Aztec and programmable privacy on Ethereum

Transcript

I think the more interesting kind of privacy technologies are ones that can actually power the world's transactions. And that's kind of where where we sit. Every time you pay someone on Ethereum, you're basically handing them your bank statement, your balance sheet, your history, everyone you've ever paid. But today, one of the original privacy teams in crypto is here to change that. ZK.money is making its comeback. What is this? What does it mean? And what do you need to know about it? Hello and welcome to Milkroad Crypto, the show that would tell you what's in our wallet, but that's none of your business. I'm your host, John Gillan. Today is Monday, September 28th, and we are going to be releasing this episode on Tuesday, September 29th because of a press embargo. Uh, but today we are joined by Joe Andrews, who is the co-founder and CEO of Aztec Labs, the company behind

the Aztec network, which is a privacy focused Ethereum layer 2. Privacy is one of the hottest stories in crypto right now. Joe is one of the leading experts on all of this. He's going to tell us what you need to know about it. If that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. And as a reminder, our podcast today is free. And that would not be possible without our wonderful partners at Nexo, the digital asset platform that lets you trade, earn, and borrow all in one place, all in one account. So keep an ear out for more information on them later in the episode. But for now, welcome to Milk Road Crypto. Joe Andrews, how are you?

>> Hey, thank you. Thanks for having me on. Uh, super excited to be here. >> I'm excited to talk to you, man. You're doing some big things. Joe, before we get into zk.money, tell us a little bit about yourself. What is Aztec Labs? What is the Aztec network? And and what should people know about these things? >> Yeah, I think we can start maybe seven eight years ago now. Um so we my my journey in in crypto um has has been a long one. Um we kind of started in 2017 2018 kind of like greeneyed and um looking at this kind of new technology to um disrupt kind of modern like onchain uh kind of like well sorry bring bring modern uh banking practices on chain and and other things. And we started looking in 2017 2018 about how

we could put like corporate finance onto blockchains. And we realized pretty quickly that um blockchains as they as they stood back then were pretty useless for most real world interactions because they they lack um a core tenant which is privacy. If you kind of you know transact in the real world today you just have this level of privacy that um we take for granted in in the in the western world. Um you know if it I can't see your bank account when you pay me. I can't see, you know, how much you spend on your groceries. Um there's just these basic principles that didn't exist um on blockchains for the last kind of 10 plus years. When we were starting to think

about uh putting in corporate finance uh on chain, the problem kind of compounds like businesses have this to an even higher uh degree than kind of you know we expect. Like most businesses rely on some information asymmetry whether it's you know their suppliers, how much they buy a product for, their portfolios, what they're what they're trading, like the whole uh kind of corporate finance industry is uh relies on information asymmetry. And usually you you get get that for a middleman. And for this to kind of work on a public blockchain, something had to change. And so when we started trying to put this these corporate finance uh tools on Ethereum, we kept running into this same problem of it's all public. Um this is not going to work. Um and so Zach, my my

co-founder at the time started trying to solve that problem. And the technology behind uh privacy on Ethereum and public blockchains in in general has expanded a lot in the last decade. like 8 nine years ago, you could barely kind of uh encrypt a number and put it on chain. And what Aztec is is kind of the culmination of eight plus years of research um mostly by kind of Zach who um is kind of um the co-founder of Aztec as well into zero knowledge proofs that enable you to now not just encrypt numbers but encrypt entire programs. And so we've been building this kind of technology suite um which culminated in the launch of a fully decentralized

layer 2 on Ethereum uh late last year. Um and the network kind of went live in in alpha form earlier this year and that is the Aztec network. It's a layer 2 that allows you to deploy private applications on top of public Ethereum. So you can have private state, public state, you can encrypt things. Kind of all of the things we wanted kind of seven, eight years ago are now possible. Um, and you can start to on board kind of real world finance uh onto these public rails and that's the Aztec network. So Aztec Labs, which is um the company I run, been the core developer of that technology um for the last kind of eight plus years. Um the network is

actually kind of launched and uh stewarded by a Swiss foundation. But the the company now has taken on a new life which is building things on top of the network to show what's possible. Like we we spent all this time bringing the network into existence and and now it's here. We want to start showing people hey you know we don't have to do things on on pure public blockchains anymore. There's a there's a much better way and that's what Labs is. >> Just want to pause for a quick second to remind you all that the crypto bull market is back. I have been deploying capital into altcoins that I think are going to do very well this bull market. Some of them are already up over 2x from where I entered. So if you want to see what's in my portfolio, what's on my watch list, and have access to me in

