Can a KYC'ed L2 Chain Unlock the Next Wave of Crypto Adoption? | Ramon Recuero, Kinto Co-Founder

Transcript

your digital footprint becomes a better mechanism a better inference to provide like proof of humanity to provide like a track record a credit history report like if you're have thousands of interactions on AV you've always paid down the interest if you've never been liquidated that I think becomes a a more complements the current kyc framework in a very nice way because blockchains are data Rich so ultimately if you become that beach head to get most users to agree and sign up for Kinto have this Kinto and if you almost become an essential metalware for everything else in crypto hey everyone if you have been listening to Empire you know that Santi and I are fed up with unaffordable fees and frustrating transaction speeds that

make the onchain experience basically unusable so the arbitrum team reached out and they showed us the platform they showed us what you can do on arbitrum whatever you're doing you can experience frictionless transactions at lightning speed on arbitrum so head over to portal. arbitrum doio and check it out what's up everyone before we jump into today's episode I'm excited to share Empire's first ever security partner Harpy is the best tool to prevent your wallet from theft in real time Harpy is not just a security solution they are a peace of mind solution but don't just take our word for it Harpy is the only wallet security solution that protected 100% of its users from attacks like The Ledger one and Q4 which was an offchain

signature attack to learn more about Harpy click the link in the show notes or visit harpy .io Empire what's up everyone before we jump into the episode little plug for digital assets Summit coming up in London March 18th to 20th tickets are pacing so far ahead of schedule that we had to decrease the discount codes so instead of Empire 20 it is now Empire 10 head over to the website digital asset Summit D London March 18th to 20th use code Empire 10 and get 10% off your ticket see you in London all right everyone welcome back to another episode of Empire really lucky to be joined by Ramon co-founder and CEO of mamori labs memor is building Kinto uh full dis disclosure Santi and I are both investors um and rone before

that head of product at open Zeppelin I think you spent some time at y combinator um on the technical lead side at Google uh and also had founded a crypto company before this so Ramon welcome to Empire my friend really happy to be here thank you for copy me yeah um Ramon so Kinto is building this like safe and secure L2 that institutions can use and uh obviously Santi and I are both investors so we believe in the vision have a bunch of questions but I think the lead into this conversation actually starts with not Kinto but Babylon Finance so what happened at B Babylon finance that led to this decision to go build uh this kind of like KY seed

L2 yep thank you it's basically a lot of pain is behind a lot of learnings behind this experience babyon for a bit of background was a defi protocol on ethereum mainnet that allowed people to create investment clubs together with your friends and invest in different investment opportunities in crypto like for example okay let's lend money on AB borrow from it and let's buy a teeth or less deposit in Combs and curve and stake the tokens there those kind of things Babylon was going well we released the community where is governance the token then we got to 30 40 million in in deposit and this is at the and this is in a space where Asset Management has traditionally not been like uh really in favor because most

people in crypto prefer to manage the money themselves and they are really far in the risk curve H but anyway we had like 30 40 million in deposits and then the r the famous RAR Fay incident happened where they suffer a re-entrancy hack and Babylon was one of the six or seven pools affected with fra and a few others and because of that um we went in a week from from 40 million in deposits to 3 million in deposits and yeah it was really painful because even if it wasn't directly our fault and it was also compounded by the decision of RAR Fay to say that they were going to refund so we dollar users so no worries all the Mone is there they're going to refund it's just a matter of time and then they changed their mind through a governance

proposal two weeks later and then when we told our users everything was going to be fine and then they told us no it's not fine so the users were they had $1 now they saw 80 cents so you can imine and this is when the crypto Market was imploding Terra all that stuff so everything was going down so the users were understandably really really angry and yeah and basically it's like in a bank or like in the JP Morgan days when spreading false rumors about this back being this Bank being ins solvent eventually led to the bank being insolvent the next day and in this case um the moment you lose trust of of your users even if you need to close your your protocol or for a few hours then then you're done so uh then we after

this eventually Ray and RAR and fade decided to refund users so we also did all the work to refund all the users so nobody lost money through through that hack but it was really difficult to to recover deposits because of the bare market and the deeg everything that was going on so we decided to close it but from all that pain is when I came to the realization it doesn't matter all the benefits of decentralization 247 everything that you can offer with crypto that we all believe in if users are losing money left and right due to hacks scams or raps what is Kinto yeah Kinto is a secure layer too that helps Focus exclusively on finance that helps people and institutions Bridge the wall of trfi

