Rand Hindi on Why FHE Wins the Privacy War

Transcript

Our first guest is Ran Hindi from Zama Protocol. Uh Zama is building FHE. There's a lot of chat uh right now about ZK privacy, the institutional wave. What is happening? The ZK Cabal is going at you know the centralized database Cabal. We've got Rand here to tell us all about it. Rand, how you doing man? Welcome to CAN. >> Good, good. Thank you for having me, guys. Very happy to be here. >> Absolutely. Thank you for joining us. Um I mean I I'm just curious what your reaction is to uh some of the chatter you're seeing out there on the timeline.

>> You know so I was looking at all this debate around centralized permission blockchain versus permissionless cryptographydriven blockchains and obviously you know I was very happy that people were taking the side of public permissionless cryptography secure blockchain because that's exactly the way we think about it for Zama too trying to bring FHE advanced cryptography to public blockchains. I think permission chain makes a ton of sense in the same way that do you remember in the 90s something called internets. >> Yeah. >> Right. Remember that. Right. Like every company had like their own mini internal internet.

>> They had like a mainframe and they had to plug into their own kind of private network >> and you could connect your private network to another company's private network to exchange data. Does that sound familiar? >> Sure. >> Right. Okay. Then people created the internet, one global public network that everybody could use to talk to each other, to share information. Uh, and with HTTPS, which brought encryption and privacy to the internet, you could use it for financial transactions, for commerce. And today, nobody's using an internet anymore. The internet actually won. So, I think we're going to see the same in blockchain. The reason why people use internet at the time was privacy and security, >> right? because the internet couldn't do

that. But once the internet offered that, people migrated to the internet. And we're going to see exactly the same with institutional finance. They're all going to move to public permissionless blockchain encrypted using technologies like FHE or Y. Not ZK. >> So the non-negotiables for not just uh the institutions with the largest of scale, but for the most part, everyone we've seen transact in finance on chain, they're looking for privacy and security. Uh this goes back all the way to the beginning of the internet and it's still true with web two and web 3 all the way until today. Uh and so uh at Zama you know you you guys are focused on the privacy side of this uh this dichconomy here between permissioned

mainframes uh versus internet open composable public networks. >> Y >> um >> and so we kind of have these differences in opinion as far as how we could come up with that. you at Zama have chosen FHE. >> Yeah. >> Uh I take it this kind of adds a third dimension to this debate that we see right now. Uh on one hand we have uh you know the mainframe intranet uh somewhat closed. They can share data with one another but it's not uh too composable. Then we have the ZK camp. Then we have the FHE camp. Um why do you believe the FHE camp of privacy is the most private secure but also composable as the

internet should be? >> You know that's a very very good question. We didn't choose FHE because we just wanted to use FH. We chose it because it was the right tool for the job. What do you want in a public blockchain? You want public verifiability. You want composability and you want uh privacy security as much as possible. There are different approaches people are taking to privacy. One of them is private chains. I guess it does the job, right? Nobody can see anything. But then you're losing public verifiability and to a large extent you're losing composability, at least atomic composability.

>> If you want to use a public blockchain, then you can use you can use T's ZK or FG. T's have been completely destroyed. Uh you know, every single T blockchain has been hacked in the past two years. As such, I don't know any large institution who even wants to touch this technology with a stick like it's dead, right? Even Intel came out and said, "Do not use T's for blockchain. This was never meant to be a technology secure in a decentralized environment where people can run their own nodes." Period. Now you got ZK and ZK is a great technology, but it's very hard to make things composable. uh you know if you're for example shielding your assets in Zcash you can send them privately but you can't stake them in DeFi you can't

swap them for other shielded assets like ZK inherently is not about computing on a private state it's about proving something about data you see yourself >> right >> FH solves that problem because it enables you to compute on the encrypted state directly so you have full composibility in the same way that you have with any existing blockchain today but without the data being visible to people outside. >> So it gives you composability. You can publicly verify the result because it's just a blockchain running code >> and it gives you security even against quantum computers.

