Innovation in blockchain technology goes on quietly while the world rages on about new-fangled applications and fluctuating cryptocurrency valuation. But research and development of novel methods to disrupt our complacency still finds a way. Liquefaction is an emerging disruptive technology in the blockchain universe that would revolutionize the access, control, and liquefying of digital assets. Developers: get used to this novel idea as implementing it is the skillset you would need to add to your repertoire sooner rather than later.
The idea first came into being when a blog post brought to attention a dangerous scenario where private keys can be exploited to sell DAO votes. Building on this idea, The Initiative for CryptoCurrencies and Contracts (IC3) team of researchers, along with Cornell Tech, developed groundbreaking primitives that we now call liquefaction. Spearheaded by James Austgen, the research paper proposed privately liquefying blockchain assets using trusted execution environments (TEEs).
What Is Liquefaction?
At its core, the idea is simple. If you can add logic on top of addresses through TEE-based policies, it effectively enables any blockchain address to behave like a smart contract. Leveraging Oasis Sapphire's SGX-powered TEEs, this would lead to storing of wallet keys securely, hidden even from their "owners".
By encumbering the keys, programmable rules are implemented which means multiple users can share a blockchain address, which, in turn, means that any asset can be shared, rented or pooled. To make all this viable, additional settings are in place to restrict signing authority and to set up a secondary-price auction mechanism to fairly determine next owner.
How Liquefaction Works?
It is interesting how encumbering keys work. The private keys just remain inside the TEEs and never leave the secure enclave.
So, when a user initiates an action via a liquefaction wallet system, the TEE gets a request to sign the user transaction.
Next, this request passes through a multi-layered, confidential policy evaluation process.
As a result, policies (governed by smart contracts) are triggered to implement the logic states for tracking rental periods, enforcing spending limits, and even restricting specific operations.
Only if all pre-set policies are satisfied, TEEs will proceed to sign the request.
The role of Sapphire is to provide privacy and security with TEEs with end-to-end encryption and then verifying the policies remain tamper-roof.
This verification chain is crucial as authorization granted after successfully passing multiple validation checkpoints guarantees cryptographically that no one can extract the keys or manipulate the policies.
If anyone is wondering why use blockchain-based TEEs and not off-chain computation, the decision hinged on two critical reasons. First, blockchain allows liveness guarantees so that no one can simply "unplug the computer" and disappear with assets. Second, TEEs come with remote attestations so that anyone can verify what's happening and ensure continued operation.
Liquefaction In Practice
The first proof of concept of liquefaction involves sharing access to a Bored Ape, but this only scratches the surface of the potential. During EthDAM 2025, the liquefaction demo case was unveiled and IC3 received a grant from Oasis to continue with its R&D to flesh out use cases.
Here is a snapshot of the yet to be tapped utility of liquefaction:
Coming back to the Take My Ape demo, while NFT rental in the form of a Bored Ape might not seem much but it showcases the value of liquefaction as tangible. What previously would cost hundreds and thousands of dollars can now be owned for a minimum of 15 minutes at a fraction of the usual price. In the process, Bored Ape #8180 made history as the most traded NFT.
Ownership is determined by a simple auction with bids in Rose tokens, and winners can enjoy:
- Control of the ape's image including the enforcing of copyright claims by restricting unauthorized image use
- Ability to play with the ape in BAYC Studio including displaying it on websites
- Proof of ownership via signed messages
- Access the BAYC member-only area including signing into exclusive platforms that require BAYC credentials
The ease of use also bodes well for web3 participation by previously mainstream and/or priced-out users. Try it yourself here!
Looking Ahead
Several months before the liquefaction demo made waves, its research paper author, James was a guest at the Privacy Now podcast laying the groundwork for the future of blockchain access.
And since NFT rental is just the teaser, we now know that there is so much more to come. A candid chat between Oasis ecosystem head, Will Wendt and Cornell Tech's Dani explored the liquefaction tech and discussed its next chapter in the works.
Liquefaction disrupts the assumption that addresses must belong to single entities, and flips the idea with programmable control and conditional access of digital assets where ownership, privacy, and flexibility come together unprecedentedly. This can potentially result in unlocking liquidity in billions of locked tokens.
For developers, simplified implementations are coming. Stay tuned!
Top comments (5)
The Bored Ape demo might seem playful but it’s proof of something big. Liquefaction on Oasis shows how ownership can become liquid, programmable and accessible. Imagine what this means for gaming, DeFi and enterprise use cases.
Liquefaction has really excited me. It has all the ingredients of making web3 popular and accessible to those who are still shackled by web2 experience for ease of use and options. When you can rent instead of buy, when you can subscribe instead of being sole owner/operator - the applications are endless. It would be as easy as getting a Netflix or Spotify subscription, or renting a blu-ray DVD instead of needing to buy it outright. This can also unlock liquidity in locked tokens. Psyched to see the other use cases of liquefaction taking off after such a successful proof of concept like Take My Ape.
Asset liquefaction! 💧
Liquefaction flips the script on asset control, turning wallets into programmable, policy-driven contracts via Oasis Sapphire TEEs. From NFT rentals to conditional ownership, it’s a glimpse of how Web3 unlocks liquidity and privacy at scale.
Fascinating piece! Introducing programmable, policy‑enforced access to digital assets through Liquefaction fundamentally reimagines wallet architecture turning a simple address into a mini smart contract held securely inside a TEE. By securely encumbering private keys and enabling conditional sharing, rentals, or pooling (as seen in the “Take My Ape” demo), this approach unlocks new paradigms for ownership and liquidity without compromising security or decentralization. Kudos for spotlighting this breakthrough shift!