Discord to ask questions 24 hours a day, join Milk Road Pro now. The link is in the description. It's just a dollar. I'll see you there. Joe, thank you so much for some of that context and history around the company and on privacy. Could we just like back up a little bit? when you pay someone in cash like that is not like a public record being created but that is sort of the default in crypto. Why did we get to the place where that is the default and what are some of like the security problems this poses or just like you know drawbacks to that being the default that you're trying to solve with the asset network?

>> Yeah, this is a great question actually. So it it kind of you have to look a little bit into how blockchains work to understand I guess why everything is public and why kind of cash is not the the default. My favorite kind of like analogy here is if you think about what a blockchain is, it's basically a group of nodes that are all trying to come to an agreement on a ledger. Um like who like you know who who has what balance. Um and if we do an example here where you know if I've got $100 and I want to send uh $10 to you in order for the 10 different nodes, let's say they're just our 10 friends and we're trying to agree like did Joe actually pay John uh $10?

Well, there needs to be a public request. So, uh, in order for everyone to kind of like see what's happened, you can you can imagine kind of they have to visibly view my wallet which has $100 in it, they have to see me take out $10 and then they have to give it to they have to see me give it to you. And if 10 people kind of well in a blockchain case if 51 out of 100 people say say yes um uh they saw that then uh the the the kind of transaction is recorded on on the ledger. And so the fact that you need consensus and you need independent third parties who could be anywhere in the world to kind of validate your transaction uh on a blockchain. uh that's why kind of this kind of like uh

default public uh status kind of exists and you can't just have a a transaction between two parties that's um private. So it's kind of baked into most blockchains that they have to be public in order for nodes to agree on on what happened. Um so it's it's fairly fundamental and you know you may kind of then follow up and say like well how does how does that state work and how do how do these kind of um privacy preserving technologies work and and the answer is um this technology called zero knowledge proofs and instead of us you know doing a basic transaction you know uh 100 minus 10 is 90. the actual computation um is a much more kind of uh expressive mathematical proof and you can still broadcast that proof publicly

and all the nodes can check it but you don't reveal any information about what actually happened and so that that technology is zero knowledge proofs and Aztec is kind of built um around that to enable nodes to check arbitrary statements um without revealing the context of those statements. My my favorite analogy is a bit like um HTTPS on the internet. Like before HTTPS um like the little kind of green padlock in in the corner of your browser, you couldn't have card payments because you know your your your information was sent in plain text across the internet. It's a bit it's a bit of a similar kind of like analogy here where after HTTPS or in this case zero knowledge proofs, you can now start to send encrypted information um on blockchains or on the

internet which enables a lot more functionality. So yeah, a lot of work had to go into unlocking that, but uh it's this premise of consensus that means that you know things have to be default public in blockchains. >> Okay. Well, let's talk about this because zero knowledge or ZK technology has been something that people talked about for a long time. You guys have launched a product built on this called uh zk.money which you're just launching today. So this is the big news that's coming out. um explain to us a little bit about what ZKMoney is, what someone can do with it, and sort of like how this product instantiates some of these privacy features that you've been trying to bring to market.

