Onchain Privacy in the Age of Payments | Money Rails 2025 | Polygon Labs

Transcript

Uh thank you so much guys. This is this is the biggest alpha talk. Alpha you can get the maximum alpha out of this talk actually like you know because privacy is the talk of the town and if you knew anybody who's working in privacy anybody respectable who's working in privacy ask them what is the best privacy solution out there in the market. And if eight out of 10 people don't tell you that it's Maiden Maiden is the best one then you know you can think of myself as a liar like this is Maiden is that high respected in the in the community and Maiden of course in Bobin is previously

co-founder at Polygon. So we started Maiden inside of Polygon. We realized that this is such a big initiative. This is will be a new chain, new VM. Everything is new required for it. And so that's why it deserves to be its own project, right? Which is connected to the A layer and everything. And so Bobin like just a small introduction about Bobin that Bobin is one of the three four key leaders from the from the Facebook's or the Meta's Libé team like back in the day there was you know the the Facebook Libra team and three of them those top researchers they came out and they started they did their own

projects when Libé was shut down. One of them is Suie the founder of Suie worked with Maiden worked with Bobin before. Then second one is Apptos and third one is Maiden right like third one is is with Bobin and Bobin is so privacy oriented that a cool thing is Bobin is is not his real name. >> You're doxing me a little bit. >> It's not his real name. Like you know he's he's like a privacy you know cipher punk and all that. So I'm really glad to have uh uh Bobin with me on stage and I want him to talk more about Maiden. So Bobin, what is Maiden and why why should people care?

>> Yeah. So first of all, thank you for the awesome introduction. This feels like home by the way. So like very excited to be here and talking to you guys. Um I think so Maiden, you know, in a nutshell, it's a privacy chain, right? So u I think privacy is super important. There are a couple of aspects like uh and we'll get into that but um when I first got into the blockchain space like I was very excited about the tech like I think that was revolutionary technology but for me like I immediately saw that there are two big issues with the blockchains and this was back in 2017 where I didn't think you know they could scale like bitcoin like I was like look read the white paper like six transactions per second there's not enough to do anything and second there

is no privacy and I was like unless we can get both privacy and scalability. There is just no way this can get to mass adoptions. And so for me, privacy was something that I was thinking even way back then. U now the path to get here was you know windy because I'm was not a cryptographer. So I didn't know anything about how to get privacy. I was actually a little bit depressed in the beginning because I was like okay blockchains are awesome but I don't know how they would actually work. And then I learned about ZK proofs and this was the time where actually it all clicked for me and I was like okay now I think I know how to make them work. And so I took time to learn about ZK. I took the time to figure out how to build the protocols. Uh a lot of that happened

while I was at Polygon. That was like the the part where a lot of the research and understanding came together. But I think a lot of this also happened at Facebook by the way. Like the first performance start prover was built at like with the Winterfell was built at Facebook. And so for me like this path of like building at this privacy focused chain but also that can scale and all of that stuff that was like basically my understanding of how the blockchain should work. So Miden again is a privacy chain. We're taking the approach where where we think like the next wave of adoption is institutions and so Maiden is focused on like you know this financial use case with institutions specifically and specifically from privacy and compliance standpoint because I think for institutions especially you know there's a cyber uh

approach where privacy is like your personal right and all of that and this is very important but also for institutions you need compliance and you need to be able to marry the two somehow otherwise this is also not going to work. Absolutely. And uh Bobby like you know about privacy back in the day I don't know whether you remember or not but you had you had given an internal presentation where you talked about three stages of privacy and I love talking about those three stages of privacy because privacy is also a spectrum. It's not like one single you know point. So I would love if you can talk to uh everybody about that framework that you share internally.

