Secret Network - What really happened in the ENG:SCRT swap?

Secret Network - What really happened in the ENG:SCRT swap?

By Orageux101 | Ad-hoc posts | 14 Apr 2021


What happened to Engima?

Enigma MPC were the developers of Enigma (“ENG”), a cryptocurrency that paved the way for what is known as Secret Network (“SCRT”) today. Enigma MPC sold ENG through an ICO that saw a total of 75m tokens sold to almost 6,000 investors for a total of $45m.

In February 2020, The US Securities & Exchange Commission (“the SEC”) passed a judgement stating that the ICO constituted a sale of securities. The SEC passed a number of sentences including a right to refund for all holders of ENG who no longer wished to hold the token (subsequent to the lawsuit) and a $500,000 fine. Enigma MPC understood that the categorisation as a security would no longer allow ENG to be a viable utility token in a decentralised network.

Around the same time, more than twenty independent validators launched a new blockchain that is now known as Secret Network. As part of Enigma MPC’s registration document with the SEC, Enigma MPC noted that they are no longer supporting the platform that ENG was planned to be used on. Rather, they were joining the Secret Network community where they were just one of many stakeholders. As a result, they have no control over the creation and use of SCRT, nor can they make ENG have functionality on Secret Network.

How was the swap for ENG to SCRT proposed?

As seen on Page 5 of the registration document, Enigma MPC noted that ENG will only have value through their right to refund or participating in the token swap proposed by Secret Network’s community.

As part of Secret Network’s on-chain governance, there were multiple proposals passed paving the way for a unification of the two communities and a token swap for ENG holders including:

  • Proposal 2: “Unify the Enigma Community” which proposed the token swap
  • Proposal 4: “Burn ENG for SCRT!” which proposed parameters for a token swap
  • Proposal 6: “Burn ENG for SCRT Budget Allocation” which allocated funds for a token swap
  • Proposal 14: “The Secret Swap Proposal” which activated the token swap

At the time of the token swap, the team leading the token swap noted on their FAQ that the token swap would not last forever as it was unreasonable to expect maintenance of the necessary components forever. They provided assurance that the swap would be open for a minimum of ninety days once the process officially starts.

How was a close date for the swap proposed?

A final token-swap related proposal was made as part of Secret Network’s on-chain governance. It was in relation to closing the token swap on a scheduled date of 1 January 2021.

  • Proposal 27: “Disable & Remove ENG to SCRT burn components”

As part of the proposal description, a number of key signers were mentioned that facilitated the swap, none of which are part of Enigma MPC.

The proposal also shows the votes that were made and it should be noted that 42% of the entire Secret Network community voted of which 99.9% was in favour of the swap (with 0.1% abstaining from voting). It can also be seen from the list of accounts that voted that the Secret Foundation (with members of the Enigma MPC team) did not take part in any voting.

How many coins were swapped using the swap?

Over the six-month period, 114m ENG were burned in swaps to nearly 2,000 addresses. It is understood that this is equivalent to 85% of existing ENG. A number of exchanges supported the swap for their users including Binance, Hotbit and Bitkub.

As you can see, the on-chain governance of Secret Network was utilised throughout the process and leaving a permanent swap would not be wise considering:

  • The time and monetary cost incurred by community members who volunteered to operate the token swap would continue
  • A permanent swap would imply that the two cryptocurrencies are equivalent in nature (which would create further legal implications)
  • As at 31 December 2020, more than 40% of SCRT was held by former ENG holders which was greater than the total vote in Proposal 27

__________________________________

SEC Registration Document: https://sec.report/Document/0001213900-20-035838/

Secret Network Governance Proposals: https://secretnodes.com/secret/chains/secret-2/governance

Secret Network List of Accounts: https://secretnodes.com/secret/chains/secret-2/accounts?page=1&partial=false

Swap Team FAQ: https://secretnodes.org/#/swap

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