NuCypher is a layer 2 data privacy protocol for blockchains and decentralized applications designed to provide developers with a solution to securely store and manage personal data on public blockchains. It is a fully decentralized network that operates on the Ethereum blockchain and specializes in blockchain security and secret management with the help of intuitive cryptographic environments for execution.
The company was established in March 2015 in San Francisco, California, US. In November 2018, NuCypher released its private testnet, which involved the participation of major staking infrastructure providers, such as Bison Trails, Figment, and InfStones. It was followed by the public testnet launch in October 2019 and the mainnet launch in October 2020.
The NuCypher network enables users to share information with multiple participants at the same time on any public blockchain eliminating the need for a separate private network such as a VPN. In fact, cloud providers only receive encrypted data while users store the associated encryption keys and control the information, which helps to minimize data leaks in the event of a cloud service breach. Therefore, the protocol is suitable for industries that deal with huge amounts of sensitive data, such as healthcare and banking.
The NuCypher token
NuCypher (NU) is the native currency of the NuCypher network based on the Ethereum protocol. This is an ERC20 token with a maximum supply limited to 3.89 billion coins.
At NuCypher’s mainnet launch, the total supply of NU tokens was 1 billion. 8% of the supply was first sold in a simple agreement for future tokens (SAFT) sale helping the project raise $133 million, while 39% was delegated to early investors. 10.04% of the total token supply was distributed through 3 private sales, the last of which ended on July 10, 2019. According to the release schedule, 3,335,938 and 4,460,000 NU tokens are allocated between SAFT and equity investors accordingly every month. Also, new tokens are released to reward stakers.
The NU token serves both as a utility token and a governance token, so it comes with multiple use cases including staking, passive earning, voting, and rewarding.
NU holders get multiple benefits. First of all, they have an opportunity to earn more tokens on a regular basis by staking, which is the only way to introduce newly released NU tokens to the network. To stake NU means to contribute to the performance of the NuCypher worker node, i.e. to provide encryption services to users on the network and receive incentives for this. The minimum staking period is 30 days. Users are rewarded for their services in both Ether (ETH) and NU. If a user does not opt-out at the end of the period the rewards are automatically restaked.
Furthermore, NU is an inflationary token with a non-fixed inflation rate. This means that the longer users hold NU tokens, the higher the inflation rate is and the higher staking rewards they get. Staking is available on the Threshold Network. It is important to note that the NuCypher network is secure against malicious staking and will automatically slash a suspected user's reward.
The NU token can also be used as a tool to incentivize the execution of key management services. Staking NU gives network participants the right to make proposals, validate them, determine the allocation of funds for projects, participate in the development of the NuCypher protocol, and choose the future direction for the NuCypher's Decentralized Autonomous Organization (DAO), the protocol that controls network parameters and updates smart contracts. Besides, NU allows its holders to delegate and revocate operations on the network.
Users can buy, sell, and trade NU on several exchanges, such as Coinbase, Binance, OKX, Mandala, KuCoin, and DigiFinex. The coin can be stored on any Ethereum-compatible wallet.
The NuCypher protocol offers access control, decentralized storage solutions, a key management system (KMS), and encrypted data sharing for public blockchains. It runs on a node allocation mechanism called WorkLock and is secured by the Proof-of-Stake (PoS) mechanism used to coordinate worker nodes.
Besides, the NuCypher network has added a proxy re-encryption layer to address the storage and response dilemma in the DApp ecosystem. This allows developers to securely exchange data between themselves without fear of being hacked. Also, it offers the NuFHE Library, a digital library that allows nodes to compute encrypted data privately using the Proof-of-Concept consensus mechanism. In addition, Threshold Network, born from the merger of NuCypher and Keep, provides several Threshold cryptography primitives, including proxy re-encryption, threshold signatures, distributed key generation, and random beacons.
NuCypher is a network of nodes that perform threshold cryptography operations. Running a node requires a minimum of 2,000 node operators who need to stake 353,913 NU tokens.
The protocol works in two ways, both of which involve cryptographic services. The first one is Umbral, which uses nodes to both encrypt and decrypt data. It also saves users’ unique encryption keys but does not have access to them as they are not visible throughout this process. Apart from Umbral, NuCypher also uses Ursula, a chain of operational nodes, for staking tokens and minting new ones, and governing the platform.
NuCypher team and partners
The project team consists of multinational professional developers with experience in blockchain, technology, telecommunications, big data, cybersecurity, and encryption.
NuCypher was founded by Mikhail Egorov and MacLane Wilkison, two entrepreneurs passionate about the decentralized Internet. Egorov, a security researcher, and physicist, is also the founder and CEO of Curve, a decentralized market maker for stablecoins. He previously served as the CTO of NuCypher. Wilkison is a software engineer and the CEO at NuCypher. In the summer of 2016, Egorov and Wilkison participated in the American startup accelerator Y Combinator.
Among those involved in the development of NuCypher are Arjun Hassard, in charge of products and partnerships, David Núñez, a cryptographer, Derek Pierre, a business development manager, and software engineers John Pacific, Justin Holmes, Sergey Zotov, and Kieran Prash.
The company is backed by its staking partners and supporters including Satoshi-Fund, FBG Capital, CoinFund, Amino Capital, Kinetic Capital, Nima Capital, Semantic Ventures, and Galaxi. In June 2021, NuCypher merged with Keep Network (KEEP) to form the Threshold network called KEaNU by community members.