Blockchain utility keeps evolving as new use cases emerge. For example, digital asset access used to be binary – whoever has the key controls the asset. So, sharing the key could lead to potential asset loss. Liquefaction redefines the future of blockchain access with a new wallet system secured by trusted execution environments (TEEs), enabling temporary access to digital assets.

I first came across the concept in a Privacy Now podcast last year, titled The Future of Blockchain Access, that hosted James Austgen, a PhD researcher at Cornell Tech and co-author of the Liquefaction paper. In this post, I will discuss the concept, share a proof-of-concept (PoC), and give an example of its integration beyond simple R&D.

What is Liquefaction?

A blog post talking about using private keys to sell DAO votes triggered researchers at Cornell Tech and IC3 (Initiative for CryptoCurrencies & Contracts) to explore the concept and expand it into Liquefaction.

Liquefaction's innovative wallet system essentially treats any blockchain asset as liquid. It is built on Oasis Sapphire (confidential EVM runtime) TEEs to protect private keys.

By adding programmable logic on top of addresses through TEE-based policies, any blockchain, even non-programmable ones like Bitcoin, can act like a smart contract. This has significant implications for governance, reputation building, and privacy, with multiple users now able to share a single blockchain address for assets to be shared, rented, or pooled.

https://preview.redd.it/bevdz1vmdxeg1.png?width=1600&format=png&auto=webp&s=3a0b6528b56301fe624dc5955b5150e7ca7f8352

To clarify, Liquefaction does not move or wrap assets; it simply controls who can sign for them and under what conditions.

How Does Liquefaction Work?

Sapphire's programmable privacy and liveness properties are critical for Liquefaction's functionality.

• The system encumbers private keys directly inside TEEs, and the keys never leave the secure enclave.
• So, when a user initiates an action with a Liquefaction wallet, it submits a request to the TEE to sign the transaction.
• This request then passes through a multi-layered, confidential policy evaluation process.
• The smart contracts that define the policies implement stateful logic to track everything end-to-end – from rental period to defining and enforcing spending limits to allowing or restricting specific operations.
• Only after all the parameters predefined in the policies are satisfied, the TEE will sign the transaction, and Sapphire will implement a verification chain.

With each transaction going through multiple validation checkpoints before authorization, there is a cryptographic guarantee that prevents key extraction or policy manipulation.

While an off-chain computation might have worked the same, the Liquefaction process utilizes blockchain-based TEE for two reasons:

1. Liveness, as mentioned earlier, so that everything is immutably recorded on-chain and no one can just disappear with assets by unplugging the system.
2. Attestations that are not only tamper-proof but also mitigate trust assumptions by allowing anyone to verify what's happening and ensure continued operation.

PoC: Take My Ape Demo

In EthDAM 2025, the first live demo of Liquefaction showcased its use case in NFT ticket sales and rentals as PoC. It enabled users to temporarily rent a Bored Ape Yacht Club (BAYC) NFT with all associated privileges. The demo project is called Take My Ape, and it works like this.

• Users can bid for BAYC #8180 in ROSE tokens via a simple auction.
• Winners can own the NFT for a minimum of 15 minutes.
• During this time, they can
  • control the ape's image and display it on websites while enforcing copyright claims by restricting unauthorized image use
  • get proof of ownership by signing messages
  • get access to the BAYC member-only area and also other platforms where BAYC credentials are accepted

The only limitation is that, being only a rented owner, the user cannot transfer the NFT to another address, thus preventing theft. However, their fractional ownership is good enough for their address to appear in the Yuga contract, just like any standard Ethereum wallet transfer.

So, practically, now anyone can gain web3 experience without needing to spend a huge amount of money for outright ownership. The whole system works like a library. So, when the rental period is over, the ownership either reverts to the primary owner or is transferred to the next borrower.

In the next stage of R&D, the Cornell Tech and IC3 team is exploring a secondary-price auction mechanism. This will be needed when one must allocate scarce credentialed access. So, when multiple users express interest in borrowing the same NFT, there can be a fair way to determine who will be the next temporary owner.

First Adoption: SemiLiquid

Apart from numerous applications around credentials or token-gating, including ticket sales, reputation, identity, soul-bound tokens, etc, Liquefaction can change how ownership works in blockchain ecosystems by making digital assets liquid through programmable access.

And the first real-world integration of Liquefaction happened when SemiLiquid adopted the tech on top of Sapphire to manage its trade and information control system, which handles policy enforcement, breach monitoring, and programmable credit receipts.

Liquefaction features into this real-world-asset finance project as it looks to explore how to make token vesting smarter, more liquid, and enforceable by design, so that unvested tokens, instead of staying idle, can be used as collateralized liquidity instruments (CLIs), without breaking vesting contracts. More on this can be learned in the Privacy Now podcast titled "Unlocking the Locked".

Final words

By securing keys inside TEEs while offering conditional access through confidential policies, Liquefaction breaks the assumption that addresses must belong to a single entity.

Small aside – if you’re wondering about TEE side‑channel risks or how much trust attestations deserve, those questions are reasonable, and Oasis addresses them here:

• Withstanding recent side channel TEE exploits: https://oasis.net/blog/oasis-tee-vulnerabilities
• Analyzing the need for verifiable attestations, and finding on-chain solutions: https://oasis.net/blog/tee-attestation-is-not-enough

Now, back to Liquefaction. The initial response to the new tech was skeptical because the PoC involved a Bored Ape NFT. However, its recent integration by SemiLiquid demonstrates how versatile the concept can be – moving beyond the world of collectibles to that of practical finance. What other use cases do you think Liquefaction could impact?

For a more informed take before you comment, you can check out the discussions on the subject here:

• Oasis spotlight on Liquefaction: https://www.youtube.com/watch?v=b6ofK6AaX4Q
• Whitepaper Reading Club podcast featuring Liquefaction researchers: https://x.com/WPReadingClub/status/1973911942239756642

P.S. It is worth noting that Oasis is a privacy-first PoS L1 blockchain protocol and not a privacy coin, and its token, Rose, is used to make the protocol decentralized through running nodes, staking, and delegation, as well as for gas fees during any transactions.