Why Wall Street Still Can’t Fully Use Ethereum

Transcript

Bless Nation. I'm here with Mo Jalil and Oscar Thorne. They are the co-founders of ETH systems, a new spinout out of the Ethereum Foundation focused on three things Ethereum institutions and privacy, which I think is uh desperately needed for all of crypto and Ethereum included obviously uh for really elevating Ethereum to the next level. Oscar Mo, welcome to Banklist. >> David, thanks for having us. Thank you. Why do we need privacy on Ethereum? Oscar, I'll throw that to you.

>> Sure. So, I would say that Ethereum is great sort of technology and works great as a credibility neutral base layer, but obviously it doesn't have privacy baked in and that's why you see sort of a lot of people been trying to figure out solutions for that whether on at the base layer but also a lot application layer. Uh so basically that's sort of the missing piece if you will in the freland. Uh and that's where we come in. Anyone that listens to bank list already know this so I apologize if you find me saying the same things you've heard many times but basically uh and for us we care about institutions they generally have two things that they really care about. One is their business and the second is that they're compliant. Um and because of those two things they kind of tend towards places that they can

control. At the same time, you have public Ethereum which has deep liquidity, has all these new business opportunities and great ways of doing things they've already done but much better. But you can't get both without cryptography. So for them, they need that in order to basically access the benefits of basically Ethereum. >> Can we talk about your guys' backgrounds because this is not day one for you guys. This is day one for ETH systems or or month one for ETH systems, but this is just uh the next step on I think your guys's very long arc that started a while ago. What context do we need to know from you two and the work that you've done in Ethereum, in privacy, and with institutions that you guys are

bringing to ETH systems? Mo, maybe just continue taking that one away. >> Yeah, so a bit about myself. Um, so I actually started in traditional finance. I used to build uh algo trading systems like Goldman Sachs and that's what I did for like five years. Um so I have a really good understanding of the kind of things that basically these kind of investment banks need. I then spent basically a number of years kind of in the hedge fund world and for me um that was like the interesting part of the arc where I was looking at all these different things. I remember reading the Bitcoin white paper being blown away but like that was too early. That was way too early. Um and then fast forward a number of years um I joined the Ethereum foundation uh kind of leading a lot of the APC BD initiatives. This was last

year when there was um you know Tomas was basically co-executive director and something became extremely obvious just in order for any of these organizations to use public Ethereum they needed privacy they needed cryptography and um I had known Oscar for a while actually so I remember calling him up and saying hey look uh Oscar um there's something I think you'd be a great fit for and we should talk about it. So I've been the sort of fear in the crypto space for around a decade or so. Uh focus like a lot on privacy very early on. Um so before this was kind of like a big talking point. Uh working at status and also creating an R&D lab. As part of that we were sort of developing uh various stuff for peerto-peer uh communication protocols that were used for sort of sensor resistance and privacy and so on. Uh so been sort of

into protocol design and privacy and resistance specifically on the protocol infrastructure layer for quite a while now. And then I guess the last five six years been sort of diving deeper into simul proofs uh and sort of doing very various tooling for it. Um including working with some of the early members of PSC at the foundation uh and also wrote like a little mini book on proofs. Uh did some research related to fing schemes and some tooling for making client side proving easier and so on. In the last few years uh I've been at um sort of the fear foundation uh and also advising them when it comes to privacy strategy and now sort of the new access layer. uh and as Mo mentioned sort of we that's where we met and we kickstarted

institution of privacy task force and I think for me one difference is that I used to sort of focus primarily on privacy of individuals and while that's still something that's very dear and close to my heart I think one thing that I notice is that there's a massive massive demand for privacy of institutions um and I think that's come about so with the last few years sort of where there's been more regular clarity and so on and you see that a lot of institutions they actually care a lot about privacy to some extent even more so than than individuals in some circumstances. So I thought that was quite exciting and sort of been a sort of great sort of opportunities as we've been focused on for the last year and sort of uh building things in in public as and then spinning out uh into a separate entity

