- INVESTMENT IDEAS
Threshold Network: Next-Gen Privacy Infrastructure
- Threshold Network (TN) is building a “privacy layer for public blockchains”.
- Threshold is foundational infrastructure for a new generation of dApps.
- Threshold Network is still finding product-market fit, but they are backed by a strong team and community (50k+ on Twitter!).
- $T could be a great longer-term investment.
Threshold Network is currently being created as the merger of two projects: Keep Network, and NuCypher. Both projects build privacy technologies for public blockchains.
We are proud to announce that the KEANU rc0 proposal has passed in both the Keep and @NuCypher communities. With high levels of community support, we can move toward implementation.— Keep #tBTC (@keep_project) June 14, 2021
We are excited to see what we can build together!
As part of the merger, a new token ($T) will be introduced for the Threshold Network. Both Keep Network and NuCypher currently have their own tokens, and upon launch, holders will be able to redeem $KEEP and $NU for $T.
The goal of the Threshold Network is to allow smart contracts to access and manage private encrypted data.
The Threshold Network is built on a set of ‘keeps,’ which are off-chain storehouses for encrypted data. When consensus is reached, Threshold Network nodes can jointly decrypt data or transfer access to another party. Threshold Network nodes can act in response to smart contract calls, so the Threshold Network is a bridge between private data and public blockchains.
Threshold Network could be used to build the next generation of decentralized applications, from medical applications and insurance, to social media. As an example, a creator could sell an NFT that automatically unlocks access to private content using the Threshold Network.
$T is a utility token for the Threshold Network. As usage grows, so should the value of $T.
The first significant application on either Keep Network or NuCypher is tBTC. tBTC is a wrapped version of BTC on Ethereum that launched in September 2020. tBTC uses keeps to securely hold BTC as collateral. Currently, there is $42m of tBTC in circulation on Ethereum. V2 of tBTC will be launching on the Threshold Network later this year.
In the near future, Threshold Network will grow tBTC adoption and likely introduce other cross-chain assets. But $T will really take off only if there is adoption from a broader universe of applications.
In some ways, investing in $T is a bet on the idea that, “if you build it they will come.” It seems interesting to be able to integrate private data with smart contracts, but there has not been that much usage of either Keep Network or NuCypher so far. Finding product-market fit is probably the biggest uncertainty with the Threshold Network.
There is also technical risk. Threshold Network is built with complex cryptographic protocols that introduce risks beyond the normal smart contract risks of other dApps. Keep Network did a soft-launch of tBTC in May 2020. But two days later, they took it down after a bug was discovered. No customer funds were lost, but this highlights the risks of building on the frontier. That being said, both teams are highly sophisticated and cautious, so this risk will be kept to a minimum.
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