and defi what do you mean by being a secure layer too yeah uh there are a few layers here one of them is is like we have kyc at the chain level and there are several reasons for this that we can unpack but this just out of the gate gives you civil resistance it probably doesn't give you civil resistance in the more in the most decentralized or crypto Bank way possible but it gives you civil resistance onar with what the airport security systems do right now it's not perfect but it works well enough and governments and financial institutions take it then on the user side we're forcing every user to have their own smart contract wallet so this will remove all the hacks that you see the

board a holders and all these kind of people that is like they get just scam H every day um and this will also enable a much better user experience so they get two things for the for for the price of one so H those are two main reason and then another one is like by having a layer tube you also have a bit more time to act when something happens because before you escape the chain so that gives you also a a bit more time to to act in the case of an emergency H I'm gonna jump in as a perhaps someone listening to this would say I definitely hear you look we've been in this environment where there have been constant hacks pretty much every day and it makes you really question if this can

actually work at scale uh what's the point of creating an environment where you have to where you lose a lot of properties so to speak like why not just go back to web to you know yeah um you know and I'm for I'm been in crypto for 10 years so the moment I hear kyc you know I it's like an immune reaction an allergic reaction my body turns red but it's not one or the other it's like everything in life this there's like Grace and in this case uh people when we tell this the the story of Kinto immediately they think oh this is a permission chain I need to ask for permission this institution will give me access but the way we have created Kinto is that H the kyc is still owned by the users governance uses with

kyc providers are allowed and you as an user you pick which kyc provider you trust for example right now we offer pla or synaps and Pla you know is a web two leading company that Banks use so they trust and they are the ones that store data on chain there is no information ever store and Kinto doesn't store anything so uh you don't lose any privacy and also even if plat gets hacked they don't have your account information so you still can preserve your anonymity and then even in Kinto by default we create for you like a non-custodial wallet in tkey that is like a embedded wallet that is not tied to anything else so even in the case that both Kinto H gets hacked then you

that address doesn't give them anything about your all the other addresses so we have split everything kind of like the Harry Potter horo crook Voldemort so it's really hard for for sangan to steal identity and that's that's our top of mine yeah I definitely hear you on on the kyc look at I think it would be it would be probably naive to think that we're going to operate and continue to operate in an environment where you don't like if you look at regulation everywhere like you know the traveling rule there there's just been steps towards understanding to some degree who's operating on chain now of course one of the questions that I had when when when you came to me I was an

investor in Babylon and I love backing repeat founders so you came to me and said hey I want to build this and I my reaction was it makes a lot of sense because you know in many ways you already know who's operating on chain like if you think about it the flow is you most people go through an exchange that will require you and enforce at that checkpoint proper kyc so they would be able to trace you know whether you want to believe it or not through chain analysis and other tools people you know it's kind of really hard to preserve uh unless you onboard it through some other like manner um but I would love to understand some of the other features

like when you talk about a more secure environment um you know in a in a place where everyone in the pool or everyone in in this L2 un like knows who each other um and can interact like what kind of activity do you foresee do you think you know this is a place where Banks come and they can trade against each other because they know who they're trading against they know the counterparty um or developers get more excited coming here because this is where most users are going to are going to ultimately be I'm curious like how you think about like building this uh and what kind of features this allows because there there are other um I forget the the name of

this other company that is like uh providing kyc as a service for any type of you know L2 uh so I'm curious how you think about like the the other benefits Beyond being kind of like KY by default yeah I think the main difference from kto is that we are doing it at the chain level and this must be like must seem like a m minor point but this kind of really important this mental model do it doing it at the chain level because talking about these cases for example rwa protocols right now on Main net they suffer from an anti- Network effect because each one of them needs to do their own kyc they cannot compose with each other uh and the users that would invest in their

products they're usually not on mainnet because they require this compliance checks so there is a mismatch there so on kto H users they just kyc once and it's like the Apple store if you already put your credit card then it's one fingerprint and then you can access everything so it's the same in kto users only need to kyc once so it's better for all the protocols rwa protocols that need this feature and then if you're if you're are issuing assets that require other checks like for example oh this is this asset is only available for users in this jurisdiction you can do that con chain really easily and then you can compose with other kyc protocols that cater to the same universe of of assets um and one important distinction here is like U we don't want to kyc everything

and we really believe for example what this happening ethereum arbitrum and we are building on top of arbitrum on Kinto we don't want to copy all the protocols that are already on mainnet and just offer them we don't want to have a compound Unis swap replace them on Kinto we just want to have the protocols or the assets or the use cases that require this compliance check and then hope multi chain to compose them with the best assets that are already available on Main net arbit Etc because we don't want a fragment liquidity if you need want have that it makes no sense to have that on on K we just hop on Main it and grab it ran what do you think you remember you mentioned a and compound you remember a launched a Arc and compound launched um what was it called