uh a month ago or so. >> Yeah. Yeah, and just to add on that, so we basically I think one interesting thing about us is that when we spun out, we came out with a year's worth of work, like an entire body of things that we've been doing from multiple workshops that we had gone, you know, hands-on with lots of different organizations to, you know, public goods that we had published, which is basically a market map of all these different use cases that people are looking at and how they map onto private solutions in Ethereum. Um and then finally we had basically writeups uh looking at whether it's like you know private dispersements or public you know le you know public ledgers versus private rails those kind of things. Um so I think for us it was interesting like yeah like you said the organization like e systems is less than

a month old but the work we're doing spans not just a year but probably a decade worth of like work that we've been looking at. >> There are a couple things you said Oscar that I'd like to learn a little bit more about. You said privacy strategy for the EF. Uh and then you also said privacy for institutions is different than privacy for individuals. I want to learn more about both of these things. But let's start with privacy strategy. What does what is a privacy strategy? Like what can you like just illuminate what the strategy is? >> Yeah. So I think a lot of that had to do with sort of the context that uh PSC found itself uh at the time at the Ethereum foundation and I think one thing that we did is sort of uh try to move move that into the foundation and

seeing sort of what type of privacy things uh if foundation should f focus on that has now moved and there's like a lot of other people so I don't want to talk too much about for foundation and what they are working on uh but what I would what I want to add to is also what Mo just said is that as sort of part of the institutional privacy task force at the fear foundation uh what we were trying to do is basically uh connect to these two worlds where you have of institutions on one hand and an ecosystem on the other and and in talking to them often times they didn't necessarily understand the Ethereum world because they just sees sort of oh it's a blockchain there's no privacy uh but the fact is that the Ethereum extremely rich in terms of different protocols or vendors or vious solutions

that exist so what we're trying to do is sort of explain to them what the space looks like and in turn also talking to various companies in the space and and and protocol engineers and explain to them here's what these users actually are looking for and that's why we sort of developed the privacy market map where we sort of talk about these kind of specific requirements these users have and they can be quite sophisticated if it's like specific business requirements or legal constraints and specific use cases and then basically map that into sort of a set of solutions whether it's like vendors or protocols uh and so on and then basically doing PC's and writeups to show things that are missing like how you can combine these building blocks of create protocols and solutions since doesn't fit what these users are looking for.

>> Yeah, I just want to add one more thing on there just really quickly because I think Oscar, I know you mentioned TSC and folks that are listening might not know what that is, but actually the Ethereum ecosystem has been deep in privacy for many, many years. So, I know privacy is like a really hot topic now, especially last year with Zcash and you know, all these privacy protocols, but the EF has had a cryptographic research lab for seven years or so, right? And um that's what that was known as PSSE, >> the the privacy stewards of Ethereum, just like the the group of people talking and building about privacy solutions.

>> Does does all everything that you guys are saying, does this mean that we have the privacy solutions that we need in terms of just like code on the shelf ready to pull off the shelf and apply it if institutions just know it's there and know how to do it? or in the terms of just like building privacy on Ethereum, building private systems on Ethereum, we still have some building to do. Like where are we in that arc of we still need to build more solutions or we already have the solutions and we just kind of need to come up with some standards or institutions just need to be made more aware of them and somebody kind of needs to just hold their hand and put the building blocks together to get what they need. like where where are

we with the evolution of privacy around Ethereum for institutions? >> It's it's it's a good question. I would say uh it's it's very much a mix. Um and I think one thing you see and I've seen over the last decade and this is partly due to sort of foundation but other people in the space like Ccash and independent research we've been sort of pushing up and making a lot of the cryptography actually usable and then the sort of companies that have come up around that and sort of made it even more usable. uh I would say that some solutions we sort of know how to do but then when it comes to specific constraints uh I would say we are still there still is some a bit to go um because a lot of these institutional use cases they not necessarily obvious in terms of the specific constraints so you

do need to customize things a little bit and you could say oh just use just like a privacy L2 but if you look into the specifics often times of the comes certain trade-offs that not every institution is willing to sort of uh make um and And it's very interesting when you when you talk to these various companies is that some of them they're extremely sophisticated like they have their own R&D department with 20 people and cryptography PhDs and they were looking at the space for like years. Uh and then on the other end of spectrum you have people who just like maybe they don't have like a very strong technical team but they sort of want like a white label solution. So you see this wide sort of spectrum in terms of uh what the users are looking for and then also different timelines and different sort

