Understand Web3 Privacy Solutions: Threshold Network in One Article

In the rapid evolution of blockchain, privacy and security have become important areas of research for current professionals. The Threshold encryption service provided by Threshold Network empowers blockchain users' sovereignty, allowing them to effectively protect their information security and digital asset privacy while experiencing public blockchains. How does Threshold achieve all of this, and what is its operational core? If we want to invest in it, how should we purchase its tokens? This article will provide a thorough interpretation.

## What is Threshold Network?

Threshold Network (T) was launched in January 2022 and is the first on-chain product resulting from the merger of two existing decentralized networks (Keep Network and Nucypher). Both technologies involve building sustainable, blockchain-based privacy solutions for users. While both networks already have their own native tokens, the goal of Threshold Network is to allow smart contracts to access.
The creation of Threshold Network is to ensure users' sovereignty over their digital assets, including simple wallets and cryptocurrencies, as well as user data, smart contracts, and company information contained in decentralized applications (DApps), as well as non-fungible tokens (NFTs) and other digital assets. Its launch also aims to address data and privacy issues in response to various hacking attacks on the blockchain and to make the decentralized digital finance industry more mainstream.
Since Threshold Network is a product of the combination of Nucypher and Keep Networks, it also has the following features:

1. Keep Network: The structural elements of Threshold Network are derived from Keep Network, which uses off-chain containers to encrypt, store, and transmit private data. These containers are called "keeps," which can be accessed by developers' smart contracts without compromising user privacy or network transparency. This technology was previously actively tested when used for tBTC, which is considered one of the most trusted Bitcoin (BTC) bridges in DeFi, connecting BTC to Ethereum.
2. Nucypher: Nucypher's privacy tools are built on "keeps," including its management of secret or sensitive information, ensuring that processed and encrypted data is not leaked. The network can also grant and revoke access permissions to sensitive information, thus protecting it when any abnormal activity is detected. Additionally, Threshold Network utilizes Nucypher's proxy re-encryption tools, which can securely delegate decryption permissions.

## How does Threshold Network operate?

While the blockchain revolution has unleashed the power of decentralized apps, Web3 platforms built on public blockchains can pose significant risks to user privacy. By employing threshold cryptography, Threshold Network provides exclusive solutions to the privacy challenges faced by Web3 platform users.
Relying on decentralized network nodes and threshold cryptography, in the Threshold ecosystem, sensitive operations are distributed among multiple independent entities (such as network nodes). To successfully execute these operations, a minimum threshold or number of collaborating entities must be met. This mechanism ensures that even with a few malicious actors, the system can continue to operate securely and normally.

Within the framework of Threshold, sensitive operations no longer rely on a single trusted party, effectively reducing the risk of system compromise. Even if there are a few malicious actors or bad actors, as long as the minimum number of participants continue to follow the rules, the system can still operate securely and correctly. This distributed collaborative mechanism brings revolutionary changes to the field of information security.
For example, in centralized custodians, under traditional models, once a bad actor appears among the custodians, user funds may face significant risks. However, under the protection of the Threshold cryptographic system, this single point of failure is effectively prevented. Even if a certain node or entity encounters issues, other nodes can continue to work together to ensure the overall security and stability of the system.

## What is the core technology of Threshold Network?

The Threshold Network ecosystem combines threshold cryptography, privacy protection services such as PRE, and the advantages of the decentralized Bitcoin to Ethereum bridge through tBTCv2. It aims to enhance user privacy, control, and accessibility in the web3 environment. By providing a set of encryption services for web3 applications through a decentralized node network, the services on this network include proxy re-encryption services (PRE) for user-controlled confidential management and access control, as well as tBTCv2 (a decentralized and permissionless Bitcoin to Ethereum asset bridge).
The proxy re-encryption (PRE) of Threshold Network is a cryptographic middleware that supports user privacy protection applications. It uses a scalable end-to-end encryption protocol, where nodes on the network act as proxy entities. These nodes securely and collaboratively re-encrypt data for recipients based on access conditions defined by the data owner. PRE is particularly useful for maintaining data ownership while enabling data sharing, such as paid subscriptions for encrypted content or the transfer of encrypted NFTs.