>> So the data you're encrypting today cannot be broken by future quantum computers. >> Got it. I anticipate we're going to see a lot more about quantum here uh as as things develop and things start to accelerate further. Uh I'm curious about FHE. Is it complementaryary to the existing solutions? uh could you have FHE sort of obfuscate or encrypt the internal computations and then prove that result with ZK um how complimentary are these two technologies and then you know when when maybe we'll start there FHE and CK are these two complimentary or they uh one or the other >> you can totally use them together right I mean if you look at the way that you get integrity of a blockchain how do you prove that something was done according

to the smart contract either you just run consensus so multiple people redo the computation and you compare the results. You can do that with FHE. You can have multiple people run the same FHE computation on encrypted state and then just verify the encrypted state or you can use ZK just like you have ZK rollups right to do I guess FH zk rollups. In practice we are focusing on bringing privacy to existing public blockchains. So we don't really care how the blockchain we're running on verifies >> the correctness of the states. Uh so it in it's it's kind of out of scope for what Zama does which is really enable privacy on existing public blockchains.

>> Got it. So let's take a couple of uh test cases out there. Um and you know there's two very competitive test cases that are out there now. You have Alex uh G from ZKYNC who's you know kind of operating on the side of Ethereum. ZK Sync is an L2. >> Thank you Alex for putting so much effort into public blockchain. >> Absolutely. and and we were hosting uh an episode of of this show in uh Washington DC during the DC blockchain summit. Alex came on. He talked about how uh these banks are not going to want to build on each other's infrastructure.

JP Morgan is not going to build on Fidelity and vice versa. Mastercard not on Visa. We need credibly neutral infrastructure uh as a way of connecting all of these disparit economic zones. Uh Ethereum is the best suited place to do that. Um and he mentioned providiums as as a particular use case. How could ZK Sync incorporate Zama's technology? How could Ethereum as a whole incorporate the FHE technology to uh embed privacy deeper into uh Ethereum as a public chain? I don't know too much about the Pervidium stack. So, I don't think I can comment on that. Uh for Ethereum specifically, the way that we're approaching the problem is let's say you've got stable coins on Ethereum.

Okay, today everybody knows how much money you have, how much money you're sending, how much you're swapping, how much yield you're making. What we found is that the more money someone has, the more they care about privacy, right? Very few people care about hiding, you know, hundred bucks in their wallet. But people that have a billion dollars care a lot because if they're moving that billion dollars, they're signaling something big to the market and every trader trades against them, people might freak out. Like think about a VC, you know, moving some tokens from a portfolio company to an exchange. People will just dump even before the they could sell anything. So people are losing millions and millions of dollars due to the lack of privacy on public chains. So we solve that problem. So we bring a layer of encryption to existing

public blockchain so that all your financial transactions are private but you're still on Ethereum. You can take your USDC tokens. You can shield it into a confidential USDC tokens without bridging to a new chain. You're still in Ethereum. And from that point, all of your future balances, transfers, swaps, deposits, and vaults are encrypted. >> So people have no idea how the money how the money is moving, >> right? >> But [clears throat] you're still in Ethereum, so you're still benefiting from all of the advantages of the public chain that you're on the go.

>> And so this is a technology once you turn it on, everything from that point forward is encrypted, correct? Using Zama, >> correct? Does this go for in Ethereum's case Ethereum's mainet as well as its L2s? >> Sure. I mean we can deploy the technology on any chain at this point. It's just a matter of deploying the protocol contracts on that chain. Uh so we have a very careful approach. We want to avoid [clears throat] fragmentation. >> Okay? >> Because in the beginning, you know, shielded assets are not going to be as huge as non-shielded assets. You have to get people to shield things.

>> There's some network effects. >> There's some network effects. So, we're really focusing on bringing our protocol to Ethereum and some other major chains in 2026, including Solana later in 2026. >> We recently, for example, announced a partnership with T-Rex Network. Yeah. >> Which is a protocol launched by Apex, huge asset manager. >> They're going to tokenize a hundred billion dollars of RWAS, you know, in the next 18 months. 100 billion. >> Yeah. It's incredible. >> And they're doing it as a roll up on Ethereum using Zama for privacy. Very cool. Awesome. Tell I mean te talk could you tell us more about how this deal came together? You know h how uh are you planning on supporting this effort because I'd imagine hundred billion