of targets if it's like retail like massive scalability in terms of TPS or if it's more the higherance kind of security um use cases. So it very much depends on the specific uh specifics we're talking about. >> And just to add on that I think maybe Oscar I don't know if you're going to push back on me on on this but I think at least for the kind of use case that we look at it's I think largely more of an engineering problem as opposed to like a research problem. Self-custody won, but it still has a usability problem. A seed phrase on paper is still a single point of failure. Phones get lost, devices break, backups disappear. Bit Key is a self-custodial hardware wallet built for that reality. It uses a two of three multisig with keys split across your phone, the Bit Key hardware

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Near.com is simply the best way to be onchain and be in control. Get 20% of your trading fees back using the bank list link in the show notes, not investment advice. Okay, so the the research is done and the engineering it seems to be like that that is just like where Ethereum is these days is like the research is mostly done. It's about just about engineering. Can we can we go through like a just a a a typical case study that you guys have with like your most average institution conversation that you have? like what's the number one form of privacy that they are looking for? Is it their account balances with stable coins or uh if they are interested in depos like creating real world assets or using real world

assets? It's like revealing their how much of an asset that they have is it sending these assets. So like private businessto business stable coin transfers for payments like businesses probably don't want to reveal that activity on chain. what kind of privacy is the most common commonly needed privacy in the conversations that you guys have? >> Yeah. So I can add a bit of color here. So first of all I think when it comes to the work that we do we span a broad range of use cases and our time is usually spent on the work that hasn't already been solved to be perfectly honest. So, for example, when you talk about the situations that you just talked about, all of them, I think a lot of people know about them. Like, for example, private payments, you know,

kind of tokenized deposits, those are great. Um, but they're already kind of solved in many ways, at least for some organizations in some countries. Um, the type of work that we look at is kind of like the work that really hasn't been taken a look at yet. I can give you some examples, right? So one is that um you know we were definitely talking to a particular organization let's just say a tier one investment bank where they do this thing known as interd dealer compressions right so what ends up happening at the end of the day they send all of their trades to a trusted third party which they pay millions of dollars a year by the way tens of millions if not hundreds of millions of dollars a year and what happens is that this trusted third party they look at this bank's trades and all of their

positions they look at another bank's trade all of their positions and then they net it out. And no one likes doing this, but they do it because the value it brings in terms of compressing these trades down and they first of all have less capital requirements because they don't have to, you know, get that ready. They have less transactions have to do. And we basically had someone that come to us and they were like, well, hold on a second. Um, is there any way that we could do this? And this is the perfect example where a kind of like I would say foundational new technology like Ethereum, a shared state could give them this without this particular third party. But the problem is then the entire world gets to see everything. So that's an example of like a very specific use case that you know I've

talked to other teams about this and most people haven't really seen this business or this opportunity that needs to be addressed. But this in itself is a several billion dollar basically business that could be taken a look at. That's one. Um to your point around basically private payments, we've talked to a number of different organizations across different jurisdictions that are looking at this and they all have different requirements and I think Oscar made a great point where like sometimes the use case is well known like private payments but the jurisdiction it's in gives you a very various permutation of it that makes it non-trivial to do. >> Yeah. Also to add on that like I would say we talk about privacy a lot and I think that's great. is very important but I I don't want us to focus only on that because often times you think if

you think about building confidential and secure systems that's one of the things you care about like you also care about sort of the security properties and and sort of if it's sensor persistent and and sort of scalability and so on. So it's a lot of it is also about sort of elevating the space a little bit in terms of rigor because if you look at a lot of the institutions they already have color of market fit. So they already have like a system with like billions of dollars flowing through it and they want to be able to move on to Ethereum with confidence and in order to do so they need to actually be sure that the system works the way it's supposed to. Uh so that's like a little bit different from like you know like vibe coding an app or whatever like it

it requires you to actually think carefully about what are security properties uh that you have and privacy is definitely one of them and one of the more tricky ones but also just one out of several so you need to think about all of them as a whole in in terms of a system and like having kind of technical specifications around this and so on. So I think that's like another thing to think like a bit more holistically about it that this is like multiple properties and they all have to be satisfied in order for users actually want to move over onto Ethereum. Uh I know that might not be like a satisfactory answer in terms of what's the most uh kind of popular use case. It's probably because we go for the really kind of edge case kind of uh problems out there.