compound treasury I think it was yeah and from my understanding both of those were not successful what do what did they get wrong um and how does that impact your strategy kto I think the same thing they get run is kind of like the I use use this analogy of the intranet versus the internet you know in the 2000s also a lot of people said no internet is not going to work it's open there's a lot of criminals using the internet it doesn't meet the the needs of all these institutions to come on board so it's never going to work and the same has happened on crypto you know with a lot of Institutions or provenance it's like they're creating this private chance um and then they wi list the participants so there is no organic flow there is no velocity of money and it's

just four or five people changing changing money between each other and as Santi said it's like why not create a a normal we to application with a database for doing that it makes no sense so in the sense things like a Arc being white being wh listed participants by default it breaks the compossibility all the cool thing about crypto is the composability and it's really hard because when you think okay YC composability there's a lot of nuance and that's where the I think the wisdom is here but it's like you can have some layer of kyc that and K we can offer that for the for the assets that need it and then even we can offer this product even multi-chain right now and even another use case is for air drops for example a lot of air

drops have G given billions of dollars to users and many of that has been lost to C resistant to civil Bots and stuff so even right now if you're doing an air drop on other chain you could check really easily oh is this a unique user and you can just check oh it has it verified in Kinto and that's it you don't need any data personal information or anything that can be one use case or other one using Unis swap B Hooks and hooking into kyc AML directly there and you don't need to to know anything so there are some things that will be in the middle and it's messy this messy middle is not clear that it's like oh no kyc at all oh everything kyc so it's like it's the messy yeah yeah that's a good observation two things to come to mind one um KC is

extremely expensive and and obviously there's ways around it I mean it's cost I forget the figure but it's cost the traditional system an enorm amount of time and money and friction and it's not the most effective thing but nonetheless I mean I don't think that we're it's going to go away anytime soon um I am curious when you you talked about the two providers synaps and um plaid I believe um that is mostly for us persons I believe or maybe Europe um it excludes my understanding is it doesn't cover the entire world uh and so how do you think about um my understanding is kyc is very not like robust in in other places so

how do you think about onboarding people in Asia or Africa Latin America I mean is that going to be a challenge or or have you thought about that road yeah great question right now between sinaps and plat both countries we support both places we support like a 85 countries so around half of the world and this includes many places in Asia Africa Europe us um but and regarding cost that's one of our value prepositions also for all these protocols areil protocols Etc because we are covering the the kyc cost and because of this relationship with Partners we can aeve good unit economics to make this viable and then because of our token incent can also use them for the kyc Ramon where is the kyc stored and

that might be a really dumb question but like you know how in trafi if you do KC like it's it's just stored on like the company's database basically or with the provider like plaid or whoever it is like how does that work for you guys exactly it works that is only the kyc providers restore the data Kinto doesn't store any personal data we don't want it we don't we don't want anything so if you as an user right now we have our launch program Open you can start kyc in uh you select oh I want to do the kyc through pla you complete the the flow it should just take a few minutes and then your information is store there and then in Kinto we only store kind of like an encrypted map between your wallet address and your ID on on pla that's it

and then imagine later two months later you want to visit this application on Kinto that offers you access to to treasuries to shorten treasuries that then you can use as collateral Etc then when you visit that maybe that Institution for whatever reason also needs your date of birth and then uh they will use our SDK to say hey J I need your date of birth and you with a signature can yeah exactly and they will redirect and then through our backend we'll check it's like and yeah is it is it read only or can plaid write back to Kinto pla can write back to Kinto in cases of AML for example if someone gets two of sanctions and things like that then automatically we update your nft on

chain that is what allows you to send transactions on Kinto because that's why also Kinto is safer only people that have gone through the kyc can send transactions but then also if someone gets added to a AML of f sanction automatically we receive the call back from plat or synaps and automatically update that information in the nft so then in an application want to H Blacklist people that have received the sanction then they are automatically compliant so what's the user experience there let's say let's say I'm Santi and I'm I'm playing around on Kinto and one day the government realizes that I'm a bank robber they send that info to to plaid plaid writes that info back to Kinto uh and Santi what wakes up and just can't like basically can't play on

chain like like what what does that actually mean he blocked out of his wallet or depend on the application I mean if that happens Santi should still be able to to withdraw assets it depends because depends on the level of sanctions or if it's Offa probably there is something really and they require you to freak everything but if not if it's just a country level sanction then you will get that information added to your nft and then all the protocols that don't allow that to happen you wouldn't you wouldn't be able to interact with them anymore yeah who do you think of as your customer Ramone is it the supply side of this or the demand side or maybe otherwise put is it the user um who wants to do things on chain or is it the