>> Yeah, so um ZK Money is a payments product uh out the gate. Um so it enables you to kind of pay anyone on Ethereum um kind of a human friendly tag. Um, so instead of paying some random hexodimal string, if you had the tag at John, I can just pay you uh a bit like a VMO style experience and it's fully non-custodial and is fully private. So uh the initial features are payments um and also conditional payments to to payment links and we'll be kind of expanding the features um over the coming kind of weeks with savings, swaps, transfers in the real world and card payments and those things. So you can kind of think of it a bit like a a private neoank um but built on uh public blockchain rails. Um and

most other people who are doing this obviously they're just using public rails. So um they don't get the privacy part. So that's that's the big differentiator. >> Okay. So talk to me about what the the the product allows people to do. So like the place to start with is just with payments, but are there things you think you could evolve this for in the future? And like where do you kind of see this going as as zk.money starts to be adopted? >> Yeah, I think the first part that's just worth flagging is, you know, blockchains have come on a long way in terms of usability and and UX, but if you you know, if you still connect to Ethereum, for the most part, you're probably still connecting via MetaMask or Rabby or one of these wallets. And a lot of these usability features are not actually

used. And so out of the gate, we wanted to build a kind of UX for basic payments that like normies and web two people could enjoy. So there's no seed phrases on ZK money. You don't have to pay gas um uh once you're in the app. Um and everything just kind of works like uh you'd expect if you're using kind of a VMO style product. So we spend a lot of time trying to optimize the user experience so that you can just you know touch with your finger or with face ID and a payment will uh kind of leave leave your wallet and be sent privately to its destination and you don't need to kind of worry about remembering hexodimal addresses. You just have tags and contacts like you'd expect in kind of in in the web two world. So that's

kind of out the gate where we spent a lot of initial time. Once we've built that foundation, we're planning on expanding to support, you know, savings vaults, swaps to different assets and things kind of like that you'll expect to be able to use that money in the real world. Um, it's great being able to pay your friends privately in crypto, but, you know, if you want to be able to use this as a kind of replacement for a custodial account, you need to also be able to pay people in the real world. So, adding kind of bank transfers and cards, those sorts of things are kind of on the road map for for later in the year. This is all a retail product.

there's a equivalent set of features we can talk about with institutions as well which I think will be exciting but we're starting with retail because it's it's an easier kind of market to go after and iterate and test uh for now. >> Okay. So the idea is neo bankanking services with retail for now and there's there's more there. Um I want to ask a little bit about the history of this. This is not the first time you guys have have have launched zk.money. Um, you had, I think, around 75,000 wallets and $100 million in volume the last time you did this, but that was shut down, I believe, in 2023. Why the relaunch now? And talk to me about the the the lessons learned from that and like, yeah, just just give me some of the history on this.

>> Yeah, it's a great question. So, we we had a previous um version of this product on a much earlier version of of Aztec. Um, that version was um more centralized and it was very limited on on what you could do. It was kind of you could kind of think about it as like the difference between maybe a Zcash and an Ethereum. Um, so the original kind of like ZK money like all you could do was payments. If we wanted to add new functionality, we'd actually have to upgrade the network and and and and change you know under the underlying core primitive of a transaction to add things like swaps or other things to to the system. We realized um two things when we were running that product. one

that it the ability to kind of iterate it and add features was way too difficult because it required you know people to be uh a low-level cryptographer and understand the intricacies of writing zero knowledge proofs like it it was you know our team could do it but it was very errorprone and and not something that you could do easily as like a normal developer and secondly um we needed to decentralize this if we were going to scale it um to like a lot more users so we ended up shutting down that version of the uh product to focus on building the fully decentralized version of Aztec. And that gave us two things. One, you know, the network now just runs on its own. Uh there's about uh 4 and a half 5,000

nodes all around the world that are just running the Aztec network. So we don't have to do that anymore. We can we can focus on building products. And two, the network itself is programmable and has a a programming language called Noir, which means that anyone uh can write programs um on the network that add features. So instead of just having payments be the only type of transaction, if you want to build a new complex type of transaction that's a swap plus lending plus all sorts of things which we can I've got lots of things we can talk about in a minute about the types of transactions I'm excited about, you can just write a program in Noah, deploy it to the network. uh you're good to go. And so it's kind of the difference between like having uh it running on a single um payment rail like like a Zcash and and

uh more programmable network like Ethereum. But uh that's where we kind of ended up going going away for 2 three years building the building this version of Aztec and now it's back to kind of take advantage of all of those those features which is super exciting. >> I love that story and that trae trajectory and the progress you made there. just I know there's just many many years of work that went into getting to this point. So, congratulations on that. Uh you mentioned Zcash. I would love for you to just differentiate for me the the functionality and you know how Aztec Network works, what you can do with it versus Zcash because you know Zcash's big pitch is like private money and and being able to transact privately. Um obviously there's a lot more to Aztec network than just that, but talk to me a

