There’s NO Chance Trillions Move Onchain Until We Solve This

[00:00:00]Everyone wants trillions of dollars to move on chain. But there's one massive problem. Public blockchains are too public. If you trade, pay someone, or move capital, the whole world can potentially see what you're doing. That does not work for real finance, and it definitely does not work for institutions. Zama is trying to fix that by building what could be the HTTPS layer for crypto. Privacy by default on public blockchains like Ethereum and Salana. Today I'm talking with Ran Hindi from Zama about confidential stable coins, private DeFi. You can take your shielded confidential USDC tokens [music] and you can earn yields on Morphova exactly the same way as if you would with regular nonconfidential USDC tokens. There's no downside, zero.

[00:00:46]There's no downside to having your assets [music] shielded. It's pure upside.

[00:00:49]>> Institutional adoption. There's just no chance that we're going to see trillions moving on chain unless we can solve confidentiality and privacy. That's where Zama comes in. We help the execute confidentially >> and why encryption may be the missing piece that finally brings global finance [music] on chain. Let's go.

[00:01:09]>> Let's go.

[00:01:17]Let's [music] go.

[00:01:23]>> So, I think it's fair to say that there's been a problem in crypto where institutions who need full confidentiality have been unable to get that on private private or public blockchains. Is that accurate?

[00:01:36]>> I think it's even worse than this actually. Um, today if you want to use a public blockchain to pay someone, everybody knows how much you pay that person, how much they have in their bank account, how much you have in your bank account. If you want to trade, everybody knows what you're trading. They can frontr run you. They can copy trade you, which is huge in terms of uh, let's say it creates a lot of loss opportunity for traders. uh but importantly I think there's a lot of people and especially those with large amounts of money to manage they just don't want to use a technology unless they have some level of confidentiality because they have that intrati so it's not just institutions I think it's finance that requires confidentiality and there's just no chance no chance that we're going to see trillions moving on chain unless we can solve confidentiality and privacy Maybe it would be constructive to talk about what the internet looked like before that existed. What was the solution and what the internet looked like afterwards?

[00:02:43]>> Back in the 90s, I don't know if you remember. Uh, how old are you, by the way?

[00:02:48]>> I'm 49. I remember.

[00:02:50]>> Okay, you remember? Great. I remember too. Uh, so remember there was something called the intranets, >> right? So an internet was a private network of computers connected within your organization and you could talk to your co-workers and you could have like a shared database you could exchange information and sometimes companies would connect their internet to other companies internet to exchange data.

[00:03:17]This is basically how institutions have been using blockchains up until now.

[00:03:21]Every one of them has their own private chain and they talk to each other but they're fundamentally siloed.

[00:03:27]What the internet brought was one global public network that everybody could use.

[00:03:35]It was a way for people to sell products to anybody in the world. It was a way for people to access and share information with anybody in the world without having to have this sort of like internet connectivity between everyone.

[00:03:49]This is what public blockchains like Ethereum and Solana are enabling for financial transactions. one global network everybody could use for transacting financially.

[00:03:59]The problem however in the internet to the early days is if you wanted to buy something on Amazon or any e-commerce website you had to put your credit card information and anybody on the internet could see it. So paying something online meant revealing your credit card data and what you were purchasing to anybody in the world. This was a very big um it was preventing effectively mass adoption of e-commerce and internet. So people invented something called HTTPS which was simply a a layer of encryption on top of the internet which allowed you to share information privately with a recipient. So when you sent your credit card information on an e-commerce website, you sent an encrypted credit card number that only the e-commerce website could decrypt and they could actually see it. And all of a sudden you just enabled global commerce on a single shared network. And from that we started having private communications. When you're sending a prompt to cloud today, your prompt is encrypted. People online cannot see what you're sending to claude. So everything that we have today, Google, Entropic, OpenAI, Amazon, all of those companies exist because we encrypted the internet. And so now think again parallel to public chains. If Ethereum and Solana are going to be the internets of global finance, we need an HTTPS for global finance to run on those. And this is exactly where ZAM actually comes and plays.