Black Rock who's like look I want to access things on chain but haven't been able to yet because there's no kyc yeah like all this is is both and it's a kind of tick and a neck problem the the way we see it right now is that uh these institutions are going to take a bit of time and you need TBL you need users to be able to convince them to create this and jump on board and I think it's also important to be credibly neutral you know black Ro for example is probably not gonna jump on Franklin Temple chain and so on another thing that kto is going to offer later because right now we solve like uh institutions have like three major problems coming on chain one is compliance that you don't know who else is in this pool Etc so you don't

want to commingle funds solves that problem kto the other one is the security hacks all that and we also have insurance at the chain level so Kinto offers a lot more security guarantees and then the last one is private transactions that is something that we plan to offer later through layer 3 on top of Kinto so there is still within the kyc AML ecosystem but then if you want to develop an application that requires everything private then you can do it h so talking about right now we're focusing on users because users the same way we're having this conversation and we don't know if it's going through Google Amazon users 5 years from now they shouldn't know if we're using Solana ethereum Kinto whatever and they don't care they shouldn't care in the end what we care is about creating value and if we want

to create value right now and not 10 years later waiting H for the regulations to change to what we would believe is the best for the centralization then that's why we need to offer this middle way to be able to offer these assets that require this this checks to comeon chain today are there going to be do you think like the growth of the ecosystem comes from apps that are new apps that are basically Kinto specific like kyc like institutional apps or is it the I don't know tier one is it the existing eth defi ecosystem that basically um launches support for Kinto with this kyc support yeah I the way I see it is that it's

probably it's probably first going to be retail and Retail getting larger and larger and it's going to right now you can see the hot ball of money in in crypto really easily but it can it can getting bigger and you can see blast uh that got more than a billion dollar in deposit and probably not much of that is institutional although they probably made some deals with market makers that help getting the initial traction but um in order for defi to grow I think it's important to to First offer a secure experience for users and Kinto is going to have this unique value proposition for users that is like okay you can access anything else you want on mainnet for example access S but access it

through Kinto and do you get all the security properties you get our wallet that we are really proud of the work that we have done and you can try online everything you don't need to worry about metam Mass you don't need to worry about gas because everything is a sponsor everything is through counter struction so it's magical uh you don't it doesn't seem like crypto but you still get the non-custodial benefit that not nobody else can access your wallet only you can access your wallet but you don't it it it feels like Robin Hood if you if you play the tape forward let's call it five years or 10 years remone are you still eventually you won't want to use plaid I'm assuming for kyc and eventually maybe you don't can you do kyc in a different way leveraging something like ZK proofs and maybe walk

us through your vision for like what the future of kyc looks like on on Kinto yeah I totally understand and this is what has prevented I think a lot of crypto people from embracing kyc because the technology is there to not need kyc because there is no reason for me to give my ID when I can just prove with a with a z knowledge proof that it's like oh I was born here and I'm over 18 years old there is no need to send my ID H so kyc is in a sense an solid technology but it's the one that is adopted by governments Banks and we know how slow they move and these institutions want to come on chain they want to create products they want to invest in products but we don't offer them ER the tools to meet their compliance checks their

compliance guy is not going to allow them to do so so that's why offering this technology now and then maybe five 10 years later it's going to be either a z knowledge proof or some even something that like w coin is an alternative to kyc that has other problems like pic said in the post but it's another alternative right now kyc is the most adopted civil resistant technology that meets the regulation requirements as soon as this changes Kinto is going to replace that piece with something with something else I'll be the first one to to do it because I I want to do it um maybe a basic question but um do you lose like what are the trade-offs here I mean obviously qsml is is important I think it continue but do you

lose speed do you lose I mean there's there's an added friction like when you talk about maybe going to another protocol another chain like a multihop um like practically speaking yes it's possible but I guess like are you inviting people uh developers to write these specific um rules um to say hey if you live in X jurisdiction and you're kyc in in you know in the US you you can only interact with so and so protocols and and so you can't do that hop but if you come from another place you can I'm curious I mean that that can get really complex really quickly in the evolving regulatory landscape and I'm I'm thinking of I was an investor in this

company called avalara which does take tax and calculates tax across every state and that changes like literally yeah every day for and it's I'm curious like that can be very costly for you guys are you inviting a whole set of developers through incentives to write these permissions and rules for for for users yes as you say I mean this thing gets really complicated especially with the longtail of assets you know if you want to put this exotic product this exotic building on chain and tokenize it I think that's going to require uh a lot of specific checks depending on which jur you in but we're focusing first on use cases that the scale and the obvious one is treasuries and and you can see maker so RWS I also

