After a period of approximately 16 months since the initial announcement of its roadmap and over two years of research and development, COTI has officially launched version 2 of its mainnet. This new iteration signifies a pivotal transition from its original Layer 1 (L1) protocol based on a directed acyclic graph (DAG) introduced in 2018, to a Layer 2 (L2) chain that is compatible with Ethereum Virtual Machine (EVM) and focuses on privacy enhancements. According to COTI’s CEO, Shahaf Bar-Geffen, the intention is to gradually shift user engagement from the L1 to the L2, ultimately phasing out the L1 system.
### Privacy Technology at the Core of COTI’s New Chain
At the heart of COTI’s updated privacy features on the new L2 chain is the implementation of “garbled circuits,” a form of cryptography frequently employed in multi-party computation (MPC). This technology was developed in collaboration with Soda Labs and enables multiple parties to execute functions on encrypted private data without disclosing any of the underlying information, functioning similarly to zero-knowledge proofs. Bar-Geffen noted that the prior L1 protocol was not conducive to this technology due to its absence of smart contracts and the inherent limitations of its DAG structure, prompting the team to pivot towards an EVM-compatible L2 chain, especially since most users are already engaged with EVM networks.
### A Strategic Choice in Privacy Solutions
COTI’s decision to bypass zero-knowledge technology may come as a surprise given the widespread adoption of zk solutions in the privacy sector. However, Bar-Geffen argues that garbled circuits provide superior efficiency compared to traditional methods. He elaborated that while zero-knowledge proofs are typically restricted to one-on-one interactions, garbled circuits facilitate multi-party computing, enabling the development of more complex applications, such as decentralized exchanges (DEXs), that require multiple users.
### Addressing Compliance Needs in the Crypto Space
COTI’s innovative privacy technology aims to cater to enterprises and institutions that require adherence to regulatory standards, a service COTI describes as “privacy-on-demand.” This aligns with the broader ambition within the cryptocurrency sector to bring trillions of real-world assets (RWAs) onto blockchain platforms. Currently, many tokenized RWAs are isolated from the interconnectedness of public blockchains. For example, BlackRock’s USD Institutional Digital Liquidity (BUIDL) Fund employs a KYC whitelist managed by its tokenization partner, Securitize, despite being an ERC-20 token on the Ethereum blockchain. Only investors with pre-approved wallets are permitted to hold BUIDL tokens.
### Enhancing Smart Contracts for Institutions
Privacy-focused chains like COTI could potentially alleviate compliance challenges by enabling institutions to easily construct smart contracts atop their tokenized RWAs while controlling the visibility of information regarding these assets. Bar-Geffen explained, “When transactions are 100% anonymous, that is illegal. But 100% transparency is also not in compliance. What COTI’s technology offers is the selective disclosure that allows institutions to reveal or not reveal exactly what they want, and decide who gets to see what.”
### Ecosystem Partners and Airdrop Celebration
COTI’s version 2 mainnet launch is supported by various ecosystem partners that are integrating into the chain, including Bancor, Carbon DeFi, Band Protocol, MyEtherWallet, and PriveX. In conjunction with the launch, COTI’s official blog announced that around 15,000 wallets received airdropped COTI tokens as part of the celebration. COTI is not alone in its focus on privacy; other chains such as the Aztec Network L2 and Aleo L1 are also targeting similar niches in privacy, although they have elected to utilize zero-knowledge technology instead of garbled circuits.