>> Is there an example? Is there like a case study that you guys have worked with in the past that we can talk about where you you could had the endto-end conversation of you had you started talking to this institution they had a privacy need. You guys worked with them did whatever you guys do and now they are using Ethereum in a confidential private way. Is there is there a story you could tell us about like an example that's like worked so far? >> Yeah, I I can tell you a story. I don't know if we can mention names because >> Yeah, I would figure Yeah. >> I mean, if we're talking about privacy >> Yeah. Yeah. Yeah. People People don't like to, you know, share especially the bigger you are, the more that you have that you basically don't want to um but we can talk about a couple. So, for

example, um so we're talking about payments. Everyone understands that, right? Like you know, I you know, I do a payment to you. um and doing that unchained everyone sees it. It's a use case that you know bog standard um for a particular jurisdiction it's a bit non-standard because first of all they want they want it to be confidential and they would like to roll it out for almost an entire country. So what's happened to them is they're like we we think blockchains are amazing. We we think you know payments are great uh but we need to be able to do it at scale for an entire nation. Um and the thing about a payment is that normally it only has like really two actors which is a sender and a receiver. This known as like a DPP like they usually have two actors. Um

but because of this particular country they have a regulatory requirement to have four actors for payments. This is the sender, the receiver, the auditor and then the government essentially. Um and to do that in a privacy preserving way they tried for I think two to three years. because I'm I'm anonymizing the yes bit. Um and they tried basically you name it protocols are out there and they were not able to do one in a way that was acceptable. Basically was it performant enough? Could they basic hit the TBS? Could they do it in a way that it basically it's not like ridiculous computational costs. And what's interesting is that for the last year or so, we've basically been publishing our market map and we've been doing writeups and they basically saw one of the basically proof of concepts and works

that we've done because we often do exploratory work around what you could potentially do on on Ethereum and they're like, "Oh, hold on a second. Uh, we've tried, you know, I don't want to name the protocols or the teams, but we tried X, Y, and Z for three, four years. We published a natural report about this, a 16page report on why we can't do it, but it seems like actually this like piece of work that's coming out the EF could work for us." So they basically reached out to us and they're like, "Hey, hold on a second. We'd love to have you guys, you know, reference your work and build something that actually looks like it could kind of solve our needs." Um, and that's an example of one where I think not only is the work kind of interesting and you it might solve a

few people's problems, but you can do it at scale. You can do it where you can affect tens of millions of people. Um, and I think that's an example of like some of the things that we've done that, you know, had we not done this open source work, had we not published it, had people not seen it, um, they probably would have just put that on the back burner for a very long time or worse yet gone to, I say worse yet, gone to some kind of private network. >> I would also add a little bit to that that like if you think about institutional uh sort of sales like they're quite long. So often times like it requires quite a lot of lot of work to sort of get something going and there's like you know some confidentiality around that and then it takes a while until you actually see

sort of the complete fruits of your labor. So that that's generally like a thing and I think one thing we noticed at EF and this is also one thing that gave us I guess the idea to of that it makes sense as a separate forprofit entity is that we had a lot of engagements and collaborations with various various institutions and there were many cases where people like okay so we would love to sort of continue working with you guys how can we sort of pay you and we basically say no no no we're nonprofit like we we have to be neutral and so we have to say no and that's sometimes where some conversations stopped because it's extremely important that Ethereum financial stays incredibly neutral and so on. So we kind of have to back off there and let other people sort of take the take the ball there but I think that