don't like the name because it's everything everything is RWS but it's like right now the obvious use case especially with the F fund rate as 5% is like treasuries and be able to allow people to use them as collateral one of our launch partners for example is Mountain protocol that is like a stable coin but gives you the yield different than usdc that that they give the yield for themselves Mountain protocol gives the yield to users yeah um when you from a regulatory standpoint and sorry if I keep asking about regulation I know it can be boring but I think that could be aot an advantage um say a government uh less friendly comes to you and says

hey can they come to you and say hey my understanding is there we believe there are some users from this country that have kyc and used gone through Kento hand me over whatever it is I want to see transaction history I want to be able to tie the wallet to the person is is there a back door is there a possibility to do that there won't be I mean initially until we release governance until we give all the power to everything to onchain governance this is going to be possible then later what we want once we put this in place we want to just have a process approved by governance that is like okay the authorities need to give you this this and that and then if this happens then governance can decide to

approve all these people and all these people information would be revealed to the kyc provider in this case it would be okay this address is this ID and then the government can go talk with the kyc provider to get the information yeah I want to make sure I understand something you said earlier because it's going to follow the next set of questions is in the scenario where synap or plaid get hacked uh that hacker is still not going to be able to tie your identity with the wallet no because there is nothing a story in there yeah and that I asked the question because in a scenario for instance where you're part of a multisig and there's five people like it's really the the

wrench attack that you're trying to prevent here people can very easily you know if if someone hacks plaid they all of a sudden know the five people on the billion dollar treasury that's that's an issue right I mean in time like Ledger for instance uh you know docs 80% of people highet worth people in crypto right and so that's it's an issue all right I mentioned them in the pre-roll now I'm going to bring them up again it's arbitrum Santi and I are really fed up with these high fees and we're really excited to have teamed up with arbitrum for the next couple of months on Empire as the leading ethereum scaling solution arbitrum now Powers hundreds of decent ized apps across defi perss nfts gaming and a whole lot more

the team has showed us everything in the ecosystem both now and what's to come and we're really really excited about it arbitrum allows both daily users and developers to interact with ethereum at scale with low fees and faster transactions the way the team got me excited was through portal. arbitrum doio so my call to action to you is to get started by visiting portal. arbitrum doio go experience on chain like it was meant to to be for a lot of Empire listeners your crypto is not just another number on a screen it's part of your future I know Santi and myself feel that way our security sponsor of this episode Harpy takes this responsibility seriously and is the only wallet security tool that Shields users from

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about protecting your crypto Investments it's time to make the switch secure your wallet for free at Harpy that's Harpy h r p. iempire if you want it to be even easier just click the link in the show notes should we transition a little bit into since you started where where you are today the conversations you're having with Partners where's the platform as I understand it you you have launched uh kind of a early beta we love to understand where the product is today and the traction you're getting yeah um our lunch program um started like two months ago and because our what you mentioned before about the friction and that is it adds a bit more

time to get on boarded on to Quinto we split up this process so in the first phase users were completing the kyc process we have like already more than 6,000 users verified and then starting a week be uh the week before we let them create their smart account wallet and every kto wallet is kind of like your own nosis safe so it's like pretty secure by default but this all account attraction you don't need gas you don't need signatures all with your fingerprint in your pky but it gives you that level of security and now we have more than 4,000 wallets have already been created starting two weeks from now the next phase we're going to actually help users that got affected by a hack in the last two years on defi we're

going to give them an incentive to join on Kinto because the idea here is that we're gonna do everything we can to make sure that Kinto is safe and these things don't happen again so that's gonna be the next phase and then we're going to start allowing people to deploy Capital ahead of our full launch that is going to be April 1 Roman you guys originally I think um you guys are you guys are kind of more like an l a layer three in a way in a because you're built on uh arbitrum but originally built on optimism is my understanding and then about maybe two months ago you guys officially announced that you had moved over to arbitrum why have uh why did you make that switch like why did you why why did optimism not work for you guys

and why'd you move to to arbitrum yeah I mean we really like the optimism stack and they were first I see than S celebrating yeah don't have fraud proofs and arbitrum is just a superior piece of technology sorry when I just cut in and solve your problem I mean it's true I mean technology wise I say they're mostly identical but arbitrum is the leader because they are farther ahead in the stage of a rollup and they also have more TBL but the reason why Arbitron wasn't a choice when you we started because they didn't release this stack to create layer TW and yeah we wanted to be on Layer Two that's another reason because also arbitrum was forcing people before to have to go through governance and you have to get approved through governance

