Mid November 2022, Cardano’s parent company IOG unveiled Midnight: its privacy sidechain. It is to smart contract blockchains, what privacy coins are to Bitcoin. Midnight adds a layer of privacy on top of the smart contracts. This is made possible by zero-knowledge proof technology. Midnight is partly aimed at the gigantic enterprise market. It will have its own token.
Developers have been working on Midnight in secret for four years. It will operate as a sidechain of the Cardano blockchain, inheriting its security and decentralized qualities. Validators of Cardano can opt in to become validators of the Midnight sidechain. Midnight is still under development. IOG will continue to provide updates as they work on it into 2023.
The limitation of most privacy coins is that they are just that: coins. There is no smart contract functionality. If you send you some Monero or Zcash, you can be pretty sure the transaction is private and secure. But what if you want more? Cardano figured out a way to get privacy-enhanced smart contracts working, a concept they called Kachina. “Kachina identifies a large class of distributed computations expressible as smart contracts with privacy guarantees.”
Use Case: KYC with Regard for Privacy
One use case would be the merging of identity and privacy. What would a world look like in which you can have self-sovereign identity combined with confidential computation? It would give you the ability to do selective disclosures.