[00:05:37]So it's actually a simple relatively not technologically but conceptually a simple idea that's been proven as one of the most impactful in history. I mean pre HTTPS it's not that complicated right >> it's very simple we you encrypt the data that's it and that's exactly what we do for financial transaction on chain we just encrypt them so that whenever you're paying someone on chain is private whenever you're transacting and buying or selling stocks or crypto assets on chain is private you could have a portfolio of assets that you're managing as an asset manager you can have a bank account on chain without people knowing how much money you're making what you're paying for. Like we can recreate all of finance completely on chain with one global network 24-hour settlement anywhere in the world instantaneous with the same level of privacy as you would have in existing financial institutions.

[00:06:34]It's so interesting because privacy has become one of the hot topics again I would say because I think in the earlier crypto days privacy was probably one of the main topics and then we went through all these crazy bubbles and you know people seem to have forgotten about it because I guess they were making so much money at the time. Uh but it seems that we've come home right and privacy seems like you're capitalizing on the perfect moment where people are starting to really care about this again.

[00:06:59]>> Definitely. Uh, I've been in crypto since 2013. So, you know, this is my fourth or fifth cycle. Like, that I don't even count cycles anymore. I'm like, eh, sure, Bitcoin dropped again.

[00:07:11]Well, see you guys in two years, you know. [laughter] No, but the reality is what changed and this was our bet at Zama, by the way.

[00:07:20]you know when we decided to build the Zama protocol you know the HTTPS for onchain finance we did it because we saw that institutions banks that people wanted to use blockchain for finance um and this was really like a missing element so I think people are excited about privacy today not because of the original cypher punk ideals that we had initially but because finance requires it and because people are excited about the prospect of having trillions moving on chain. So to be honest, I think if we do our job right, nobody cares about privacy anymore. It will not be a topic.

[00:07:59]Not because we gave up, but because it'll just be by design in every blockchain. It'll just be there. It's in your browser. There's like this small lock when you connect to a website.

[00:08:09]>> It's there. You know, the connection is encrypted. You don't think about it.

[00:08:13]>> We have to do the same for blockchain transactions. From a dev perspective, the internet was the internet, right? Uh for HTTPS, but now you're talking about having something that needs to effectively fit every chain, I would imagine. Right. So technologically, is it do you have to create something different for every single chain or is it really a one-sizefits-all solution that you can create?

[00:08:35]>> It's a very much a one-sizefits-all solution. So there is a version for EVM that works with any EVM chain Ethereum base polygon Binance and then there is a Solana version which works I guess for Salana right u that's fine you know when you're building a mobile app you build it for Android and iOS we're building it for EVM and for SVM and with those two versions we can target effectively all of blockchain so the protocol is designed to be crosschain on day on there. There isn't going to be like a different version in every chain.

[00:09:10]There's just going to be >> one encryption layer. You've got, you know, confidential assets shielded USDC on Ethereum. You can move it shielded to Polygon and Solana.

[00:09:22]>> That's really interesting. It seems complicated, but it ser solves all the interoperability issues even of transactions and bridges that existed just by using your layer. Mhm.

[00:09:33]>> You have to I I think you have to whenever you're building core infrastructure today, you have to build it crosschain by design. You know, liquidity is fragmented. Uh people have money on Salana, they have money on Ethereum. If you're a trader and you want to access the liquidity, there needs to be a way to do that seamlessly.

[00:09:51]And just because you're doing it confidentially shouldn't mean that you have worse access than someone who's using blockchain today. So the the baseline is what people have today on top of which we have confidentiality. We we cannot make things worse than they are without confidentiality otherwise people are just not going to use it.

[00:10:11]>> Okay. So you kind of alluded to the fact that everybody needs this. Okay. So let's start with the individual and then we'll go to the institution. So as individual I want to send a transaction to somebody somewhere and it's a financial transaction that I obviously don't want people to have any uh visibility into. Mhm.

[00:10:27]>> Does this feel to me the same as I'm used to from, you know, going into MetaMask or Phantom and typing in a wallet and sending someone a transaction? Am I using it through your >> uh through a, you know, do I have to go to a different wallet? What does this look like for me who wants to use it tomorrow?