little bit about that and what people should know about the differences between these. Yeah, I think the best the best analogy is is kind of the Ethereum to to Bitcoin kind of um analogy. So I think Zcash is two things. It's an asset and it's a way to send that asset privately. And so you you can you know you can get utility in in in both ways. One from just holding the asset because you think it's a store of value or you think it's a it's a asset you want to hold and invest in. And then you can also get utility out of it by sending it to someone else privately.

But your transaction is in Zcash, which means that you know it's maybe not that useful if you're a business that accepts dollars or you need to do euros or pounds or other kind of um asset other assets. And so Ethereum is kind of, you know, the programmable version of a blockchain that like in in this model it's not like Bitcoin where there's one asset. Bitcoin and Zcash. Ethereum and Aztec is kind of the analogy I'm trying to draw here. Aztec is kind of this general purpose layer bit like Ethereum but um we have privacy built into it. So when you deploy an application on Aztec you can have extra features that are privacy um uh enabling privacy in in that application. The main difference

would be Zcash is kind of a blockchain that has one program and one asset. Uh Aztec is a is a network that enables you to deploy any number of programs in any number of assets um and have them all be encrypted um if if if you want to. So Zay Money in this example is effectively one set of programs. We've deployed to Aztec that supports any number of assets. At launch will support D USDT, USDC and Ethereum as kind of some assets. But as we kind of expand the feature set, you know, we can have other tokens coming in. We can have RWAS, we can have kind of yield bearing assets, all sorts of things can go in the system uh because it's a programmable layer unlike Zcash which is kind of one one

asset. One analogy and I'd like to hear you you may disagree with this but an analogy I've heard is like um it's kind of like a fixed blade versus a Swiss Army knife. Um there's just like a lot more applications and things you can do even though they were both knives. Um but yeah, there's there's a lot and I think that that Bitcoin to Ethereum, Zcash to Aztec network, that analogy is helpful um there. Um I I think we'll get deeper into this Zcash question uh at some point, but I I do want to come back to Ethereum because I I think it's an interesting question of why you decided to build ASIC network on Ethereum as a privacy layer 2 as opposed to just spinning out your own layer 1 because like you said, you've got several thousand validators around the globe.

You could have just done your own layer 1. Why build this on Ethereum and and what was the decision-making process on that? >> Yeah, we've we've been back and forth on this question a lot over the years and it and it comes down to two things. Um, one is, you know, Ethereum is kind of like a record of global consensus. What happened is the strongest kind of um uh you can really get for a programmable blockchain. And so if you want the assets that you're transacting to be, you know, h have the kind of consensus and and the backing of Ethereum behind them whenever a transaction says confirmed, you must be on Ethereum. And if you want to compete with that, you know, you have to kind of get enough activity on your network in just in staking um and enough value in the kind

of the staking set such that you can kind of compete with Ethereum's um consensus capital is like a word that people use for it. And so I think recreating that from scratch is a is a very difficult thing to do. Obviously, lots of people like to do that and be an L1 because it's a it's a very big prize if you can achieve it, but in practice, it's it you know, there's a massive network effect behind Ethereum and it's quite hard to upset that. And given we were, you know, already doing something very very difficult with, you know, bringing programmable privacy uh to a blockchain, doing that and trying to kind of attract more capital than than Ethereum is, you know, you're having to solve very very two very very hard problems. So that's the first kind of

just practical answer. I think the more kind of like philosophical answer is is that you also need to look at e economic activity. I sometimes get berated for for saying this, but privacy is actually pretty useless uh unless there's economic activity, right? If if if there's a it's like the the famous analogy of if a tree falls in a forest, does anyone care if if you can't see it? um you know, if you're if you're on a blockchain where there's just one person, one node, and you're the only user, does it matter that it's uh public or or private? And the answer is probably it doesn't matter. Like privacy is not really the the reason that you're there. You care about privacy when uh there's a lot of economic activity and

