Contents
The convenience of moving more and more aspects of our life to digital devices and the internet comes at a steep privacy cost – both governments and corporations now have access to unprecedented amounts of information about us. The way internet infrastructure currently operates allows for both mass surveillance and more precise kinds of privacy breaches, with cybercriminals constantly looking to obtain sensitive information that they can exploit for profit.
Privacy is also an important issue in the cryptocurrency community, although the most popular cryptocurrencies like Bitcoin and Ethereum aren’t really anonymous – they’re better described as pseudonymous. There’s also some cryptocurrencies that are explicitly designed for privacy; Monero, Zcash and Horizen are a few examples of such coins.
One interesting thing that has emerged from the increasing adoption of cryptocurrency are new systems of incentivizing and coordinating large numbers of users through crypto assets. In this article, we’ll be checking out Nym, a project that’s looking to leverage a cryptocurrency-based incentive system to create a worldwide network of nodes that enable users to browse the web and interact with applications while preserving their privacy. Nym is positioning itself as a better alternative to other privacy-enhancing technologies like Tor and VPNs.
Nym review
The technology that’s being developed by the Nym project can be roughly split into two parts. Nym are developing a mixnet to provide privacy at the base network layer (i.e. layer 0), but the project is also creating “selective disclosure credential” tech that allows users to maintain privacy and control over their data when using applications.
Before we take a closer look at what Nym are working on, let’s briefly go through the project’s history for better context.
Nym is being developed by Nym Technologies, a Switzerland-based company founded in 2018 by Harry Halpin, Claudia Diaz and Dave Hrycyszyn, although the project worked in stealth mode until August 2019.
The core members of Nym’s team met through PANORAMIX, a privacy project that was funded by the European Commission following Edward Snowden’s revelations of the mass surveillance conducted by the NSA in the United States. PANORAMIX led to the creation of the Loopix mixnet design, where Nym team members Ania Piotrowska and George Danezis were among the 5 co-authors.
The project received seed funding from Binance Labs, and closed a $6.5 million investment round from venture capital firms in July 2021. Some of Nym’s backers include Polychain Capital, Greenfield one and 1kx.
Nym project links:
- Nym website
- Nym litepaper
- Nym whitepaper
- Nym testnet explorer
How does Nym protect user privacy?
Nym are working of a full-stack solution for privacy. As we’ve mentioned earlier, one of the core parts of Nym’s technology is a mixnet, which is designed to prevent metadata from being seen by prying eyes – this data includes things like your IP address, the device you’re using, your location, etc. Here’s a surface-level explanation of what the Nym mixnet achieves this:
The mixnet “mixes” together packets from all Nym mixnet users before they reach their intended destination. Before entering the mixnet, packets are encrypted and modified on users’ devices so that they’re all the same size. Then, the packets are sent through multiple “mixnodes”, with a layer of encryption being stripped each time before the “original” packet finally makes its way to its destination. There are also random delays in the transmission of the packets to prevent packets entering and leaving the mixnet in the same order, which could provide very useful information to an adversary.
While the mixnet is designed to preserve privacy on the network layer, Nym is also working on solutions to preserve privacy in applications that use the internet. Nym does this through private credentials, which uses zero-knowledge proofs, which you might have already heard of thanks to Zcash or ZK-rollups on Ethereum, and other technologies. Essentially, Nym’s private credentials feature allows users to be selective about which information they want to disclose to the applications they’re using.
For example, this technology could be applied in vaccine passports, a topic that’s highly controversial from a privacy perspective. The Nym project is working on a European Commission-funded project to develop a private credentials system that could be used in COVID-19 vaccine passports. If applied, this could allow users to only disclose their vaccination status when such checks are required, while not leaking any other information about themselves.
The NYM token
The Nym team has determined that economic incentives are necessary to incentivize network operators and ensure that the Nym privacy stack is scalable enough for widespread use. This is where the NYM token comes in – it helps maintain the decentralization of the Nym network, and is also used to reward mixnet node operators and Nym blockchain validators for providing their services. NYM also thwarts spam attacks, as it makes spamming the Nym network economically unfeasible. Those who want to use the network have to pay for the services with NYM tokens.
Nym also implements “mix-mining”, where node operators are rewarded for doing useful work, i.e. mixing packets to help users preserve privacy. This is an interesting alternative to “traditional” proof-of-work systems, where the computations themselves don’t have any external benefits.
Nym distinguishes between “bandwidth credentials” and “service credentials”. NYM tokens can be used to pay for bandwidth credentials, unlocking access to the Nym mixnet. Users who want to maintain their privacy while using layer 1 or layer 2 applications have to buy service credentials, which are also accessible with NYM tokens.
The Nym mainnet is expected to launch later this year
Currently, the Nym network is in a testnet stage. You can check out the activity on the testnet using the Nym testnet explorer, which provides interesting info such as geographical node distribution, mixnet gateway nodes, and blockchain validators.
Geographical distribution of Nym mixnodes.
The testnet also serves as a way to test Nym’s tokenomics, and see whether any adjustments need to be made before the launch of the Nym mainnet and NYM token. The Nym testnet currently uses a test token called PUNK, which is used similarly to how the NYM token will be used on mainnet. Testnet participants can delegate their PUNK tokens to mixnode operators, and earn a portion of staking rewards in return. The Nym team provides a more detailed explanation of the NYM staking system in this article.
The Nym mainnet is expected to launch later in 2021, and it will feature both the mixnet and the NYM token. By the time the mainnet is launched, the project will also have released a desktop wallet, decentralized reward sharing, mixpools and other features.
The bottom line
Nym is taking a full-stack approach to online privacy, an issue that’s already major and is only set to become more important over time as the overarching process of digitalization marches on. By combining its mixnet and private credentials technology, with a cryptocurrency-powered incentive system, the Nym project is hoping to create a sustainable and scalable privacy network.
With the mainnet launch expected to happen this year, we’ll soon be able to gauge whether Nym has come up with a viable solution of tackling the online privacy problem. If the NYM token incentive system works as intended and the project also delivers a smooth experience for everyday users, it wouldn’t be too much of a surprise to see Nym gaining some serious traction.
