CoinClear

COTI

4.8/10

Pivoting from payments to privacy L2 on Ethereum using garbled circuits — ambitious but early-stage with unproven execution.

Updated: February 16, 2026AI Model: claude-4-opusVersion 1

Overview

COTI (Currency of the Internet) launched in 2019 as a DAG-based payment infrastructure protocol designed for enterprise and merchant payment processing. The original vision was a high-throughput payment network that could handle mainstream transaction volumes with low fees, positioned as an alternative to traditional payment rails. COTI partnered with Cardano to develop the Djed algorithmic stablecoin and operated the COTI payment gateway for merchants.

In 2023-2024, COTI announced a significant strategic pivot: COTI V2, a privacy-focused Layer 2 on Ethereum that uses garbled circuits for confidential computation. The new direction targets privacy-preserving DeFi, confidential tokens, and private smart contracts — addressing the growing demand for on-chain privacy without the regulatory stigma of privacy coins.

The pivot is both COTI's biggest opportunity and biggest risk. The original payment network never achieved meaningful adoption, and the team is now competing in a new domain (privacy infrastructure) against established projects (Secret Network, Oasis, Aztec) with deeper expertise. The garbled circuits approach is technically interesting but unproven at scale in a blockchain context.

Technology

COTI V2: Garbled Circuits

COTI V2's core innovation is the use of garbled circuits — a cryptographic technique from secure multi-party computation (MPC) — for on-chain privacy. Garbled circuits allow two or more parties to jointly compute a function on their private inputs without revealing those inputs to each other. In the COTI V2 context, this enables confidential transactions, private token balances, and encrypted smart contract execution on an Ethereum L2.

The approach differs from ZK-based privacy (Aztec, Zcash) and TEE-based privacy (Secret Network, Oasis). Garbled circuits have theoretical advantages in computational expressiveness but face challenges in efficiency and communication overhead. Whether this approach can achieve practical performance at scale remains to be demonstrated.

Original COTI Network

The original COTI network used a DAG (Directed Acyclic Graph) structure with a Trust Score mechanism for transaction validation. Nodes accrued trust scores based on historical behavior, and transactions required validation from nodes meeting certain trust thresholds. The MultiDAG protocol supported multiple tokens on the same DAG structure. While technically interesting, the original network's adoption remained limited.

Migration Path

The COTI V2 migration involves transitioning from the original DAG-based network to an Ethereum L2. The COTI token migrates from the original network to Ethereum. This is a fundamental architectural change — not an incremental upgrade — which carries significant execution risk.

Security

Garbled Circuit Security

Garbled circuits are a well-studied cryptographic primitive with proven security properties in academic research. However, their application in a blockchain context is novel. The security of COTI V2 will depend on the correct implementation of the garbled circuit protocols, the Ethereum L2 infrastructure, and the interaction between confidential and public state.

Audit Status

COTI V2's smart contracts and privacy infrastructure are undergoing audits as part of the development process. The original COTI network contracts were audited, but the entirely new V2 architecture requires fresh security validation. Given the complexity of privacy-preserving computation, thorough auditing is critical.

Operational Track Record

The original COTI network operated without major exploits, though the limited value secured made it a low-incentive target. COTI V2 is too early-stage to have a meaningful security track record.

Decentralization

Network Operation

The original COTI network was operated by a relatively small set of nodes selected through the trust score system. COTI V2, as an Ethereum L2, will inherit some decentralization properties from Ethereum but the L2 operator (sequencer) is typically centralized, at least initially. Details on COTI V2's sequencer decentralization plans are still evolving.

Governance

COTI governance is managed by the COTI Foundation. There is no DAO or on-chain governance mechanism for token holders. Development decisions, including the V2 pivot itself, were made by the core team without formal community governance vote.

Centralization Concerns

The unilateral pivot from a payment network to a privacy L2 illustrates the centralized decision-making structure. While the pivot may be strategically sound, token holders had no formal say in a fundamental change to the project's direction and technology.

Adoption

Original Network

The original COTI payment network achieved modest adoption. The partnership with Cardano for Djed stablecoin brought some visibility, and the COTI payment gateway onboarded merchants, but neither reached meaningful scale. Payment infrastructure is an extremely competitive market dominated by established players.

V2 Development Status

COTI V2 is in development with testnet phases. Mainnet launch is planned but has not yet occurred as of early 2026. Until V2 launches and attracts users, adoption is effectively zero for the new product. The project needs to rebuild its user base around an entirely new use case.

Developer Ecosystem

The COTI developer ecosystem is small. Building developer tools, documentation, and community around garbled circuit-based privacy programming is a significant challenge — it requires developers to learn a new paradigm distinct from both ZK privacy and standard smart contract development.

Tokenomics

Token Overview

COTI has a total supply of 2 billion tokens, originally distributed through public sale, team allocation, and ecosystem reserves. The token is migrating from the original network to Ethereum as part of the V2 transition. COTI is used for transaction fees on the network and will serve as the gas token for the V2 L2.

Value Proposition

COTI V2 aims to create demand through privacy-preserving DeFi applications that require COTI for gas and privacy computation fees. The thesis is that confidential DeFi will generate organic token demand. However, this is speculative until V2 launches and demonstrates real usage.

Migration Uncertainty

Token migration from the original network to Ethereum introduces technical and trust risks. Users must swap their tokens, and the migration process must be executed without losses. Historical token migrations in crypto have occasionally resulted in complications.

Risk Factors

  • Pivot execution risk: Transitioning from payments to privacy L2 is a fundamental pivot with no guarantee of success.
  • Unproven technology: Garbled circuits in a blockchain context are novel — performance and practical viability are untested at scale.
  • Competition: Established privacy projects (Aztec, Secret Network, Oasis) have multi-year head starts in privacy infrastructure.
  • Adoption restart: V2 requires building an entirely new user base, developer ecosystem, and product-market fit from scratch.
  • Centralized governance: No community governance mechanism; major decisions made unilaterally by the foundation.
  • Original product failure: The original payment network's failure to achieve adoption is a concerning precedent.

Conclusion

COTI is in the midst of a significant identity crisis — pivoting from an underwhelming payment network to a privacy-focused Ethereum L2 using novel cryptographic techniques. The garbled circuits approach is technically interesting and could differentiate COTI from ZK-based and TEE-based privacy alternatives if executed well.

However, the risks are substantial. The pivot restarts the adoption clock, the technology is unproven in a blockchain context, and established privacy projects have significant head starts. The original payment product's failure to gain traction raises legitimate questions about execution capability.

The 4.8 score reflects the interesting technological direction tempered by early-stage execution, unproven adoption potential, centralized governance, and the inherent risk of a mid-lifecycle strategic pivot. COTI V2 deserves monitoring as it progresses through testnet to mainnet, but investment at this stage requires high conviction in the team's ability to execute a fundamentally new technical vision.

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