for being a layer two because we want to be a layer two not a layer three we are we are to arbitrum what Bas is to optimism to to help explain it so and and now we talk with arbitrum and then they they are so helpful they they replied really quickly that it was in comparison with optimism we had a much better experience working with the arbitrum team and that's why we switch it was an upb brainer for us on this point um what is the uh like the licensing model um you know you're paying some sort of fee to Arbitron right yeah sequencer fees temper there are still finalizing it they just H posted on the governance Forum I believe last week or the last few days and is going to be approved hopefully and then

that's the model around 10% sequence surface so so arbitrum didn't throw you a big fat Grant to incentivize you to come and build and arbitr no just to be clear because other l2s are it's important you know I from a BD standpoint you know when you think about it's uh I've heard some crazy deals in terms of Grants and incentives so yeah it's good to see that um what um what are you most focused on right now from a product standpoint and these last few weeks focusing on on this wallet to make sure I think it's you know I really I'm a huge fan of Solana as well I think the the experience that we have ran Kinto matches Solana in terms of transaction in terms of user experience what we can

get with phantom um so that's that's my focus and then now it's going to be focusing on getting the world out there and that's why we are going to London to the to the D conference we're going to start creating more blog post spreading the world up there and getting the protocol ready for Capital deployment end of March we're also completing several security audits we're also partnering with Hyper native security protocols we want to have h a chain analysis we want to have the the chain secure because I have a lot of PTSD from from my experience at babyon so I don't want to go through that pain again yeah uh maybe one HK so so like we know that um a lot of Exchange accounts

get traded this happened during the FTX collapse this happened Happ s time and time again you know U how do you prevent that me mechanism from happening here so say that I kyc it's tied to my particular wallet that wallet might have hundred of interactions with other wallets so presumably you say Okay Santiago has these other interact with these other wallets say that someone comes to me and I and I sell that account you know I basically give them access to my cryptographic keys and they can now sign on my behalf is there a way to understand that and how do you prevent that because then all of a sudden you you know someone gets access to it's a liability for me I perhaps so I should

be cautious but I could also be hacked you don't really know right unless I'm attesting to like I sign a transaction with a message saying I'm still here it's me it's not the Lazarus group or it's not you know so and so yeah insert is really difficult and we we cannot is it's a to ident identity theft in the real world but in your case that you were saying if you if you get it stolen it's really easy the other case is really easy that you eventually can prove as going through the kyc saying oh that's not my account give it back to me that's really easy but the but the the case where you sell it willing Le to someone else it's probably gonna take a while for for the system to pick that up and then invalidate it not that you will

right because you can do it in a centralized exchange hoping that that centralized exchange is probably not going to you know give that information back to authorities um but yeah how do you prove that Humanity actually I'm curious like if if someone gets hacked and you need to prove that it's actually not you controlling the keys like what's the mechanism to do that I mean you force them to go through the kyc again and the life Tech and everything yeah Alo okay got it yeah yeah that makes sense and just as a data point like I've heard varying the cost for kyc uh providers kind of are all over the place when you talk about these

Partnerships like like the can you talk about the speed and the cost just if you can't disclose specifics I just like to understand like order of magnitude like how long does it take how expensive is it for you or the partner or you know the total cost per user yeah the cost I can give ranges the cost of kyc change a lot I mean for individuals it can be1 to $2 to $3 and then for businesses it's a lot more involve the process so it takes know 1015 the good thing about kto because we have Network effects we can buy a lot of kyc processes at once and then make it cheaper and then establish that partnership because then they also ensure that they have also repeated

repeated uh business from us so the unit economics make it out of make more sense then regarding time it changes a lot by jurisdiction for example you're a Us customer it can take you one minute out automatically as you go through the process you're approved so it's actually frictionless if you are for example also if your ID doesn't match your current address then you also need to provide a different proof of address document so that can slow things down so but most a I would say 85 to 90% of the people less than 24 hours it seems like there's a great opportunity maybe not with coinbase because I remember when you were raising coinbase announce base and I was like wait a minute like this sort of they already have million users that are kyc

and they already have Bas and L2 so what void are you going to fill here but um this all let me to think okay like if you're you talk about Phantom you talk about other wallets Argent like so many other wallets didn't have kyc yeah wouldn't this be more of an opportunity to do B2B versus B Toc like just go to the wallet if a user is going to create a wallet like the aggregators like Phantom so Phantom's in a great job se you on board right they create a wallet you already have a lot of that information or moonay or whatever immediately by default you you're you like also create the Kinto kyc like nft and the wallet um now Phantom you would argue why would they do that the user can then just go