>> Yeah. Yeah definitely. So like uh there are different asp. So like the first level although the difference between the third one and the fourth one is fairly minor but the first one is what we have in blockchains today which is zero privacy for the most part. Maybe there are some exceptions but for the most part we have zero privacy. Everything is transparent. A lot of people up until recently didn't realize this actually like right now the privacy narrative was picking up and people are understanding that blockchains are not really private but the idea is that that this is a immutable ledger that is there for all eternity for everybody to see in a transparent way. This is like uh a very big problem and this is like the what we have right now transparent full

transparency no privacy. Second level is uh what I call a web two privacy. This is what you have with your bank. This is what you have with PayPal where you uh don't see everybody's transactions but there is some authority that sees those transactions. This is like the web two level of privacy. And then you have this like the next level of privacy which is more kind of like strong privacy which is um you know similar to what Zcash for example is doing where people uh you know only you and I see that we've transacted but uh nobody else can see there's no other authority and then you can go even stronger than that like you can say like nobody can see what's going on like you wouldn't know necessarily that I sent you money for example it could be used for donations and things like that and so those are different

levels of privacy I would say one of the points and I uh made yesterday as well at one of the uh talks is that people frequently think about privacy as binary as you said like where either we have transparency or we have like absolute privacy where nobody can see anything and I don't think it's a it's like that and it's in real world doesn't work like that like I think nobody would object that we would say transferring $100 should be fully private like nobody should see necessarily how you transfer $100 but if I'm sending a million or billion dollars like I don't think a lot of people would argue that that transaction should be fully private where nobody sees how a billion dollars is being sent and so there's still a lot of work to do in terms of figuring out what is the right place both on the

technology side and in the kind of like social regulatory and other sides how to draw the line but I do think of privacy as a spectrum which is some things are okay to be private and some things are may not be as okay to be private >> yeah and uh you talked about something called compliant privacy back in the day right and uh I would love to love to hear from you like what do you think what do you what do you think of compliant privacy and like I have a follow-up question like on that but first you finish that. >> Yeah. So as I mentioned like um compliant privacy is really important for institutions especially right because if you operate a business you usually operate under jurisdictions of some u country or some uh legal or or

some kind of organization or whatever and in that point like uh you know I don't know of any business or financial institution that says I don't care about compliance for many other reasons. Uh and for them being able to say okay we're going to still preserve privacy but we're going to make sure we're compliant. I think u there are different ways to be compliant right there's voluntary compliance which is works like this there's a and I think voluntary compliance we have the tools like zk is a perfect tool to give the voluntary compliance where you say I've you know uh complied with this certain set of rules but I don't need to reveal all the information that went into that this is a perfect use case where you say okay I can choose uh to uh comply with rules without making my data publicly

available to regulators and whoever I think there's also a question of involuntary compliance and that's a much more complicated question where you know should the protocol be able to enforce some things on users without them wanting to uh uh enforce uh kind of be imposed on this and this is again uh I think here people usually get binary where they say either you know you get full privacy you don't get privacy at all and here as well I do think that you know even though the conversation is much more difficult but we can come up with tools and all of that stuff to make it a scale rather than a binary choice I see. So in in in this compliant uh privacy mode like I remember that you were saying that initially you want to launch Maiden as a single sequencer you know chain. So in the single sequencer

chain if I'm not if I'm not wrong I think you were saying is that if like you will be able to see the operator actually sees who is doing what transactions. It's like a bank but you don't disclose it to anyone. But if a regulatory body comes to you and says that okay show me these these these these these transactions and so you will be able to selectively reveal them right so my question is like first of all is it like this second how do you think that the crypto community will take it >> yeah so I think uh first of all yes it is like this so uh we're launching as a centralized L2 uh and as a centralized L2 uh we will operate the network in such a way where uh we will see all the

details for the initial period of time and then uh people but people will be private against each other. This is kind of what close to this web two level of privacy that I mentioned before. Um now this is a temporary um kind of state. We do want to end up to a state where uh there is more privacy. Uh now why do we do it this way? Uh one of the reasons for this is uh kind of regulatory uh environment like we want to take this couple of years to understand you know first of all we want to make sure that Miden is not not used for nefarious purposes like North Koreans trying to launder money through Maiden that would be way more complicated or impossible to do if we are seeing all the transactions. Um second it gives us time to figure out like what is the right

approach from this uh compliant privacy as well like what is accepted by the regulators what they're looking for how can you marry this voluntary and involuntary compliance if there is a good good approach to this so this gives us time to both on the technology side and on the social and regulatory legal side to figure out how exactly this should work in the end state um and I think it also like the important thing by the way it's not only about regulation and things like that it's also about security Right? ZK systems are incredibly complex like it's very easy to miss uh a bug and things like that. And then the privacy system without this kind of training wheels it is very uh risky to launch with like full privacy right away because if there is a bug um you know you won't even be

able to see it. Like if privacy is working you won't even be able to see it. This allows us and gives us time to make sure we battle test the network well enough where we're sure that there are no uh issues or underlying bugs that could jeopardize the network. So again this like initial period gives us time to figure out you know security and safety on the technology side and it gives us time to figure out the appropriate way to give people more privacy uh in the longer term at the same time building the protocol in such a way that is threat resistant and doesn't allow people to launder billions of dollars.