[00:10:44]>> I think we've done too good of a job to make it visible. uh that you know uh we spent years building this technology and make it work and now it works so well and is so seamless that people are like ah you know it doesn't even look magic right I'm like if you knew what went behind making this boring in a way right but boring is precisely what you want you know privacy is not what you're selling what you're enabling is for use cases to come on chain that would not be possible without privacy um so you can use it today with any existing wallet that you have. If you've got MetaMask, Rabi, if you're using any one of those things, it works off the shelf. We are currently working on integrating those confidential tokens into every uh wallet, every custodian, every exchange so that you can use it just like you use traditional ERC20 tokens. Uh right now we also have a Zama app on app.zama.org or that you can go to to manage your confidential assets to put them in vaults uh to swap them confidentially.

[00:11:55]But this user interface we created is just one way that you can interact with confidential assets. Exactly the same in the same sense that you know you can swap assets on the unis swap website or you can do it from meta mask. At the end of the day you know this is going to be integrated everywhere and it doesn't really matter which entry point the user is going through. It's just going to be a wallet.

[00:12:17]>> I mean, dude, does this get to the point eventually in your mind where it it just becomes the default of every transaction that everybody does on every chain and we don't even know it? Like kind of as you're saying, like I just go into my MetaMask, I send something and you guys have integrated in some way, shape or form and I never even think about it at all.

[00:12:33]>> Exactly. There's a point. There's a point. And and you know, for that to happen, you need two things. First of all, you need integrations. So you need this to be supported everywhere so that you never have to think about oh this is shielded it doesn't work in this wallet.

[00:12:47]So you need every wallet every on and off ramp every exchange every touch point in the crypto ecosystem has to support it. This is the work we've been doing this year really kind of like getting those integrations done. The second thing you need is utility. Great.

[00:13:03]I've got shielded USDC.

[00:13:05]What for? What do I do with it? Yeah, I can send it to people but can I make money? Can I make yield on it? Can I swap it? So that's where you need to start integrating with a broader financial and defy ecosystem. Uh and this is precisely what we launched recently with Morpho uh and stakehouse.

[00:13:22]We launched the first confidential USDC vault with stakehouse on top of Morpho.

[00:13:30]You can take your shielded confidential USDC tokens and you can earn yields on morphaults exactly the same way as if you would with regular nonconfidential USDC tokens.

[00:13:44]So, so think about that for a second.

[00:13:46]You can have the same yield actually better because we incentivize it. You can have the same yield or better with confidential assets than non-confidential assets. So my question is why not do it confidentially? There's no downside. Zero. There's no downside to having your assets shielded. It's pure upside.

[00:14:06]>> No, I agree. And that kind of speaks to the individual and the way that we behave with blockchains. But I've got to imagine when we start talking about the black rocks of the world and the largest institutions, as you said, we kind of have a have had a chicken and an egg problem. They want to bring trillions of dollars and quadrillions in volume literally into tokenized assets and settlement, but they can't do that if I can literally just go on the blockchain explorer and see what Black Rockck's doing, right? So, I guess make maybe speak to >> exactly >> how they do that now without the privacy layer or if they've already moved to privacy and how this will, you know, solve those problems for them.

[00:14:44]>> There there are two sort of forces happening right now uh in onchain finance. Um we've got the DeFi native financial players, the creators like stakehouse, uh the protocols like Morpho and Uniswap. They're moving progressively towards more traditional finance products as well, right?

[00:15:06]Offering yield coming from different products than just collaterized lending, right? So you've got this bottomup uh momentum that's happening going from DeFi to this sort of middle ground uh that we now call onchain finance. It's not DeFi, it's not Trafy, it's something in the middle. And at the same time, you've got Trafi, the Black Rocks, and the other guys starting to move on chain, but they still want to keep the level of compliance that they have with Trafy, the confidentiality they have with Trafy, the liquidity, the access, the distribution they have with Trafy.

[00:15:41]And so onchain finance is where those two world meet, where defi and stratfi actually sort of like end up uh merging is onchain finance. So I think you need to serve both. I think you need you need to work very closely with the morphos and the curators and you need to work very closely with the institutions and the black rocks so that we can find this gigantic trillion dollar market called onchain finance.

[00:16:11]>> So I just want to talk I guess a little bit more about your build what you've built. I'm looking at it through here.