and interact but like a lot of the users in these wallets are interacting on chain right and so naturally it would be a good opportunity for you guys to by default kind of be in that flow right so you don't have to do it twice you you create the wallet in Phantom you go takes you 20 minutes to all this stuff then immediately use the same set of Dos in that time frame to create the nft like the Kinto nft right yeah no that's exactly what we're thinking and MPE and Cado we're talking with them for this reason the only thing there is a bit of a legal problem there for data exchange agreement for example if they K with some other partner there needs to be some legal process in place to make sure um there can be a change of data um but

is is workable it's just a bit of engineering effort on both sides size and bit of legal paperwork and we're working with some it's similar for example when a protocol Builds on Kinto and then for some reason uh they need also personal data they they're they're going to have to sign this data sharing agreement so then they can retrieve data from plat or Cena from the customers it's similar to that but with the partners and it's a great idea working with this with all these wallets because they already have on board it it is that's why also we work with synapse because it's the biggest KYB uh provided in crypto they work with binance so they already have kyp a lot of people that are already in crypto and out of these 6,000 people

that have like on boarded so far uh you have an understanding of who they are are they mostly retail are they some sort of businesses like who who are these folks we have a few institutions that we have provided the KYB and they have KYB but mostly mostly is retail because this phase we we have focus on retail um they are a bit from everywhere in the world we have probably from this 10,000 us that have started the process we have around 1,000 between the US and Canada then we have another probably 1,000 Western Europe then we have 500 Japan Korea and then we have aanch also from other countries like Nigeria or India Ron can you take us in in the room

of um you meant you mentioned Das so at Das we have like you know City and U you know Black Rock and JP Morgan and all these like B the kind of classic big traditional institution speaking who when you I know you've met with a lot of these folks already like can you take us inside the room into these conversations like why haven't they played in defi what do they think of Kinto what's like stopping them from get on boarding to Kinto today what what is their I guess current framework for this yeah great question and it's really funny because when we talk with with dra five people they don't get some other things but they immediately get it's like oh everyone needs to be kyc in the chain it's like oh they automatically get that value Pro they automatically get it uh what has been preventing them from doing

things on chain and we have talk with some of these ER Financial Partners that recently on crypto on crypto Twitter they have been really vocal um it has been the lack of compliance and the commingling of funds and this is interesting we talk even with with BCS Crypt that do stuff on chain and they even are afraid to do stuff on AB because they don't know who C party is and even people like Galaxy you know they have to do their own work uh to analyze an a pool or a unisa pool to decide if they they are willing to take the compliance risk to put money there so I think um the compliance risk and the security risk of course defy smart

contract hack and then the lack of liquidity because some of these things like a or provenance or uh there is no velocity of money liquidity is really low and there is not so much stuff to do so for the staff what is safe there wasn't anything to do for the stuff that wasn't that there was a lot of to do like in ethereum mainnet there was no way to meet their compliance needs how does privacy tie into their needs uh you mean data privacy or user privacy um it's more like trading privacy basically and I don't know how Kento has thought about that yeah that's what I was mentioning before with layer 3es being able to do layer threes and you can think like the Aztec technology they that they can do so you can do that

on top of Kinto and then it's great because you benefit from all the kyc ml Network effects but then you can do also if you need your private decks or private per and then you want everything be private you can create that roll up on top of Kinto as a as a layer three nice um I know you guys talked about RW briefly but take us inside the world of RW raone and I know you mentioned uh it's a good quotee like everything is an rwa but what kind of areas of rwa way are you excited about right now right now we're really excited about treasuries you know you can see the growth of these protocols like condo B even Mountain protocol they have because everyone wants safe collateral that's one of the things because right now with

RWS a lot of people are also thinking oh is RWS just a bare Market narrative or because last year it's like oh RWS are GNA take about the wall and now right now when the B market starts it's like oh nobody cares about thews I want to make 100x on Bon or or these other tokens and the truth is somewhere in the middle I think if you can get great collateral safe uh that you can then use as collateral to build on top then that's going to increase the amount of liquidity is going to increase the amount of TBL and right now 5% treasuries are a really appealing collateral and imagine that you can in Kinto is one of the first products that we we want to offer that you can deposit usdc then you convert it to this collateral that pays you 5% and then you

can borrow from it and buy something else you can buy a or you can even Loop it if you want a collateral buy treasure that gives you instead of five give it you six or 7% with a bit of risk obviously but is there anything uh that Kinto unlocks that isn't possible today but will be made possible because of kto I think composability between rwa protocols is the main one an easy compossibility because right now you know if you want to do something with cut and then use it as collateral to use somewhere else is is really really difficult to though Ron this is a great chat um anything that is like obviously missing from this conversation that we should that we should talk about or Santi anything that you're thinking through I just go back to the main point