>> Yeah. So, so in in the initial phase uh you know Maiden will have some sort of this operator trusted privacy that the you are trusting the operator that operator is not going to disclose anything just like you work with any other you know single sequencer L2 you are trusting the operator that they are not going to steal the money >> and blah blah blah. >> Well to be clear this is not about stealing the money. This is just the privacy. No, I know I know I was just giving the analogy of uh the the the single sequencer L2s but then what is the next stage and I'm curious about like once you enable the next stage then how do how does the compliance privacy still get preserved because I'm guessing in the next stage even you don't know.

>> Yeah. So next stage there are some things that we know and some things that we need to figure out like uh uh what we know is that we will build like the accounts where voluntary uh compliance will be super easy like the way we're working we have partnerships with uh uh uh teams in the space like open zeppelink for example building a private state management we're working with predicate as an another example which is like imposing uh uh you know can plug in the compliance checks into things so if people opt in into being compliant that is going to be very easy the involuntary part is a bit more tricky I have some ideas of how this is going to work but and these ideas are based for example you can say as I mentioned if you're transferring a small amount you are fully private uh there is no uh no kind

of other conditions if you're transferring large amounts maybe you need to encrypt it in such a way where if let's say one-third of the validators come together they can decrypt your transaction later on so if there is like a extreme event the network can go and decrypt uh like large transactions again this is like pure speculation right now this is >> maybe maybe like one idea that I'm just getting right you know like live is that you know maybe there's some sort of like governance or some sort of like uh you know privacy committee based stuff where there are like 10 people in the committee and if there is a regulated body like FBI or CI like not CIA FBI or not CIA FBI or like you know some other uh you know kind of regulatory body comes to you SEC comes to you income tax

comes to you at that time that committee can give a temporary key to that agency see that okay you are allowed to look into these five 6 10 transactions >> it's possible but it gets tricky if you do it this way because like you know as soon as you tie to a specific country then you know does this committee respond only to FBI does it or does it respond to like a Chinese government does it respond to Russian government as well and so I think this the idea is probably going to be something like it's a governance at the level of the chain but it needs to be more kind of like this is a validator set and you need to convince like one-third of the validators to be you know or whatever ever the number is.

>> Oh yeah. The DAO members actually like they all have to sign some sort of threshold. >> Exactly. So like and again there is a lot of research that still needs to be done to make sure there are no holes and it works correctly. I think we can do it in such a way where um you know 99% of people get privacy uh by default and like there's maybe a small set of use cases where there's extra precautions needed where you know you you require some extra things where you know you you need to do like get per not even permission but like reveal your transactions to a small set of people like if you're doing really high value transactions. Yeah, I think that's like the that's like the the holy grail of a privacy blockchain. Like if you can find a place where you can still uphold all

the cipher punk values, but you also have like a an ability that if an regulatory body wants to get into some transactions, they can get into it, right? Without having a central party having all the control to give, right? This is kind of the holy grail. >> Yes. Yes. I think I mean if once and if we solve this problem I think it would be a very like again uh privacy I do believe it's like a fundamental thing that needs to be there otherwise the system doesn't work but at the same time we live in a real world and we need to make sure that you know it's not that easy to launder a billion of dollars I like to like make an analogy to cash right so like cash is a very private system where if you and I engage in transaction nobody else knows about it

but cash unlike blockchains has a nice property that it is like it's very easy to make small value transactions. But if I want to transfer a billion dollars in cash, that becomes much more complicated. And like transferring a billion dollar in cash, you know, you still have like the cash has this nice property where it is good enough for law enforcement to be able to track and like figure out that, you know, transferring a billion dollars involves a lot of steps that make it tricky for criminals to transfer billion dollars in cash while normal people and regular people can just transact privately with small amounts. But with this with blockchain transactions, don't you think that I can simply break down that billion dollar transaction into thousand smaller transactions?

