Escaping Privacy Godot: What It Takes for Web3 Privacy to Go Mainstream

Transcript

Why privacy? Information asymmetry vs power asymmetry

All right. Hello everyone. Appreciate the chance to uh talk to all of you. Before I talk about uh the presentation and who I am, actually I want to start with a very fundamental question which is why privacy? Uh I've been in the industry now for nine years and this is a question that continues to come up and this is this is where I've landed. Privacy creates information asymmetry to protect individuals from power asymmetry. The world of data is growing exponentially. The world of AI is accelerating and it becomes increasingly important that we have technologies that can actually help protect individuals, give you the

autonomy and give you the choice to opt in. Uh who am I? I'm Carter Wetzel. Uh from 2017 to 2019, I spent two years uh building a book called Building or writing a book called Building Confidence in Blockchain. During that two-year journey, I found out that blockchains, the vast majority of them were 100% transparent. And that's actually inspired me. So, I raised $5 million back in 2020 to build Shade Protocol on top of Secret Network, which is one of crypto's first privacy preserving blockchains. I spent three years building private DeFi with a team of 25 people. uh built silk, the world's first privacy preserving stable coin tracking a basket of currencies and commodities and also built the world's first encrypted cross margin uh money

Carter’s background (Shade, Silk, private DeFi)

market as well as a DEX. Uh we reached about 50 million in TVL. I didn't quite reach commercial success but learned a ton about consumerf facing privacy and the reality of building privacy tech in the world of web 3 and made the jump in 2025 to help Phoenix uh bring FHE technology to Ethereum uh and beyond. But today's presentation is called Escaping Privacy GDAU: What It Takes to Go um Mainstream. So for those of you who have never heard of Samuel Beckett's uh Waiting for GDAU, it's actually about um two characters, Vladimir and Estreon, that uh spend days and days and days waiting uh for someone called GDAU to

“Waiting for Godot” & the privacy adoption myth

arrive to save them. And uh this scene goes on for years and years and years. And there is this long uh patient wait for something that never arrives. And I feel like the privacy community has been waiting for GDO, waiting for the world to wait up uh wake up and have urgency about the problems that uh at play. And this is kind of the mental model that I think a lot of privacy projects have had. Uh there's the different axes here. You have transparency and privacy. You have people that are skeptical about institutions. And you have people that are very trusting. And the idea has been if we can just convince the people uh that uh data leakage and power misuse

The failed mental model of convincing users

are things that you should care about things like the 2001 Patriot Act, things like the Equifax uh data leakage. If we can if we can just convince people uh to become more skeptical and to care about privacy, they'll become privacy conscientious and we'll we'll usher them into our utopia of tools of the Moneros, of the Signals, of the DVPNs and and the Samurai wallets. And I have seen hundreds of privacy projects since 2017 have this mental model for like winning adoption. But what I found is that it's actually a lot more complicated than this. When you actually go out and try to build these products and put it into the hands of consumers, it's not purely a philosophical question. It's it's not a question necessarily of the individual's desire. There's all these other uh vectors pushing back on

people's ability to actually want to use privacy tooling. Uh first one is UX friction. A lot of times these privacy tools are complicated to be onboarded to. Uh there's regulation which says, "Hey builders, you might be doing something criminal. Hey users, you might be doing something sketchy." And there's like not a lot of transparency out there about web 3 privacy and what is and isn't allowed. I'll talk a little bit more about that later. Uh there's speed. A lot of privacy solutions that have been built are very slow. Uh there's bad liquidity. If you're building a encrypted lending and borrowing market or like a private trading market, uh you could have the best privacy preserving tool in the world, but if there's no liquidity there for people to use, it's

UX friction, regulation & speed problems

not a useful tool. And I've seen so many privacy projects build and build and build and get to that point and then not have the liquidity to be a useful protocol. So even if someone wants to and cares about it, they still can't use it. It's they they can't justify it. Um, privacy maximalism is another one which I will do my best today to not participate in which is of the hundreds of privacy protocols. People say, "Oh, your privacy is worse, yours is bad." And there's a lot of like infighting that I think can turn people off to actually wanting to even jump into privacy because it doesn't feel very approachable. These communities feel highly technical and sequestered off.

Liquidity bottlenecks in private DeFi

And then another one which I'll talk about Phoenix helping solve is what I call the far-off silo which is in the world of crypto. Hey, you want to use my privacy product, please bridge here and then to here and then come to this app and you know 20 steps later you're finally if you finally have achieved the privacy but normal people aren't willing to spend the time and energy to to get over to that silo. So not only do consumers face friction, there's also builders, right? I a brighteyed bushytailed college student that learns about this lack of privacy and they're like okay I want to build a privacy what does it take for me to go build it and ship it and build something like commercially successful that will impact thousands of millions of people and the first thing is it's difficult to get

funding uh privacy as a vertical has been seen as something that doesn't necessarily have clean product market fit or demand uh bad developer user experience if you compare to like solidity and ethereum where there's thousands of developers and thousands of open source folks that are contributing to a general commons privacy land things are very siloed off. So you're coming into a new sequestered off ecosystem with with less examples. Um far-off silo again relevant less code examples. It's harder to build frontends and backends with privacy. Uh will I be arrested? You know an open question that samurai wallet tornado cache developers have had to face. And once again where do I find liquidity? Even if I build it well will there be enough for it to be useful? So

Privacy maximalism & siloed ecosystems

the good news is the tides are turning. So despite all of these friction points I've just mentioned, this is an optimistic presentation and not a pessimistic one. Um, a couple of variables. So first off, AI is making it easier than ever before to build privacy projects. Now, I want to caveat that that there is large data risks with using AI. So that is obviously implicit. As someone who's supportive of privacy, definitely check out Venus, which is Eric Vorhees privacy AI project. Really, really cool project. But as a whole AI is going to the builder that was like oh all these different privacy primitives encryption creing keys decryption keys how do I build a front end on top of this more complicated technology it's all becoming much more approachable with