dollars there's several players several enablement providers. Um we were in you know New York doing digital asset summit talking to the likes of securitiz and superstate uh a lot of these tokenization partners. Are you working with any other tokenization partners to in embed privacy into their tokenization stack? Uh how are you working together maybe with T-Rex as well as uh some of the other players in this particular space? >> Yeah, I mean of course short answer is yes. We do think RWAS are huge. Like if you think about asset management as a category. It's a$120 trillion dollar asset category, right? Like people are excited about couple hundred billion dollar of you know stable coins on

chain. Think about a couple hundred trillions of assets on chain, right? Think about tokenizing real estate, tokenizing energy. Like these are the really big markets where most of the money currently is, right? Payments is huge. I like tens of trillions of dollars market. But asset asset managements in general is even much bigger. So I think I think you know we're not we're not going to be counting TVL on blockchain in terms of billions anymore. We're going to be counting them in terms of hundreds tens and hundreds of billions dollars going forward. >> It's an exciting place. >> I mean it's it's happening finally. It's happening right and the guys at T-Rex are a big part of that because really driving this.

>> Yeah. >> Uh you know they created the um the permission token framework which is really important for security tokens, >> right? Without that there would be no security tokens on chain. >> Permission token framework meaning that you have to have certain permissions maybe be accredited investor have pass whether you put it on blockchain or not you know like it doesn't change security law. Right. >> Right. So having a way to enforce that was really important for people to start using >> so for for using a public blockchain Ethereum for securities you need privacy and you need compliance. >> Privacy is Zama's job. Compliance is T-Rex's job.

>> Got it. Why is T-Rex deploying the hundred billion uh dollars of RWAS on their own network using Zama's technology for privacy versus going to another institutional network like Canton? >> Uh well, I think they want to uh Canton, [laughter] but they're doing it like as a public protocol. Yeah. And I think the reason why they decided to be a public protocol um is they want crosschain liquidity. That's really important for them. uh they want to be able to go beyond institution to institution use cases you know so enabling a broader set of players to participate and it's much easier to distribute your solutions products rwas to a billion people in the

public network than onboarding a billion people to your own private network right because they're already there >> I mean there there isn't a billion people in blockchain yet but you know we're going to get there at some point >> right >> um it just makes sense from many many different perspective security-wise also I think you know ethereum and Solana actually are hard to beat. Uh they've been around for a long time. They have like a huge amount of economic security and also just reputational security backing them. Uh as you said, they're incredibly neutral nuclearproof protocols.

>> Yeah. Um what what is it about T-Rex and their launch that excites you the most? Is it the hundred billion dollars? Is it uh this institutional player finally coming on chain? Is it kind of the the idea that you guys have launched, the token has launched, but it's not Job's not finished. >> Yeah. >> Still so much work to do. What what excites you most about going forward? >> I mean, all of what you said is very exciting. To be clear, one of the biggest institution putting 100 billion on Etherum ecosystem is very exciting. Period. Right. I think T-Rex is interesting because the team behind it is Tokeny. token was a tokenization platform that was bought by Apex uh like a year or two ago. So these guys have

been doing this for a long time. You know, we're talking about one of the main player in the whole tokenization space. They've been doing this way before, >> right? >> So they have expertise, they have the knowledge, they have the backing of a big institution, right? They have the commitment to this 100red billion plus assets. Um they just know how to do the job. Like this is not like a startup, you know? This is I love startups, but this is this is the big player coming and saying this is how we're going to do finance going forward. >> Yeah. Incredible. Ran, as we draw to a close here, what are you uh most curious about? You know, we've got a whole ECC here still to go. It's just Monday. Um what what are you what are you hoping to learn? What kind of builders are you

hoping to talk to over the course of the week? >> I want to understand how people are thinking about building products now that they know privacy is solved. >> Like what new mechanism does it open? How what are the things people could not even think of doing on public blockchain that are now possible? >> Yeah, >> I think it's just the beginning and people are realizing that there's no longer any limitations to using Ethereum. Uh it used to be slow, not anymore. Used to be expensive, not anymore. The only problem was privacy, not anymore. >> Fix that. Yeah. Awesome. Incredible work, Ren. Thank you so much for joining.

>> Thank you for having me. >> Have a great time in Can and uh we'll see you next time. >> Great. Thank you, guys. Yeah. Bye.