[00:16:16]Obviously, you know, it's kind of built by Paris FHE cryptography company, right? And so you guys are running the Zama Protocol here. You raised 115 million bucks >> uh of 150 total 57 in a series B led by Panta Blockchain. So at a 1 billion valuation. So just people understand we're talking about a unicorn here.

[00:16:38]>> Like this isn't uh some nent idea.

[00:16:41][laughter] >> No, it's not. Uh actually I I've I started working on FHE in 2015. My previous company that I was running was an AI company already focusing on privacy. I sold that company in 2019. In 2015 I discovered FHE full homorphic encryption which is a way that you can compute on encrypted data without having to decrypt it. So think about it like end to end encryption for any kind of online service that you might want to use. Um, [snorts] unfortunately back in the days, a decade ago, it didn't work.

[00:17:13]It was too slow, very hard to use. You could barely do things with it. So, it was a good idea, but not doable in practice. When I sold my company, a week later, I started Zama with my co-founder, Pascal Pa, who's one of the inventors of FHE. And we didn't really know yet what the product was going to be. We just wanted to make FHE work. So we assembled, you know, the the Avengers team of cryptographers and researchers, you know, to just just look, you know, here's a bunch of money, make it work pretty much, right? And uh couple of years later, it did start to work. And so we started looking for what is the market we want to apply this for. Is it confidential AI? Is it blockchain? Is it databases?

[00:17:54]And what's interesting is that when you look at cloud applications like AI, if you trust the provider that you're, you know, working with, Entropic, OpenAI, Google, and if they don't get hacked, technically your data is not public, right? Sure, they see it, but your neighbor doesn't. And for most people, that's good enough. What that's what most people are happy with.

[00:18:19]Blockchain didn't give you that opportunity. if you used a blockchain application, if you did finance on chain, the whole world, including your neighbors, would actually see what you're doing. And we looked at it, we're like, "Oh, wow. Our technology is a vitamin for, you know, cloud applications, but it's a painkiller for blockchain applications. How big is the market if you enable confidentiality on public networks like Ethereum?" Well, if you look at how big the internet became with HTTPS, I think it's pretty clear that blockchain and onchain finance is going to be trillions and trillions of dollars more with confidentiality.

[00:18:58]And so, a couple of years ago, we're like, you know what, let's go all in on that. Decided to refocus the entire company with one single purpose. Enable confidentiality on public blockchain and drive adoption of that. So that in let's say four years 95% of financial transactions on Ethereum and Solana will be encrypted using Zama. That's the goal. 95% in four years.

[00:19:22]>> Quite a goal. So who's using it now?

[00:19:24]Obviously I read about T-Rex ledger uh which 32 billion in tokenized assets. So this is very much in use already.

[00:19:33]>> T-Rex is huge. I mean, we haven't rolled out with them yet, but we do we are, you know, the privacy partner for their protocol. So, T-Rex is a protocol that's being launched by Apex Group. Apex is a $3.5 trillion, you know, asset servicing companies, like, you know, one of the biggest Trafi institution out there. Um, they've already committed to tokenize a hundred billion dollars of assets on T-Rex. To give you some sense of the scale that represents, all of RWA's on public chains today is about $25 billion. So the one one one partner that T-Rex has, Apex, is going to tokenize four times more assets than all of blockchain RWAS today. Okay. Of that hundred billion dollars, if only 5% is shielded using Zama, 5%. I'm not talking about 95%. 5%.

[00:20:30]It would make Zama the largest protocol in terms of value shielded, bigger than Zcash.

[00:20:37]So one partner, 5% of one partner integration is enough to make Zama bigger than Zcash.

[00:20:45]Like that is the scale we're talking about here. Like finance is literally trillions. DeFi is peanuts in comparison to the amount of money coming on chain once you have confidentiality. So does this function sort of for people who you know don't quite get the uh the depth of it like a swap you swap into the shielded asset and then you go about your business with the shielded asset and basically it you know it's private once you're in it but you that how it >> it's not a swap the way it works is more like you know like you can have ETH and wrapped ETH uh effectively you know you just send let's say you want to have shielded USDC you take your USDC and you deposit it into the confidential USDC contract on Ethereum. So this is on Ethereum. You're not bridging, right?

