Multiple key validators on the privacy-focused Secret Network have ceased operations, primarily citing technical issues related to mandatory Intel firmware upgrades, leading to market uncertainty and heightened volatility.

Executive Summary

Multiple major validators, including Smart Stake, Kingnodes, Azul Collection, and Domerium Labs, have ceased operations on the Secret Network. These departures are primarily attributed to core technical issues and pressure to complete mandatory Intel firmware upgrades. This situation has contributed to a bearish and uncertain market sentiment, with expectations of high volatility for the privacy-focused blockchain.

The Event in Detail

Smart Stake, a prominent staking service provider, announced on January 29, 2023, its decision to discontinue support for the Secret Network, with services ceasing on February 21. The stated reasons included "complex/stressful validator operations," the "cost/effort ratio," and the problematic nature of mandatory Intel firmware upgrades. Prior to Smart Stake's announcement, Azul Collection and Domerium Labs had also declared their withdrawal from the validator ranks in December 2022. Domerium Labs specifically noted that "worries voiced yesterday, regarding the 1.6 Omega update, have come true," impacting the compliance of numerous validators. Additionally, Kingnodes announced its discontinuation of validating services on January 14, 2023. A representative for Smart Stake clarified that while internal financial transparency and political influence within the Secret Foundation were present, core technical issues were the decisive factor for their departure from the network.

Financial Mechanics and Technical Underpinnings

Secret Network leverages Trusted Execution Environments (TEEs), specifically Intel SGX, to provide privacy features. However, these implementations introduce specific technical challenges. Security expert Andrew Miller highlighted concerns regarding Intel SGX vulnerabilities, including ÆPIC Leak and MMIO Vulnerabilities, which Intel publicly announced on August 9, 2022. A critical vulnerability identified in Secret Network was the sharing of the same master decryption key across all nodes, making the network's privacy dependent on its least secure nodes. A compromise of any single node could lead to the leakage of this key and user data, potentially allowing for the complete retroactive disclosure of all Secret-4 private transactions. The mandatory Intel firmware upgrades proved problematic for many validators, leading to significant operational stress. Integrating TEEs into blockchain infrastructure demands substantial engineering effort and specialized expertise, a process characterized by a steep learning curve and less mature development tools. Furthermore, operating TEE-based systems incurs ongoing costs for specialized hardware, increased computational overhead, and the necessity for expertise in both TEE and blockchain technologies.

Market Implications and Strategic Context

The exodus of validators poses immediate and long-term implications for the Secret Network. In the short term, it may lead to reduced network security, diminished decentralization, and operational disruptions. Longer-term, it could impact trust in the Secret Network and its broader ecosystem, highlighting potential infrastructure challenges relevant to other blockchain networks reliant on similar hardware and upgrade processes. The issue underscores the inherent tension between leveraging advanced hardware for privacy and maintaining decentralized operational integrity. While Secret Network acknowledges these infrastructure challenges, its 2025 roadmap includes plans for minimum hardware requirements, MRENCLAVE migration, and WASM engine upgrades, signaling efforts to enhance network resilience and security.

Expert Commentary

Regarding the departures, a representative for Smart Stake stated, "Many projects have all kinds of issues and they sail through the tough times and recover from it... The decision to leave Secret stemmed primarily from issues with the network's core technology." Additionally, Guy Zyskind, Secret Network's founder, alleged that Secret Foundation's founder, Tor Bair, made an undisclosed sale of foundation funds, directing a "low-to-mid seven figures" portion to himself as a dividend. Zyskind also raised concerns about an alleged undisclosed "open loan to Alameda or one of its affiliates by the Secret Foundation."

Broader Context

The challenges faced by Secret Network underscore the broader complexities of integrating TEEs into Web3 infrastructure. The need for continuous and carefully managed firmware and software updates is critical for maintaining security in TEE implementations, as is the robust implementation of attestation mechanisms. While Secret Network grapples with these issues, other projects like Phala Network, which also utilizes Intel SGX, have claimed to have controllable impacts on similar vulnerabilities, suggesting varied approaches to managing TEE-related risks within the blockchain space.