Smart contracts have been heralded as a revolutionary innovation in the world of blockchain technology, automating transactions agreements with unprecedented speed and accuracy.
Despite their many advantages, smart contracts are not without their limitations. In this blog post, we will explore some of the key challenges and drawbacks of the traditional smart contract architecture, including their reliance on on-chain data, the potential to expose sensitive information, centralization of oracles, and vulnerability to manipulation. Concurrently, we will introduce Jiritsu, one of Serafund’s portfolio companies, building solutions to these problems. This cutting-edge technology addresses many of the shortcomings of traditional smart contracts, providing a trustless, secure, decentralized, and confidential system for executing contracts based on specific conditions stored off-chain.
Let’s dive deeper into some of the issues faced by smart contracts and how Jiritsu is working to bring verified compute to the industry.
Smart contracts are passive scripts that need external agents (keepers) to activate them. On-chain automation solutions have limited resources and are susceptible to exploitation, while relying on human keepers who might not always be available or well-incentivized.
Today smart contracts face a few key challenges, notably:
1. Reliance on On-Chain Data:
Smart contracts must rely on data already existing on-chain or input from transactions. This can be expensive and slow. Many real-world applications require the use of off-chain data, such as financial market information or external sensor readings, to make informed decisions. This constraint hampers the flexibility and applicability of smart contracts in numerous scenarios.
2. Confidentiality and Privacy Concerns:
Smart contracts often handle sensitive data, and the public nature of blockchains can lead to the exposure of crucial information. This lack of privacy can deter potential users from adopting smart contracts, especially with trades, sensitive business operations, or personal information.
3. Manipulation
Sophisticated traders and miners can take advantage of the predictability of smart contracts to manipulate transaction order or extract value through techniques such as frontrunning or MEV. These actions can negatively impact the user's experience and raise concerns about the fairness and security of smart contract execution.
4. Centralization of Oracles:
Oracles have emerged as a popular solution but have often introduced centralization, which comes with risks and goes against the core principles of decentralization in blockchain. Centralized oracles can be prone to single points of failure, manipulation, and bias, potentially compromising the integrity of the smart contract.
According to the cofounder Nazarov, it is estimated that Chainlink is providing 60% of market data across all of DeFi.
If a data provider has advanced knowledge they could exploit the market by manipulating prices for their trades, leading to unfair advantages and undermining trust in the system.
Jiritsu Solution
Jiritsu creates trustless automation using off-chain computational resources and zero knowledge proofs. It combines mathematically secure consensus mechanisms for verifiable computations and cryptographically secure triggers for automation. This is done through the core engine, the ZK consensus, and the automated keeper, the ZK signature. Jiritsu uses Multi-Party-Computation (MPC) wallets and signature delegation to enable fully automated blockchain transactions.
Jiritsu uses zero-knowledge encryption to protect exploitable data such as the address and trigger condition, making it extremely difficult for attackers to front-run a transaction.
What makes Jiritsu unique is its use of a combination of consensus algorithms, trusted execution environments (TEE), and threshold signatures scheme (TSS) to ensure the security of transactions. This approach ensures that even if some nodes are compromised or delayed, a transaction can still be executed. Jiritsu's security measures address confidentiality, forgery, and denial-of-service attacks, while its unique primitives enable better security and a more efficient transaction process.
Additionally, the selection and creation of an MPC wallet and team with custody of the private key within the framework further enhances transaction security (similar to Fireblocks where each team member has only a fragment of the key). Multiple network operators who must agree on a condition before signing the transaction together. This architecture has three main benefits:
Consensus must be achieved for the nodes to execute the function
No one node has the ability to take full control of the delegation
The private key is not revealed
Here's how Jiritsu tackles the issues mentioned above:
1. Secure Access to Off-Chain Data:
Jiritsu enables the execution of smart contracts based on off-chain data without compromising the security and integrity of the system. By leveraging MPC and TEE, Jiritsu ensures that the data used in the execution of a smart contract remains confidential and secure.
2. Enhanced Confidentiality:
Jiritsu places a strong emphasis on confidentiality, using advanced cryptographic techniques to protect sensitive data. This ensures that crucial information is not exposed to unauthorized parties, thereby maintaining privacy and encouraging wider adoption of smart contract technology.
3. Decentralization:
Instead of relying on a centralized oracle, Jiritsu employs a decentralized approach, using multiple nodes to reach consensus on off-chain data. This eliminates single points of failure and ensures that the data fed into smart contracts is reliable and resistant to manipulation.
4. Prevention of Insider Trading and Manipulation:
Jiritsu's design makes it extremely difficult for adversaries to unfairly transact in anticipation of a smart contract's execution. The use of MPC and TEE, along with techniques such as threshold signatures and consensus algorithms, prevents bad actors from exploiting advanced knowledge of off-chain triggers for personal gain.
The Jiritsu process flow includes setting up a job, generating an MPC wallet with permission to sign transactions, achieving consensus, and running MPC computations with ZK signatures. This results in a more secure, efficient, and reliable automation process for smart contracts.
How Jiritsu works:
Example: A company wants to use Jiritsu to automate their sells on a specific cryptocurrency once it hits a certain price target.
Set up job: The seller would specify the data source (D) the price (C) , the function (F) to calculate the value, and the target price (T).
ZK Encryption: The sensitive information is encrypted.
Set Up MPC Wallet: Jiritsu creates a new private key and distributes shards to all of the nodes that are assigned to the job
Node Consensus: Jiritsu nodes check the data source (D) and declare when the target price (T) has been met. Once the signature threshold has been reached, the nodes are said to be in consensus on the condition (C) being met.
Automated Keeper: Jiritsu's automated keeper signs the transaction using the zero-knowledge signature and executes the smart contract to sell the assets (F).
In this example, Jiritsu enables a secure, automated, and decentralized asset sale at a target price. There are also many other use cases that can benefit from this novel system.
Smart contracts have brought a plethora of benefits and use cases, transforming the way transactions and agreements are executed. However, traditional designs have their limitations, such as reliance on on-chain data, confidentiality concerns, centralization of oracles, and vulnerability to and manipulation. Jiritsu emerges as an innovative solution to these challenges, offering a secure, decentralized, and confidential system for executing smart contracts based on specific off-chain conditions. By utilizing advanced cryptographic techniques, secure multi-party computation, and decentralized consensus mechanisms, Jiritsu addresses the shortcomings of traditional smart contracts and paves the way for their broader adoption in various applications. As blockchain ecosystems continue to evolve, solutions like Jiritsu hold the key to unlocking the potential of smart contracts and further revolutionizing the world of digital assets.