[00:21:32]It's on Ethereum.

[00:21:34]>> Uh the confidential USDC contract will then mint the same amount that you deposited as confidential USDC. So sure people can see how much you deposited because you know by definition that's public. Yeah.

[00:21:45]>> But from that point every transfer you're making, every token you're receiving is shielded. So people don't know how much you're moving around, how much your balance actually ends up being uh and whether you're swapping confidentially, depositing, you know, in the steakhouse morph vault confidentially. Nobody has any idea how much money you have. But that's a beautiful thing. You're on Ethereum.

[00:22:09]You're not on a different chain. We're not asking you to use a L1. You're on Ethereum. Your money's on Ethereum. It's shielded on Ethereum. You're swapping on Ethereum. It's Ethereum with encryption.

[00:22:20]So, interestingly, if I have say shielded USDC and I want to go trade, right? Uh, what about the asset that I'm purchasing? That's I assume not shielded if I swap into some new altcoin or something like that, right?

[00:22:32]>> Uh, that's correct. That's the reason why we're adding more and more assets to the protocol so that you never have to do that. So you can go from shielded asset to shielded asset back to what's effectively your vault and all that's ever seen is what you deposited or remove from that vault once you decide to I guess if you decide to go out of the shielded assets.

[00:22:51]>> That's great. Which >> so if we do our job right you're never going to actually unshield like there's no reason for you to unshield >> if every wallet every on every exchange every swap every lending protocol support shielded assets. And that's the goal. That's exactly the goal, >> right? which shouldn't be a problem because eventually I mean even if you know I'm an American so we obviously are in a very like highly regulated and watched I would imagine as as it goes >> less than less than Europe >> right if eventually OKX or Coinbase or Kraken or all of these you know uh are accepting your shielded asset the government will still see when I go to cash right because there's nothing I can do about that but they won't be able to see kind of what I do in between which I think is really the somewhat ideal version >> so that actually is interesting conversations. So, you know, compliance, people think about compliance as KYC, right? Compliance is different.

[00:23:44]Compliance is primarily about how can you make sure that people using your products are using it for legitimate reasons. So, how do you make sure that North Korea is not laundering money? How do you make sure that you know a terrorist group is not uh getting funded that way? And we don't want that. I want to be very clear about something. The market for compliant finance on chain is a million times bigger than the market for illicit activity on chain. The >> of course >> terrorist financing, money laundering is a tiny use case in comparison to you know banks settling on chain uh people paying uh for the groceries and investors putting money into all kinds of different ETFs. So, we've made a position very clear. Zama will not welcome illicit activity in the protocol. Period. And the way that we do that is that we enable the token issuers and the DeFi companies and the financial service providers to build their compliance rules directly into their confidential assets and applications in the ZAM protocol. So when I'm issuing confidential USDC after someone deposited USDC, the user can see their own balance obviously, but me as the token issuer, I can also authorize myself or my compliance officer to see all the activities of people using my assets.

[00:25:13]And so by doing that, you're kind of recreating what TRFI has today where I see my bank account, my bank sees my bank account, but my neighbor >> doesn't see your bank account. Yeah.

[00:25:24]>> Right. And then compliance is just Trackfy compliance. You don't have to reinvent it, you know. It's just it's the same as we've had.

[00:25:30]>> Right. So it literally doesn't it doesn't allow for any illicit activity.

[00:25:33]It has the same protections. It just gives you like if I want to go to a store and pay with cash, the world doesn't need to know that I went and paid with cash.

[00:25:40]>> Exactly. And we've even >> Doesn't mean I'm doing anything wrong.

[00:25:42]I'm just paying with cash.

[00:25:44]>> Exactly. And we've gone one way, one step further than this. Uh we've actually we do what's called transitive compliance. So if the underlying asset is shielded, let's say if US, if you're shielding USDC into confidential USDC, if Circle freezes an address in USDC, it automatically propagates and freezes the asset in confidential USDC as well. So you don't actually have to do anything, you know, you just need Circle to do what they're doing and then it'll just propagate into confidential USDC automatically. Um, and I really think that this is how things should be. You know, I don't think that we as the protocol should decide what assets should be frozen, but the token issuer who's issuing confidential stable coins or whatever else, they can decide whatever they want that's right for their own business.

