COTI launches V2 mainnet: A new era of privacy-focused L2 solutions

Introducing garbled circuits for enhanced privacy and regulatory compliance

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Artwork by Crystal Le

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After about 16 months from when the team first announced its roadmap and more than two years of R&D later, COTI launched v2 of its mainnet yesterday.

COTI’s v2 mainnet marks a shift from its DAG (directed acyclic graph)-based protocol L1, launched in 2018, to a new EVM-compatible and privacy-focused L2 chain.

The goal is to gradually migrate user activity from the L1 to the L2 and eventually sunset the L1, COTI CEO Shahaf Bar-Geffen told Blockworks.

The cornerstone of COTI’s new privacy tech on its L2 chain is the use of “garbled circuits,” a kind of cryptography commonly used in multi-party computation (MPC).

Developed in partnership with Soda Labs, garbled circuits allow parties to compute functions over private data inputs that are garbled, i.e., encrypted. This works without revealing the underlying data, similar to zero-knowledge proofs. 

“The technology was impractical to implement on the existing L1 due to its lack of smart contracts and DAG structure,” Bar-Geffen said. He explained the team’s shift in focus to an EVM L2, also citing the fact that most users are also on EVM chains.

COTI’s choice not to use zero-knowledge technology may seem like an unusual one, given the prominence of zk usage in the industry for privacy use cases.

But Bar-Geffen believes garbled circuits as a technology are far more efficient than incumbent solutions. 

“Garbled circuits are multi-party-computing, whereas zero-knowledge is limited to a 1-to-1 relationship. You cannot build sophisticated applications with multiple users like, for instance, a DEX with zero-knowledge.”

With its privacy tech stack, COTI also plans to target enterprises and institutions with a need for regulatory compliance, what COTI touts as “privacy-on-demand.”

This points to the crypto industry’s desire to bring trillions of real-world assets onchain.

Today, most tokenized RWAs are walled off from the composability of public blockchains. 

For instance, BlackRock’s USD Institutional Digital Liquidity (BUIDL) Fund uses a KYC whitelist enforced by its tokenization partner Securitize, though it exists as an ERC-20 token on a public chain like Ethereum. Only qualified investors with pre-approved wallets can hold BUIDL tokens.

Privacy chains like COTI could potentially solve this compliance pain point by allowing institutions to easily build smart contracts on top of its tokenized RWAs, and then choosing how the information around these assets are revealed.

“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 [which] decides who gets to see what,” Bar-Geffen explained.

COTI’s v2 mainnet is going live with support from ecosystem partners integrating into its chain. Partners include Bancor, Carbon DeFi, Band Protocol, MyEtherWallet and PriveX.

According to COTI’s official blog, about 15,000 wallets were airdropped COTI tokens to celebrate the launch.

COTI is not the only chain with a privacy focus. 

Other similar privacy-focused chains, like the Aztec Network L2 and Aleo L1, are building toward a similar niche within privacy, though both have opted to use zero-knowledge tech rather than garbled circuits.


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