>> So, so that's part of the research like you need to uh figure out how to handle this. And one of the ways to handle it is have an identity system where you have some identity that says okay you can't create a 10 million sibles of yourself. Now creating such an identity system is also challenging because you know uh you want to make sure it's permissionless enough where people even who don't have like passports and things like that can obtain this. Uh but at the same time it's like civil resistant enough so that you can't create like you know if you can create like a few copies of yourself that's fine nobody minds but you shouldn't be able to create like thousands and millions of copies of yourself. That's the bigger like and if we can solve that problem I can I know how to make a really good privacy

system. >> Yeah. And what do you think about the Zcash right now picking up because Zcash is extreme right? Zcash has like if let's say an a a a North Korean entity Lazarus group let's say does a very big hack they move that all that money now with this near intents and all that right they move it to Zcash after that it's lost nobody can do anything about it right do you think that right now we are seeing so much about Zcash and I'm also big Zcash bull in a way but I feel that the moment there's a big enough hack that happens and the regulatory bodies figure out that they can't do anything about it. They are going to bring you know the similar kind of restrictions that they brought in last last time like in the last cycle 2022.

>> I mean first of all I'm very happy that Zcash is getting a lot of attention. I think it's welld deserved. The team is awesome and they've built some of the best tech in the industry and like they were true pioneers for me like one of the moments when I like really blockchain industry click for me is when I saw like Zcash launch because this is like putting like something that was purely theoretical into like real production use case. I do think there is a big risk like tornado cashache was a fine protocol that operated fine until North Koreans started to launder money through it right if North Koreans didn't try to launder if Lazarus didn't launder money through North Korea it probably would have been operating and nobody would have >> uh you know touch the founders and all of that stuff now we can say that like

okay probably founders shouldn't have been touched at all like publishing code should not be uh considered a crime and I believe that fully but at the same time like it did attract attention because of the hacks and if the hack happens another system it will be I mean for Zcash there may be some like on-ramps and off ramps that can still like near intense maybe you can stop it at that level but I don't know enough to be able to say intelligent things about this >> yeah yeah exactly like you know that's why I like I have a little bit of that worry on Zcash like right now Zcash has crazy momentum but then the moment there is one or two large incidents like this happen and then you know few regulatory bodies line up and uh that will make it very very um difficult but I I would say I would

say that the regulatory environment now is a bit different as well. So maybe it's not going to be as bad because there is much more understanding and you know at that time I think there was a concentrated effort to like shut down. >> Yeah. Yeah. Yeah. No 100%. But I'm saying like if the offense is big enough and then you know that even like the current regulatory regime somebody like some regulatory FBI goes to them that this is like a terrorist funding and we have absolutely no way to track it. I think even the current regime is going to say that okay this is too much. Right. So this might happen. >> It's possible. It's possible. >> Yeah. But hopefully that by that time Maiden like you know compliant privacy is there. So people for other people because what will happen is if somebody will do a bad thing on Zcash Zcash you

know get gets into this trouble and all the normal genuine people who wanted you know who were using Zcash for proper privacy their individual sovereignty they will also not be able to use it. But hopefully at that time Maiden will be able to use it. And I always say that I have this slogan and I'm going to keep tweeting about it that you know people say that you know Zcash is private Bitcoin right so I say like if Zcash is private Bitcoin Maiden is private Ethereum because it has programmability also and you might want to talk about like you know people can build complex >> yeah I think the programmability aspect is super important for this specific compliance and like being able to run specific checks that are important. I think I want to say one other thing the

maiden that doesn't frequently come up is also postquantum resistant. So you have a cryptography that will last for a long time like even with the advent of quantum computers and thing like that miden we're using a different proving system and yes other system probably can upgrade to that over time but we have built miden with the understanding that we want it to last for a long term you know we're taking steps and it like incremental in building but the foundation is such where it's quantum resistant it like will have extremely strong level of privacy and we will try to figure out how to make it work both for you know re regular people but also to make it So that it's not easy to launder money through Maiden.

>> Yeah. Yeah. I mean that's that's the most fun part about for me about Maiden also that on Zcash you can do simply BTC like payments but on Maiden you can do Ethereum like smart contracts and that too you can have client side proving full privacy for clients and the applications can interact uh to some extent with each other. So so I think we have our time up. Thank you so much Bobin for being here. Absolute honor to host you. >> Okay. Thank you. Thank you everyone.