Builder friction: funding & dev experience

AI and that is hugely encouraging uh for people that want to build technologies that protect individuals it's more accessible to build it now another one is on that capital and liquidity front uh things like Zcash Zama Aztec Phoenix hundreds of millions of dollars in recent history is pouring into the privacy space. So much of crypto has been, you know, code being forked again and again and again and a lot of these different verticals are very commodified and so people are being forced to innovate and privacy is one of those frontiers that venture capital and people are starting to believe can actually provide products with an edge and a moat and that's very encouraging on the commercial side. There's also open- source momentum. Every year that goes by, developer experience gets a little bit better. Uh better code

libraries, a larger corpus of successful projects and projects that have failed. And so there's momentum growing within in within the world of privacy. And so this is where Phoenix comes in that I represent because there's a couple of problems that we are also contributing to the privacy common comments on. So what is Phoenix? Phoenix is a solidity smart contract library where you can add FHE encryption to your smart contracts. So importantly earlier I talked about the silo problem which is like come over to my L2 and build build a build something right. Um we are actually a solidity smart contract library. So any EVM anywhere uh we can bring Fenix's library, we can bring our co-processor, we can bring our technology to your chain and those builders now have

AI accelerating privacy development

instant access to building with this encryption. This is a huge deal. Solidity libraries do not solidity developers don't need to learn something new. They can go FHE dot and you have all your privacy function calls that pop up when they're coding. This is huge huge progress for going to the developers as opposed to asking them to philosophically come and overcome friction and go somewhere else. Right? So chain agnostic. The second piece I mentioned earlier is that speed is something that uh privacy has not been known for. And so Phoenix is actually very highly performant. Um there's been some breakthrough research from Dr.

Capital returning to privacy (Zama, Aztec, Fhenix)

Isiskin and Guy at Sagi uh that actually scale decryptions per second to 64,000 decryptions per second. So what does this actually mean? Imagine a 100 users are on a portfolio page and they want to look at their encrypted token balance. Uh previously if you had a hundred people trying to do that at the same time it wouldn't work. Everything would break. Not very scalable if we want to bring this to millions of people. But now uh with breakthrough uh research now we can do 64,000 decryptions per second. So now we're starting to start to reach to a point where we can we can support many many thousands and thousands of users all at once. Uh the other piece of the puzzle is when you're actually uh computing across encrypted data whether it's addition, subtraction, whatever

whatever operation you're performing. Uh previously this is known as being pretty slow. Uh we've seen a 37x increase to now operations take 8.48 uh milliseconds per operation. And this number is actually going to get even faster and faster and faster. So if we want to bring privacy to the world, people need it to not feel it. They don't we need them to not feel inundated by the privacy. we need to have it match the experience that they would expect. Uh developer experience is getting better and Phoenix is really really good at um shared state. So if you've heard of like Zcash or Monero, they're very focused on UTXO models which is basically uh I can move asset from A to B and have uh privacy and they're very very good at do

FHE as a Solidity smart contract library

at doing that. Phoenix is very good at shared state on a smart contract where you have lots of individuals participating in a pool or in an auction or any sort of situation where you need to pull together multiple users into a use case. This is where Phoenix really uh is is special with all those speed uh benefits and it's broken down I I'm not one of the protocol engineers so like feel free to ask questions I can direct you to the documentation afterwards but it's broken down into three pieces. You have uh the end user on the application side can encrypt their data and submit it to um the smart contracts which is sitting on um the blockchain and events are emitted uh with this encrypted data uh like if someone submits new transaction and then an off-chain co-processor uh basically consumes this

Performance breakthroughs (64k decryptions/sec)

event uh computes across the encrypted data without ever decryting the data which is a very powerful attribute and then state is uh is updated. So zooming out again, privacy problems, we started very pessimistic. Speed and performance, we're seeing massive improvements on this front. Funding and liquidity, we're seeing growing venture and institutional interest. Uh UIUX onboarding, we continue to see improved tooling and improved uh information sharing with privacy commons. Uh on the complexity of building side, AI makes this a lot more accessible. On the regulatory front, this is still very bad. I go out to DC about once a year.

There's other people that are permanently in DC advocating for privacy and the regulatory landscape actually has not gotten better. We have not received any new legislation that has actually defined what we are allowed to build. There is maybe some uh backing off a little bit in the current administration, but at the end of the day, the Justice Department is still uh prosecuting people actively even when they're being told kind of not to. And this is ultimately because we need new legislation. And I know the folks at Coinenter and multiple people there's there's there's growing coalitions around trying to find a solution here on the regulatory front. And so within privacy max maximalism I want to mention some of the biggest privacy folks are spending capital to try to uh talk to the regulators and convince them that

Regulatory challenges & DC advocacy

privacy is at a very American value, a very important individual value and that it needs to be protected um at all costs and that includes the solutions that we're building. And then death by silo that I talked about earlier. Uh with chain agnostic solutions like Phoenix. Uh now more than ever before we're not asking users to take 10 jumps to get to uh privacy. And privacy impacts every vertical. Um from lending and borrowing to trading to tokenization of assets to private payments, identity and KYC. Every single vertical in crypto has so much innovation left that we can do with privacy. And so it still is really day zero, day one because the first five years I think was privacy projects doing

Closing

a lot of experimentation and now we're narrowing in on some some truths that this presentation talked about and I really do feel like the tools are arriving um in force for the world to build with and so if you're a builder please look into privacy so much room for innovation to be had. So stop waiting for GDAU go and build. We now have all the tools we need. Thank you. Heat.