Cardano founder Charles Hoskinson has unveiled a new privacy-enabling blockchain called Midnight. Under development for years, the network generated its genesis block on Monday.

Developed by Input Output Global, the R&D outfit behind Cardano, the complementary "partner" network is designed as a “fourth generation” blockchain to bring real-world assets onchain by delivering end-to-end privacy.

“Satoshi gave us good money; Ethereum gave us programmability; Cardano brought the third generation of interoperability, scale and good governance. Midnight gives us our identity and privacy back,” Hoskinson said in a statement.

Like other privacy-enabled chains like Zcash, Midnight features the ability to selectively reveal or hide data using zero-knowledge proofs. This is important because it enables user privacy while also supporting compliance requirements.

The network is built around a hybrid ledger that can mix “public and private data in one transaction” and shielded assets that can hide balances and counterparty details. 

Midnight also uses a programming language called Compact that makes it easy for developers to build privacy-preserving apps without much ZK expertise.

NIGHT and DUST

Perhaps the most innovative feature of Mightnight is its dual-token model. The network’s governance and utility token, called NIGHT, is unshielded and meant to serve as a “store of value for the ecosystem without being consumed by daily transactions” while granting governance rights to holders. 

Holding NIGHT also generates DUST, a “renewable” gas token. “Unlike traditional gas models where tokens are burned or paid out, DUST operates on a recharge model similar to a battery,” the announcement reads, noting the amount of DUST earned is proportional to the amount of NIGHT held. 

NIGHT holders can designate their DUST resources to others, meaning developers can cover transaction costs for users. 

In December, Midnight opened its year-long NIGHT airdrop to 37 million eligible wallets, aiming for “a broad, inclusive, and free distribution of tokens” to help bootstrap Midnight’s userbase. 

Hoskinson said he invested approximately $200 million of his own funds to subsidize the development of Midnight, with Input/Output handling the network’s technical development, cryptographic engineering, and protocol design.

At launch, Midnight will run under a federated validator model, "ensuring the network maintains security and stability as it matures."

Early node operators include Worldpay, Bullish, MoneyGram, Pairpoint by Vodafone, eToro, AlphaTON Capital, Google Cloud, Blockdaemon, and Shielded Technologies, according to the announcement. 

Cardano connections

While Midnight maintains its own ledger, consensus mechanism, smart contract environment and dual-token system, the network has several connections to Cardano.

For instance, Cardano Stake Pool Operators can also run Midnight validators to earn NIGHT tokens, meaning Midnight may inherit a degree of Cardano’s existing security and decentralized staking infrastructure.

The two chains are also built for easy communication and interoperability without relying on third-party bridges, Fergie Miller, director of research partnerships at IOG, previously said. 

Not only can assets move bidirectionally between the chains, allowing Cardano users to swap into a privacy-preserving environment, but Cardano-based apps can also be built with the ability to call Midnight when it needs programmable privacy.

To some extent, Hoskinson said Midnight is aiming to develop the DeFi and RWA ecosystem that has struggled to take root on Cardano, by providing the sort of institutional privacy and security guarantees missing from many of the leading smart contract blockchains. 

Last week, the Midnight Foundation announced that UK-regulated Monument Bank planned to tokenize up to £250 million ($330 million) in retail deposits on Midnight. For comparison, Cardano's entire DeFi ecosystem is estimated at $146 million in total value locked, according to DefiLlama. 

"While the previous generations of blockchains achieved scale and programmability, and sparked waves of innovation, they did so on public ledgers. This is why the vast majority of the world’s value remains off-chain," Midnight wrote.