Decentralized finance has thrived on transparency. Open ledgers, public smart contracts, and verifiable transactions have formed its core. But this very openness is now one of its biggest limitations. Public visibility restricts the design of competitive, trustless financial markets, exposing strategies, and inviting front running.
When every transaction and order is visible before execution, high-frequency bots can exploit pending trades, and sophisticated actors can reverse-engineer strategies. Institutions that rely on confidentiality in traditional finance are left hesitant to enter the decentralized space.
The next generation of DeFi demands privacy, as a way to keep computations secure without sacrificing decentralization or performance.
Why Transparency Limits DeFi’s Potential
The open nature of smart contracts has typically locked DeFi developers into a design space where privacy is impossible. Order books, lending positions, and bid data are fully visible to anyone observing the chain. This leads to significant inefficiencies and deters institutional adoption.
But this is no longer the only design space. On-chain privacy is now becoming a reality, offering a new pathway financial innovation in DeFi: the ability to compute over private data while maintaining trustlessness. Once privacy becomes interactive, on-chain applications can resemble traditional finance in sophistication, but without its centralized intermediaries.
Sealed bid auctions that prevent participants from knowing each other’s bids until settlement.
On-chain dark pools that allow large orders to be matched without revealing intent or position sizes.
Private lending agreements where rates, collateral, and terms remain confidential while still enforceable on-chain.
Confidential trading strategies and rebalancing operations for institutional participants.
AI Agents that can trade and interact with one another without exposing their underlying decision-making logic.
The Evolution of Privacy Technologies in Blockchain
The blockchain privacy landscape has evolved significantly, with various cryptographic approaches emerging to address on-chain confidentiality. Zero-knowledge proofs (ZKPs) for example, perform well for static proofs, but face challenges when computations require private inputs from several parties. Fully Homomorphic Encryption (FHE) has opened new possibilities for encrypted multi-party computation, but struggles to overcome compounding computational overhead. Furthermore, Trusted Execution Environments (TEEs) have some advantages but really on hardware-based trust assumptions.
How Garbled Circuits Enable Interactive Privacy in DeFi
Enter Garbled Circuits: a breakthrough approach to secure multiparty computation (MPC), where several participants can jointly execute a smart contract without revealing their private inputs to each other. They maintain correctness while preserving confidentiality for each party involved, a critical requirement for enterprise-grade financial applications.
COTI’s implementation of Garbled Circuits on Ethereum brings the first-ever blockchain deployment of this cryptographic protocol, which has existed in theory since the 1980s. As a privacy-first Ethereum Layer 2, COTI’s approach delivers a unique performance profile, up to 3000x faster than FHE and 250x lighter than alternative privacy solutions, while maintaining full EVM compatibility through gcEVM.
This combination of speed, lightweight computation, and multiparty computation capabilities unlocks the missing layer of functionality that confidential DeFi requires:
Institutions can execute private swaps, hedges, or rebalancing without public exposure.
Developers can design lending structures and bid matching engines using Solidity with privacy parameters, leveraging familiar Hardhat environments.
Protocols can achieve fair competition without relying on off-chain intermediaries, secured by Ethereum’s infrastructure.
Applications can run on any device due to the lightweight design, making enterprise adoption practical.
Where privacy solutions require trade-offs between performance and security, or between decentralization and confidentiality, COTI’s Garbled Circuits architecture delivers compliant privacy, combining transparency with confidentiality rather than relying solely on anonymity. This positions COTI to enable use cases across trade finance, real-world assets, healthcare, identity management, and DeFi that require both regulatory compliance and cryptographic privacy.
Interactive, confidential DeFi is not just a feature, it’s the foundation for institutional-grade on-chain finance. With Garbled Circuits deployed on Ethereum, COTI is building the infrastructure layer that makes next-generation private financial applications not only possible, but practical at enterprise scale.
Summary
COTI is redefining blockchain infrastructure through programmable privacy — giving builders, communities, and institutions the ability to innovate in a secure, compliant way. By integrating privacy as a foundational layer rather than an add-on, COTI enables transparency, flexibility, and empowerment across all of Web3.
About COTI
COTI is the programmable privacy layer for Web3. Powered by high-performance Garbled Circuits, COTI brings fast, low cost, flexible, and compliant privacy to any blockchain. With privacy that’s programmable by design, COTI enables the next generation of DeFi, payments, identity, governance, and AI.
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