Another component of the Threshold ecosystem is tBTCv2, a decentralized and permissionless Bitcoin to Ethereum asset bridge. Unlike existing centralized solutions, tBTCv2 allows Bitcoin holders to access the DeFi and web3 universe without relying on intermediaries. It replaces centralized intermediaries with a randomly selected group of operators running nodes on the Threshold network. These operators collectively use Threshold encryption technology to protect users' Bitcoin holdings. User funds are controlled by the consensus of the majority of these operators, preventing any individual or group from gaining control. tBTCv2 is permissionless, ensuring that everyone can access it.

## Threshold DAO

The DAO (Decentralized Autonomous Organization) of the Threshold Network is at the core of its decentralization mechanism, providing a platform for community-driven projects and a framework for democratic and decentralized voting, which is crucial for the operation of the entire network. This goal is achieved through the dual governance system of Threshold DAO. The Threshold DAO mainly consists of the following two aspects:

1. StakerDAO:
2. The DAO holds the core decision-making power within the Threshold network, as it represents the stakers running decentralized nodes. These nodes are responsible for validating transactions, ensuring the continuous operation of the network.
3. Each member of StakerDAO must hold stakes in the Threshold network, and their voting power is proportional to the size of their holdings.
4. This ensures that those who directly contribute to the network (by running nodes) have a greater voice.
5. TokenHolderDAO:
6. Members of the DAO manage finances, token issuance, and network governance through decentralized voting and community-driven decisions.
7. To maintain accountability, TokenHolderDAO has the power to veto proposals from StakerDAO. This provides a check-and-balance mechanism to ensure that no single group can unilaterally control the network.
8. Each member of TokenHolderDAO must hold tokens of the Threshold network (assumed here to be T tokens), ensuring that only those with an economic stake in the network can participate in this layer of decision-making.
9. Keep and Nucypher Representative Council: This elected committee decides on staking rewards to incentivize token holders to become stakers in the network. The committee also has the power to veto proposals to ensure that the network's direction remains decentralized, aligns with the spirit of the Threshold network, and retains accountability.

## Threshold Token Economics

$T is the upgraded native token of the Threshold Network, serving both as a utility token for the network and as a governance token for the Threshold DAO. $T enables the operation of the network and has the following functions and uses:
Staking Rewards: Like all Proof of Stake (PoS) consensus algorithms, users must stake their tokens to become validating nodes and earn rewards. Honest behavior is rewarded, while dishonest behavior is penalized. The amount of $T staked by each node affects the amount of rewards validating nodes will receive and their voting power in the DAO. The more $T staked, the more likely they are to be selected to validate blocks.
Liquidity Pools (LP): Keep Network proposes to incentivize users to move their liquidity from the KEEP-ETH pool available on Uniswap to the T-ETH pool. This will increase the available yield rewards, thereby increasing the number of potential Threshold token holders and enhancing the network DAO's engagement with new community members.

$T holders can help operate the Threshold Network by staking and running decentralized nodes to validate activities on the network, incentivizing them to do so without using any centralized institutions. Additionally, by becoming active members of the DAO and participating in voting and discussions, T token holders can ensure the network remains community-driven and decentralized.
The total supply of $T is 10 billion, with 90% of the tokens exclusively held by the initial owners of NU and KEEP tokens in the initial token supply, while the remaining 10% of the total supply is held by the treasury.

## Future Value Analysis of Threshold

As an innovative cryptocurrency and blockchain technology, Threshold Network has significant advantages in security and privacy protection while supporting scalability and decentralization. However, its complexity and cost issues may limit the technology's adoption and application scope. Additionally, performance challenges also need to be properly addressed to ensure the network's competitiveness and user satisfaction. With continuous technological advancements and market developments, Threshold Network is expected to play a larger role in the future, but it also needs to overcome its existing shortcomings and challenges.
Threshold Network has truly promising products along with the structure and tools to achieve this goal. Furthermore, its incorporation of the Keep and Nucypher network communities should mean it has a healthy DAO community and a large number of staking nodes to ensure decentralization and activity. This indicates that $T has a very promising value outlook as a cryptocurrency. In the long run, as more applications are built around its functionalities, Threshold has significant appreciation potential.