Cardano Founder Launches Privacy Blockchain ‘Midnight’ with Dual-Token System

Cardano founder Charles Hoskinson has unveiled Midnight, a new privacy-focused layer-1 blockchain years in the making, with the network officially launching this week after generating its genesis block on Monday.

The new chain, developed by Input Output Global (IOG) — the R&D firm behind Cardano — reflects Hoskinson’s belief that a lack of robust privacy protections on most popular blockchains is an important part of what’s holding blockchain technology back from mainstream institutional adoption.

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.

Charles Hoskinson, Cardano founder

The thinking behind Midnight is that most of the world’s value stays off-chain because public ledgers make it very difficult for businesses and institutions to transact with the confidentiality they require. To address that, Midnight uses zero-knowledge proofs to let users selectively reveal or conceal transaction data — satisfying both privacy needs and compliance requirements. 

According to Midnight’s statement, this hybrid ledger design means public and private data can coexist within a single transaction, with shielded assets capable of hiding balances and counterparty details.

For developers, the network introduces a new programming language called Compact, intended to lower the barrier to building privacy-preserving apps without requiring deep expertise in zero-knowledge cryptography.

Related: Hoskinson Says He’s Down $3B: Cardano Founder Breaks Silence on Crypto Crash

A Novel Approach to Gas

One of the more innovative elements of Midnight’s design is its dual-token model. Rather than a single token functioning as a governance, utility and gas token, Midnight splits its economy into two: 

• NIGHT, for governance and utility, acting as a “store of value for the ecosystem without being consumed by daily transactions”; and 
• DUST, a renewable gas token generated by simply holding NIGHT.

“Unlike traditional gas models where tokens are burned or paid out, DUST operates on a recharge model similar to a battery,” the Midnight team said.

DUST recharges over time — proportional to how much NIGHT a user holds — functioning more like a battery than a fee pool. Developers can also receive DUST allocations from NIGHT holders, opening the door to apps where developers can cover the gas fees for users, meaning users would never have to worry about gas costs at all.

Prior to its launch, Midnight began a year-long NIGHT airdrop in December, targeting 37 million eligible wallets. Hoskinson has said he personally put in around US$200 million (AU$291m) of his own money to fund the network’s development.

Midnight Maintains Close Links to Cardano

At launch, the Midnight network will have a relatively limited set of validators, including some operated by companies in the tech and finance industries such as Worldpay, MoneyGram, eToro, Pairpoint by Vodafone, Google Cloud and Blockdaemon.

While Midnight is an entirely new layer-1, it maintains close ties to the Cardano network. For example, operators of Cardano Stake Pools are now able to run Midnight validator nodes to earn NIGHT tokens, suggesting Midnight may share some of Cardano’s staking-based security infrastructure.

Midnight is also built to facilitate communication and interoperability with Cardano without requiring the use of any third-party bridges, according to Fergie Miller, the director of research partnerships at IOG. 

This interoperability will allow tokens to flow easily between the two chains, meaning Cardano users will be able to easily shift into Midnight’s privacy-preserving environment as they wish. It’ll also mean developers of Cardano apps will be able to seamlessly use Midnight when they need to leverage its enhanced privacy features.

By providing this enhanced privacy environment closely linked to Cardano, Hoskinson appears to be trying to create a kind of institutional DeFi and tokenisation haven he has never been able to establish on Cardano itself.

Related: Nasdaq’s Tokenisation Push Could Split Markets, TD Warns

Already there seems to be some interest, with the Midnight Foundation announcing last week that UK bank, Monument Bank, plans to tokenise around US$330 million (AU$480m) of retail deposits on Midnight — a figure more than double the amount of total value locked on Cardano’s entire DeFi ecosystem, according to DeFiLlama.