Nucypher Crypto: Smart Investment Or Risky Gamble?

NuCypher is a decentralised encryption software that provides a security and privacy layer for public blockchains. It has been described as a super-cool tool for spies and secret agents. In October 2021, it was one of the top 80 cryptocurrencies in terms of market value. However, it is worth noting that NuCypher is a high-risk investment option and its price can be easily manipulated due to its low market cap. In July 2024, Wallet Investor predicted a negative outlook for the currency, suggesting that it is not a good investment option.

Nucypher's merger with Keep crypto

NuCypher and Keep Network, two Ethereum-based protocols, have proposed a "hard merge" of their networks, creating a new interoperable network called "Keanu". The merger is significant as it is claimed to be the "world's first decentralized protocol merger". The new network will be a single protocol referred to as "Threshold", backed by a new token called "T".

The proposal for the merger was published on March 8, 2021, and the result of the vote was announced on June 14, 2021. The integration will be phased out, with a new staking contract launched first, supporting both NU and KEEP as work tokens. Each community will be granted a combined 50% stake in Keanu. A decentralized autonomous organization (DAO) will be created to oversee the change and decide how much "T" will be given to NuCypher and Keep token holders.

The merger combines the similar technologies and goals of the two networks. Keep Network is a protocol that allows blockchain users to privately store and transfer data off-chain, while NuCypher offers a decentralized data encryption and protection layer for Ethereum-based decentralized applications. By joining forces, the networks will be able to achieve more together and create a robust foundation for the upcoming v2 overhaul of tBTC, a decentralized Bitcoin tokenization protocol built on Keep Network.

The integration will also pave the way for layer-two integrations, allowing users to mint tBTC on Optimism, Arbitrum, Polygon, or zkSync. Additionally, Keanu will offer greater modularity to the existing stakers of both networks, providing a greater selection of modular components through which they can earn fees. It will also reduce the networks' reliance on inflationary incentives, allowing the new network to become sustainable off of fees alone faster.

The launch of Threshold Network and tBTC v2

The launch of the Threshold Network and tBTC v2 is a significant development in the world of cryptocurrency and blockchain technology. It represents a merger between two privacy-oriented networks, NuCypher and Keep, resulting in a single protocol called Threshold and a new token called "T".

The Threshold Network leverages threshold cryptography to protect digital assets by distributing operations across independent parties, requiring a subset of them to cooperate. This increases security and reduces trust assumptions, enhancing the overall decentralisation of the network.

The launch of tBTC v2 introduces a Bitcoin-backed token that allows users to access the Ethereum and cross-chain DeFi ecosystem. Each tBTC token is fully backed by 1 Bitcoin held in reserve. The integration with the Wormhole cross-chain token protocol enables the easy movement of tokenised Bitcoin to over 20 blockchain ecosystems, including both EVM and non-EVM chains.

The accelerated launch of tBTC minting was a response to the urgent need for decentralised infrastructure in the wake of the collapse of TerraUSD, LUNA, and FTX. With the emergency shutdown of renBTC, there was no permissionless way to use BTC in DeFi, and billions of dollars were stranded. By accelerating the launch, the Threshold Network aimed to provide a stable, secure, and scalable gateway solution for users to access the dynamic Ethereum DeFi universe.

The initial rollout of tBTC v2 includes a system of optimistic minting, featuring two additional roles: Minters and Guardians. Minters are a small group of technically expert participants who monitor the chain for revealed deposits and request to mint tBTC. Guardians, on the other hand, act as a failsafe during a three-hour delay period, where they can cancel fraudulent or improper mints.

The privacy and security of public blockchains

NuCypher (NU) is decentralised encryption software that provides a security and privacy layer for public blockchains. It allows seamless data sharing between multiple participants using proxy re-encryption. The rapid rise in the value of NuCypher came as a result of a massive spike in trading volume. According to Coinbase, its trading volume broke the $2 billion mark, representing an 18,390% increase.

Public blockchains are public, and anyone can join them and validate transactions. They typically allow anyone to join and for participants to remain anonymous. A public blockchain uses internet-connected computers to validate transactions and achieve consensus. Bitcoin is an example of a public blockchain, and it achieves consensus through "bitcoin mining."

Public blockchains are decentralized and allow any node to access transactions, events, and actions of users. This can be a privacy concern for some, as everyone can download a blockchain and access the history of transactions. However, blockchain technology aims to increase user privacy, data protection, and data ownership.