your experience either as a business or as a user um is made worse by a lack of privacy. So, it's kind of privacy enables products rather than privacy is the product is is the way I think about it. And because Ethereum has the most economic activity, it makes the most sense to build a privacy layer on top of Ethereum because we're the closest we can be to that economic activity. Um, and it means it's very easy to bring that economic activity into Aztec and back to Ethereum. Um, so if we want to do a swap, we can actually just swap with unis swap and we can get a bit of privacy doing that. um if we want to, you know, have uh like a savings vault, we can kind of connect to RV or Morpho and and connect to all of the activity

that's already happening and add bits of privacy to that. So, it's a lot easier to kind of uh do that if if you're really connected to Ethereum as an L2 versus having to kind of bridge in um and bridge out as an alternative L1. >> Gotcha. Okay, that's really helpful context on there. I want to get your thoughts on this as well. Ethereum's own teams are working on developing privacy solutions as well. The Ethereum Foundation has a project called I may mispronounce this so forgive me but I think it's Kohaku or Kohaku Kohaku um which is trying to deliver privacy directly on the L1 for for Ethereum wallets. Can you talk to me about how you think about this? Is this a competitor? Is this a a partner to to the Aztec network or just like how do you see other privacy solutions in the

Ethereum ecosystem relative to to what you're building? >> Yeah, I think the more people focusing on privacy in my view it the better. Um I think I if if there are kind of initiatives to just do basic private payments, you can think of them as competitive with uh ZK money. I I think we would have a a far better UX and kind of just uh user flows uh today. I'm also though very bullish on the Ethereum privacy roadmap because we've had to build a lot of things into Aztec that if they were built into Ethereum would make Aztec much more performant and easier to use. So I think there's a lot of um kind of synergies between the two road maps and as Ethereum scales and as these features we we can take advantage of

them both at the Aztec level and also uh in the applications uh we build on top of um Aztec. I think ultimately whether they're competitive longterm is kind of is going to be judged by whether Ethereum uh stays credibly neutral. you know, they at the moment usually just build things into the protocol that make applications easier and Kohaku is, you know, it's spin out from the the EF. It's not actually built into Ethereum. And so, yeah, whether whether they stay uh kind of uh in that kind of methodology or not um is is kind of time will tell, but they haven't enshrined unis swap into the protocol and it's like the most successful swap. So to me it would feel a step too far for them to kind of enshrine full private

transactions into the protocol. Um and usually they will pump that to the application layer and yeah the application layer I think we we will win hands down. So I'm not too worried there. >> Um also the last part I'd say is that um privacy is also uh there's a network effect around it. Um so the more you can have different privacy apps on Ethereum, you have privacy sets associated with them. And so, you know, if there was a thousand users in one privacy and privacy set and 10,000 in another, if those can be connected together, then you kind of uh your users can share a much larger privacy set. So, netnet, I think the more people focusing on privacy on Ethereum, the the better the ultimate privacy will be for end users.

Um, which is just a positive thing for everyone. >> You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with. You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital, you end up having to sell something that you probably wanted to keep. That's why we at Milkroad are partnering with Nexo. These guys keep the whole thing under one account. You can buy, trade crypto, earn interest on what you already hold, and even borrow against your capital without having to sell it all in one spot, all in one account, all on Nexo. So, if you need liquidity, but you don't want to give up your position, or you're already holding crypto and you want to be able to do more with it, I think Nexo

is worth your time. We love working with them. I think you will, too. Tell them Milk Road sent you. Okay, this is making me more and more bullish the longer I keep talking to you. Um, I want to talk a little bit more about some of these functionality, not just the differences between Aztec and Zcash, but like the functionality set for for different users, right? Like there's different use cases for privacy for um privacy privacy which whichever side of the pond you're on when you're pronouncing it, but it's different for retail, for businesses, for um institutions, individuals. Talk to me a little bit about how you see that and then you know AI agents could come into this conversation too. just talk to me a little bit about some of the differences in terms of the user groups and how you're trying to think about servicing them with the products