that um the things that are preventing people to use crypto and that we get this uh mainstream app I think is security the first one and then user experience and then once we solve these two use cases the the application is going to come and I agree with s also that games for example is an obvious one that is going to happen and it's going to happen I believe in the next 12 to 18 months and then these people are going to get comfortable with crypto so then slowly we're going to be able to grow the number of users in more and more entren cases and the biggest one is some of the asset management players but eventually I mean from here to 20 years

from now is it's just going to be a constant gain of more use cases and more territory in a way yeah yeah what I'm excited about is that hopefully this becomes the beach head to get more people to you know for better words disappreciate the like doing kyc is not like this huge breach it's already being done at some point for you to interact on chain whether you want to believe it or not um so if you're naive enough to understand that you're like a non it's really not the case but hope but but I think the flip will switch where people start seeing the benefit of and and getting comfortable with the partners that you're using and the you know a lot of what we talked about here is the security and the way that this

hand data is handled and you know doesn't have access to to to to avoid a situation like Ledger right where you know a lot of this information comes out and then and then ultimately like my my thesis is like KC is a very crude mechanism today um it constantly needs to be updated a lot of it is information in the real world that is like not actually very sound um but it's the best we have like like utility bills and bank statements and all that stuff like there's a whole web of trust but about 5 10 years from now your digital footprint becomes a better mechanism a better inference to to to provide like proof of humanity to provide like a track record a credit history report like if you're have thousands of

interactions on AV you always pay down the interest we've never been liquidated that I think becomes a a more complements the current kyc framework in a very nice way because blockchains are data Rich so ultimately if you become that beach head to get most users to to agree and sign up for Kinto have this Kinto nft you almost become a essential metaware for everything else in crypto um and unlocks things like under collateralized loans and I think it really I get excited from a financial standpoint like defi just becomes you know there's certain things that haven't worked because we haven't you know really figured out this and and the Civil resistance like for air drops for Community engagement become really

really essential um I always like to ask this question like if if we bring you on in a year or two from now and Kinto doesn't doesn't work doesn't live up to your expectations or like why would that be like what are the what are the scenarios in your mind where Kinto doesn't get off the ground yeah there there are a few as always yeah in a startup there are so many ways you can die and only a few ways that you can be successful um one of them can be even if regulation gets really really friendly and then oh we don't we don't need and there is just one designated for example if the US says okay we're going to approve everything Defi and then this base is is going to be the source of Truth and then

it's like oh if you have an attestation on base that can that can decide the winner H one way then another one is like oh RWS that is going to be one of our first Focus uh don't get any traction don't get any TBL so then kto fails to get $100 million in TBL another one can be we suff a security incident so then for us if we're focusing on security and then we suffer a security incident that would be a death nail so those are three ways that kimto can fail yeah um well you're a repeat founder um you you and I mentioned I I I really like backing repeat Founders um for someone that is new getting started

in the space what would be your best advice or set of advices for them they're new to crypto and building something you want to build something on crypto um It's tricky because you know I come from YC and I come from the from W to and YC has always been like the way to go to get the the advice about how to get the started and all the advice from YC still applies so I would say this is a good but then there are a lot of things where it doesn't apply and capital formation Capital location incentives the way we the way you onboard users is totally different so I would follow your curiosity and I would PA for example why combinator with the Andre and horo with crypto school I think those are good

resources to get the high level and then get a sense of how you can because making the switch from building a company to building a protocol and you don't need to build a protocol per that's another thing that you need maybe you don't need a token you can build assass on crypto maybe that's a business model or maybe you need the protocol and the token and the incentives and the community but all the all the all the paths are available yeah it's a good observation I think this a good place to end it perhaps we'll see more and more businesses just build on top of protocols and without a token but just you know um so it's a it's a great Point that's it for me I mean Roman great great having you on I think it's uh exciting what you guys building um and

yeah thanks for coming on and sharing your your insights y know anything else no all good remone rud for man thank you for having me looking forward to see you both in person in London see you in London my friend by guys hey everyone Jason here thank you so much for watching today's episode wanted to take a quick second to thank today's title sponsor arbitr we know you are tired of onchain experiences that have unaffordable fees and frustrating transaction speeds and that's why we partnered with arbitrum you can experience frictionless trades lightning speed and LaGree transactions all for pennies per transaction explore arbitrum expanding ecosystem at portal. arbitrum doio that's portal. arbitrum doio see you for the next episode hey everyone

thank you so much for watching today's episode really hope you enjoyed it we wanted to take a second to just remind you about upcoming digital asset Summit in London March 18th to 20th Santi and I got your back seats are limited if you heard it earlier in the podcast there's a little competition running at blockworks to see who can drive the most number of tickets so when you register for the digital asset Summit make sure you use our code see you in [Music] London