One key aspect of privacy in blockchains is the use of private and public keys. Blockchain systems use asymmetric cryptography to secure transactions between users. Each user has a public and a private key, which are random strings of numbers and are cryptographically related. Public keys can be shared with other users in the network as they give away no personal data. Each user has an address derived from the public key using a hash function, which is used to send and receive assets on the blockchain. Private keys, on the other hand, are used to protect user identity and security through digital signatures and are used to access funds and personal wallets.

Another method to increase privacy on public blockchains is through cryptographic methods such as zero-knowledge proofs (ZKP). ZKPs allow one party to prove to another party that a given statement is true without revealing any additional information. This increases privacy as no information about the transaction is revealed.

While public blockchains offer benefits in terms of decentralization and distribution, they are not immune to cyberattacks and fraud. Hackers and fraudsters can target blockchains through phishing, routing, Sybil, and 51% attacks. Therefore, it is essential to have a comprehensive risk management system in place to reduce risks against attacks and fraud.

The future of blockchain technology

Blockchain technology is an exciting and rapidly evolving space with far-reaching applications across many industries. While it is most famously associated with cryptocurrencies like Bitcoin and Ethereum, blockchain is much more than just a digital payment platform. It is a distributed peer-to-peer ledger system that eliminates the need for centralised management entities such as banks.

The open-source and secure nature of blockchain technology provides an unmatched level of transparency. Each record in the ledger is distributed to millions of computers worldwide and verified for accuracy. This makes blockchain ideal for secure data sharing and protecting sensitive information.

Government Data Distribution: Governments are likely to adopt distributed ledger technology (DLT) systems, replacing traditional paper-based methods. DLT provides greater trust, transparency, and security through encryption and validation features.

Increased Industry Transparency: A single blockchain shared between industries will enhance transparency and security. This will make information more accessible to the public and reduce the complexity of having multiple systems for different companies and sectors.

Institution-Issued Cryptocurrency: Governments may eventually shift from fiat currency to cryptocurrency due to its traceability, reduced settlement times, and overall efficiency. Cryptocurrencies can be backed by real assets, and their value can be controlled, similar to printing more money to deflate a currency's value.

Identity Management: Blockchain can address flaws in current identity systems, providing a single, secure source to verify identity and assets. This is especially beneficial for individuals in developing nations who lack adequate means of proving their identity, giving them access to legal documentation.

International Trade and World Economy: Blockchain technology has the potential to revolutionise international trade by unifying payment methods, paperwork, and regulations through a single digital international system. This will increase efficiency, reduce fraud, and foster greater trust between nations, ultimately boosting international commerce.

The impact of blockchain technology is expected to extend far beyond these predictions, with new use cases and innovations emerging daily. As the technology matures, it will likely play an increasingly important role in various business applications, such as smart contracts, automated tracking, and policy enforcement.

The volatility of the crypto market

Volatility is a natural part of market activity, and it refers to changes in the price of an asset. It can be healthy, with steady increases or decreases in price within a general range, or it can be extreme, with rapid price movements in either direction. Extreme volatility often has a negative connotation because people associate it with market chaos, uncertainty, and loss.

The crypto market is considered one of the most volatile markets available to investors. Cryptocurrency is an incredibly volatile investment. In one day, Bitcoin’s value dropped by 30%. This is because the market value of crypto is based entirely on speculation, which is essentially educated guesswork. Investing in something that is speculative is a guaranteed way to introduce volatility to a portfolio. It means the investment’s value isn't very grounded, making its price incredibly sensitive to even slight changes in investors’ expectations or perceptions.

There are no indices to measure crypto price volatility, but a glance at historical price charts reveals that extreme price movements occur at a much faster pace in crypto prices compared to prices of assets in mainstream markets. For example, the price of Bitcoin rose by 125% in 2016 and then again by more than 2000% in 2017.

Many of the reasons for price volatility in mainstream markets also apply to cryptocurrencies. News developments and speculation fuel price swings in crypto and mainstream markets alike. However, their effect is exaggerated in crypto markets as they have less liquidity than traditional financial markets due to a lack of institutional investors and large trading firms.

Heightened volatility and a lack of liquidity can create a dangerous combination as they feed off each other. Other than Bitcoin, most other cryptocurrencies also lack established and widely-adopted derivatives markets. However, there are signs that volatility in crypto markets is improving as institutional investors and trading firms are beginning to enter the asset class, and a derivatives market for cryptocurrencies is also taking shape.

Whether crypto volatility will eventually mimic volatility patterns present in mainstream assets remains to be seen. But as the asset class continues to grow and develop, it will likely continue to exhibit outsized volatility until it reaches full maturity.

Frequently asked questions