you're building. >> Yes, it's a it's a great question and I think I mean the rise of AI is actually a great place to start. I think we see kind of like every day like you know there's a data breach somewhere and someone's KYC information is is leaked on the internet and uh the you know AI is kind of I would say largely responsible for at least the the increase in data breaches like it's much easier to kind of for adversarial people to try and hack um data and the thing that's quite scary uh is you know in in an AI age when you have agents transacting for you on chain and you have more data breaches is you're creating a lot more public fingerprints of who you are on chain and your

personal data is leaked a lot more frequently. Um, and so these two things combined together mean it's very very easy to you know figure out that I'm Joe. this is my Ethereum address and this is how much money I have and you know wrench attacks and and these sorts of things that we see in Europe and in France and and other areas where people are held ransom um because they have crypto um or they're kidnapped um because they have crypto just become more and more uh preva prevalent and the things that we care about building are things that you know protect against that. So in order to protect against that you have to do two things. One, you know, make make transactions private, but you also have to inside the transaction still have conditional

logic. You can't just have basic payments. You may want to do something like I can send you a payment, but you can only claim it if you have a passport that has your name on it. So in that in that world, you know, you may get compliance benefits. You also get extra security from it. Uh, and there's lots of things you can do in this way where you can attach logic into a payment because you have privacy. One example we have in in ZK money of of this feature is um being able to pay someone to their email address. So if I have your email address, I can send a payment link to you. I can put it in an email and you can only claim it uh if you prove you have ownership of that email. And so it these features kind of um enable you to

basically build better user experiences, but you can only do it because you have a form of privacy. The flip side and maybe a good way to just visualize this is if you bind a payment to a passport or an email, you would never put that on Ethereum because you'd be like, wait, I'm putting my passport information on a public blockchain. Um or I'm putting my email address on a public public blockchain. But you can now do these sorts of things. Um, and so I know it's a little bit meta, but those are the sorts of features that we're trying to kind of uh build and uh we feel like they can really help, you know, these products actually enter our daily lives.

That's on the kind of like who I am and uh like who I am when I'm transacting side. There's basic more basic things around kind of um you know swaps, savings, just being able to transact in the assets that you want that you may want to do privately, but these kind of um programmable private payments are the ones that I think I'm I'm more excited by because they're they're things that they weren't possible before without privacy. >> Gotcha. Okay. So, there's a lot there. Um I want to talk about the institutional angle on this. institutions for a long time have said they can't come on chain because having all of their positions be public is like a you know a security risk and a lot of other problems for them. Do you think that now after years of of working on this you've finally gotten to a place

where you know there that you now have solutions that are able to you know meet the needs of those institutions bring that capital on chain or are there still things that you think are on the road map that need to get shipped before that really starts to happen in size? I I think we have the basic building blocks where anything an institution kind of needs to go on chain can now be built. That's still not the same as an institution actually coming on chain. Um I I think um a few things are probably still missing. One is sufficient compliance and regulatory clarity around how these technologies kind of uh work.

We're getting there. It's you know it's changing every day in the US at the moment. Um but you know that that is a big part of this and so I think we we we have we have the ability to bring uh a lot of institutions on chain but without that kind of like rubber stamp of um this is the right way to do things um it it is a lot harder. I think we're starting to see very positive things out out of kind of the the last week of Hester Pierce's SEC kind of like reign where she's kind of at least tried to lay the foundation for a lot of um problockchain even pro privacy uh angles. The the most exciting one is kind of around KYC for us um and and her recently coming out and saying that KYC is basically a way it's like a giant

honey pot that shouldn't exist anymore and there's better ways to do it with zero launch proofs. We actually have a a separate product um called ZK passport that does exactly this which we combined with ZK money to to enable uh these flows. So I think we're we're get definitely getting there but the the last piece is still regatory clarity. I think what you what you can now do on a public blockchain though is is definitely sufficient uh to bring an institution on chain. They just need the last little push. ZK Passport is another product that Aztec Network has launched and I don't want to dive too deep into this right now because you know this but there's something that our audience should take away from this is go learn more about Aztec Network and what they're offering and how they're solving

