieve its endgame, Namada’s MASP will be unified at all levels.

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