[00:26:33]>> Yeah. You you couldn't work with USDC and Tether if it if that wasn't the case because they've always very transparently said, you know, we work with law enforcement. If there's illicit activity, they freeze things, right?

[00:26:44]That that's normal. So, exactly.

[00:26:46]>> It has nothing to do with you.

[00:26:48]>> Yeah. just do it, you know, not our problem.

[00:26:51]>> Yeah. Yeah. That that that makes perfect sense. Listen, I mean, I I find this so so absolutely fascinating. You said 95% in four years. Was that sort of the goal?

[00:27:01]>> Well, that's my goal. Uh you know, but uh even if we reach a fraction of that, the market for onchain finance is so huge because it's not just that the the number of confidential transactions will be bigger in four years. is that the amount of dollars on chain will be bigger as well. And so if you compound those two things, so the the addressable market growing and >> 10% of a 10 times bigger pie, [laughter] >> I mean 10% of of onchain finance in four years is 10 times bigger than all DeFi today.

[00:27:34]>> Right. Right. Right. So it's just the reason why I'm saying 95% is because um encryption technologies HTTPS and al like have a tendency to have very strong network effects and to become a winner takes all kind of market.

[00:27:47]>> Yeah. Once it works it works.

[00:27:48]>> You know if you're shielding your assets in Zama they're not compatible with assets shielded in a different privacy protocol. And so you could unshield it and move it but then you're losing privacy. So I think that there is a very strong network effect in having the liquidity before others do and from that you can compound into this 95% adoption curve.

[00:28:10]>> This is a winner takes all situation.

[00:28:13]>> Winner takes all situation and uh I'm very well set on being the winner in this market for sure.

[00:28:20]>> Yeah, it sounds that way because I I've got to imagine there were a lot of competitors to the idea of HTTPS that we don't remember these days.

[00:28:27]>> Honestly, you know what? I'll tell you something >> or other ideas. Yeah, >> I >> Interesting.

[00:28:32]>> I've spoken to hundreds of customers, partners, everybody integrating this.

[00:28:38]I have yet to see someone else than Zama and Kanton on those deals. That's it.

[00:28:45]There are two companies being considered right now. Kanton for like internet type privacy and Zama for internet type privacy. That's it. do differentiate that as a way. Yeah, that's interesting.

[00:28:59]>> Yeah, Kenton is internets and and we're HTTPS like that's how really how you think both have value, right? To be clear and Canton is a fantastic company and they're doing an incredible job on boarding everybody to blockchain. Uh I think we serve a different purpose. You know, I think you know if an institution wants to use Ethereum, that's where Zama comes in. Kentton doesn't help them use Ethereum confidentially. We help the music team confidentially, but we don't go and deploy a chain in your organization. That's not our job. So, I think, you know, we're gonna have both.

[00:29:30]There's going to be I think where this is going is you're going to have Cantonike consortiums uh between large institutions. So, banks will talk to each other kind of like you have, you know, interbank settlement networks.

[00:29:44]>> Yeah, I was just I was literally going to say interbank settlement. Yep.

[00:29:47]>> The same thing, right? And they'll use Canton for that for sure. But then you've got, you know, e-commerce, you've got Visa, Mastercard, Swift, uh, all of these things, you know, running on public rails. This is more of like where Zama is actually coming in.

[00:30:02]>> Uh, so yeah, >> very very big. Very big.

[00:30:06]>> Yeah. Is there anything else that I missed here? Because, uh, you know, I feel like I have a good grasp of it and the audience will, too. But that doesn't mean that I asked every question that I should have asked.

[00:30:16]>> I I think it's pretty good.

[00:30:19]>> Awesome, man. It's really impressive.

[00:30:21]Um, it really is. And I think, you know, I've never heard anybody address the problem holistically. It seems like, you know, you kind of get a solution to each tiny problem, but as you said, that seems like it'll be so disjointed and that there's no way that wins. So, uh, yeah, I I give you give you all the credit in the world for for being the winner takes all here.

[00:30:43]>> You're you're a good host. You're a good host.

[00:30:46]>> I appreciate it, man. Thank you so much, Ran. Thank you for having