these things with zero technology or zero knowledge technology um because just like you said Hester Pierce is talking about this there are better ways to do this now and learning about that is important I want to talk about something with the last few minutes we have here the the financial side of this Zcash has gone from I think it was around like 40 $450 or so in June. Now it's over $1,500. It's one of the biggest pumps in the market that we've seen this year. Um something like a 25 26 billion market cap now in this privacy token. Do you think that the market is going to continue to reward projects that have privacy solutions here and just what do you make of this sudden move of capital into Zcash after so long of it just like languishing

sideways? Like what's your read of this whole situation here? >> They've done the market very very well. Um I I think that a few things. One, as I said earlier, like Zcash is two things. It's a privacy technology, but it's also an asset. And so um that the the reason that I think you can correlate the two so strongly in in Zcash is that by holding Zcash, you you have um some privacy benefit of your net worth. So for kind of people who were historically holding Bitcoin um you know and it you know they would lose some privacy doing that potentially that there there's a kind of like a a clear pitch um from like one store of value to more private store of value. Um it's like do you want gold on your bed or do you want gold under your bed kind of as

a as an analogy. So I think I think that there's definitely um a thesis there that makes sense to me. I don't know if the current levels of of hype around it are justified given that it is purely just it's a store of value. Um and uh it's it's kind of speculative in in that nature. I think the more interesting kind of um privacy technologies are ones that can actually power the world's transactions and that's kind of where where we sit and they obviously operate on a different economic model which is transaction fees and you know adoption of the technology globally. It's it's a different thesis, right? Like one requires lots of people to hold Zcash and the price will go up. Um the other

requires lots of you know worldchanging applications to be built on crypto rails that need privacy. And then you know transactions drive the economic model of these networks like Aztec. And so they're you know they both require users to believe and want privacy but in a different way if that makes sense. And so I think yeah, the timing of Zcash has been great with AI. Um, and kind of like being able to kind of show the difference between public Bitcoin and and a more private uh Zcash. I I don't know if it's going to be able to sustain this uh another kind of five five sixx or whatever it's gone in the last 3 months. So I I I don't know what you're talking about. I was reliably told that it was going to infinity overnight. So um yeah, that's not financial advice. Uh

and a joke. So just for just to be clear in case anybody takes that literally Joe I do want to talk about the Aztec token here and just situate for me where the token sits in all of this in these products that you're building in the network that you're building how it captures value just talk to me a little bit about the token why you have one and and how you see it fitting into this ecosystem you're building. >> Yes it's a great question. So you know ast is a fully decentralized network. Um uh and the token powers that. So it's what enables you know stakers from all around the world to you know stake uh they stake in the token and it creates uh kind of economic penalties if they misbehave and it gives them rewards um when they when they do their job

correctly. And so the primary reason for Aztec having a token is is to fulfill decentralization and have this incredibly neutral layer that people can build applications on. And privacy is, you know, has not always had the the best kind of view with uh regulators. It's it's a double-edged sword of kind of like how people view it. Um you know, we've seen this throughout time with technology when we had the email uh encryption wars. We had SSL being kind of banned in the US. We've had like various forms of technology even with the kind of current tornado cashache cases where privacy on blockchains is a double-edged sword and um uh we had to launch our tech decentralized um to make sure that it wasn't controlled and owned

by anyone because someone owning all the data of the blockchain is is a very bad outcome. So the reason that kind of the token exists is to facilitate that decentralization um and make sure that there's uh economic incentives to actually keep the network decentralized. What it means kind of like day-to-day is under the hood transactions on Aztec uh are paid um the fees are paid in the Aztec token. a small amount is burnt in every transaction and you know fees go to the sequencers or provers who actually make sure the blocks are produced and and kind of um sent up to Ethereum. You don't see that in an app like ZK Money because we've got full fee abstraction. So uh under the hood uh

fees are being paid but you know you'll just see die in your account or dollars in your account. Um, and you'll never see any of this, but um, that's just because we have a a very programmable network that we've managed to abstract, you know, pass uh, kind of C phrases. We don't we have pass keys instead of C phrases. We don't have gas. It just kind of works under works under the hood, but it is there in every transaction. You could go to a block explorer. you wouldn't be able to see what the contents of that transaction was, but you would be able to see a small amount of ASIC tokens um kind of being sent uh or burnt um under the hood in that transaction. So yeah, that's kind of the purpose of the token on the network side and uh people kind of use it for that

purpose. >> Gotcha. And as there's more adoption of the Aztec network, more transactions, more volume, more burning. Um makes sense. Um I want to ask a final question here. uh you we talked a little bit about the strategy for institutions, for enterprises and businesses and for individuals. Do you have a differentiated strategy for AI agents and getting them to adopt um the products that you're building and what has that look like right now and what have those conversations been like? >> Yeah, so they are early, but we we've been starting to explore a few things with CK money. The best way to think about it is you probably wouldn't give Claude or your favorite agent um full access to a bank account today um because it could run run wild, right? It could do these things and if you know if you give it a private key, you should

basically assume that all funds on that private key are lost. With programmable um private transactions um you can do two things. Um you can constrain what's possible for an agent to do. So a good example is uh like this idea we have for institutions and invoices. Um you can have uh some sort of local client side technology that scans your inbox and you could have an agent create invoice proof. So every time you get an invoice coming in, you could kind of have an agent uh you know look for your inbox and decide to make a payment. If you just gave an agent cop blanc access to your bank account to do that, it'd be very likely at some point that uh the

agent could do something wrong, pay the wrong person. It's possible with like a technology like Aztec and ZK Money to make sure that a payment can only exist if it follows a cryptographic set of rules. And one example of that is uh every email in your inbox is signed by a sender and recipient. And so you can prove that you know under the hood in the email kind of protocol there's there's a email that came in from stripe.com and uh inside that email there's a PDF and inside the PDF there's an IBAN and there's a bank bank account um and I know $1,000 and a date and so you can prove all of this in a zero knowledge proof and effectively have a type of programmable payment on ZK money

or or Aztec that says you know, this payment can only be created if an email came in from one of my approved email kind of invoice partners. There is a PDF in the in the email that has a valid bank account that um you know I've paid before and all all of these kind of conditions can be proved and that really constrains what an agent can do such that you don't have to trust the agent anymore. if Claude goes rogue or uh one of these kind of agents starts hallucinating, they actually can't do that much damage if you can straighten the payment correctly. So, this is one area we're looking at because it it would mean that like internally we would feel

comfortable setting setting kind of an agent loose on on our kind of um invoices because we could just we could constrain what it could do. So, that's one example that we're we're exploring. I think the the other kind of more obvious one is just, you know, as you start to get agents to do payroll or um in the more kind of like consumer uh landscape, buy your groceries and and do these things like you just don't want that information to be linked back to you again. So, it's basic private payments again. So, it's all around either constraining what an agent can do or making sure that the um the kind of uh information that's leaked associated with you is kind of not there. Um and so both both are very valuable. Joe Andrews, co-founder and CEO of Aztec Labs. Thank you so much for being on

Milkard Crypto. I learned a lot from this conversation. I've been very fascinated by watching this technology develop and by watching you guys building what you've been doing for so many years. So, thank you so much for being here and sharing all this alpha with our community and our audience. Where can we send people to find more of you and your work online? Yeah, you can uh follow Labs on on X or uh my X handle is uh in in the description below. And if you want to check out ZK money, uh you can check it out tomorrow or today uh at launch.zk.money. Um and you'll be able to kind of, you know, claim your claim your tag bit like Venmo if you're in the US and uh yeah, just start paying your friends privately and with lots more features to come later in the year.

So stay tuned. >> We will definitely stay tuned. And yes, this is coming out on Tuesday, so ZK Money will be live by the time this episode is out. So definitely go check it out, claim your tag. Uh Joe Andrews, thank you so much for being here. I hope we can catch up again soon. >> Awesome. Yeah, it's been a pleasure and thanks for the time and the great questions. >> And thank you all for joining us. I hope you all learned something today. I know I did. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Crypto. Thanks for being here, everyone. Bye. Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milkroad Pro

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