also shows a lot about like how much demand there is and so on. Uh so as we've been sort of spinning out now and into a separate for-profit entity uh it's a lot easier to have sort of these commercial agreements in place because it's a lot easier for uh an institution to understand it's very straightforward in terms of contracts as well. What I'm hearing from you guys is it feels like there is a lot of very bespoke solutions that need to be built as you said for the specific permutation of privacy in a particular compliance jurisdiction for the specific needs of a specific institution. My concern about that is that if we keep doing bespoke stuff, it doesn't really scale because if you make a perfectly fitting glove, it it's only

going to fit one one hand, right? And the alternative that I see for that is like well we have the core of Ethereum things like unis swap things like a things like EOAs like my address my ledger and if we can get privacy in these core things the level of scalability that we get on Ethereum on net is going to become much larger and maybe institutions can like once once we get pretty high fidelity private privacy scaled and easily accessible and closer to a default on Ethereum, then institutions could like bend a little bit and they're like, "This doesn't

perfectly fit, but like I can maybe change my systems a little a little bit in order to fit this form factor of privacy." And if we get everyone on to the same standard, then the total amount of privacy both on Ethereum and on the world can can grow massively. And so I'm I'm I have a I guess the question is a concern about the scalability of what you guys are doing and isn't don't we just need privacy a little bit more baked into like Ethereum core rather than doing bespoke stuff on the margins. How would you guys respond to that?

>> Yeah. Yeah. I've actually got a really good answer for this. So a couple of things I think um one is that we could do both. That's one there that do that and that's why I think Ethereum is amazing. The second thing is that, you know, we talk about these bespoke bills, but actually each one of these markets, each one of these industries is freaking huge. We're talking about potentially hundreds of millions, if not billions of dollars. So the way we think about it is that we actually like we don't like doing purely bespoke bills. We think that's a really bad idea. What we think is that you go in and understand these highly specific use cases because if you don't really understand it, you can't really solve it. And what you end up doing is that you can create generalized solutions that can be reusable for other

people. So for example, I told you about the interdata compressions that can be useful every investment bank. We talked about for example the their kind of like u you know multi-party DBPs that can also be spread out. So our plan really is and the way that we think about it is that we want to generalize and we want to do two things. One is that where we can open source and share with the rest of the world because that basically hardens uh the way that people look at privacy on Ethereum. The second is that take these reusable components and put them into a place where they essentially become a stack that people can easily switch on. So the way I think about it is that this bespoke work is almost like you know when you do a startup have this idea maji talks about the idea maze you

go and you try to find out what works. Um and you know Paul Grim also talks about things like you know do things that don't scale and that really is important when you work with institutions because they have these systems already. they have billions of dollars of of of business and to get them on chain you have to start from that side as opposed to the D5 native side and I think like you said like there's different people working on both but I don't think actually enough people are working on the trady side that then converts into Ethereum as opposed to there are many teams already on the crypto native side that are kind of going the other way so having both is the way to do this >> yeah I would agree with that and also like I would say like in general the

space has invested like a lot in like generic infrastructure if you will and like if you build it they will come but that's not always the case especially when you're talking about these large institutes with like very specific requirements so I think there's value in like actually going after the specifics and then generalizing after and there's a few ways we're doing that uh so like one is in terms of the open source libraries that we're pushing out so like building blocks and also in terms of like technical specifications that are written in such a way that they can sort of be generalized or you sort of to the extent that is special case you sort of make that very clear so it's like swap ball or or or pluggable or sort of modeler and so M and then I think in general like base layer privacy is

amazing. We would love to see that and that would just enable even more use cases. So we definitely support that. I think it's great. It's just not the main thing we're focusing on. Um and then there's like a lot of other things. So for example, we talk about liquidity there's like solutions when it comes to interability like if you're economic zone and and and these sorts of things. So I do think you can get the best of both worlds and there's like many different ways to approach this and we are focusing more on like how do we actually move institution onto Ethereum and that's like our number one priority. Yeah, and just to add on that, I know we've got like a million points here, but I think for organizations that may have been running for hundreds, like over a hundred years, some of them are

like that old. Um, you need to kind of build that bridge and come from where they're building. It's like, hey, look, this is how your business is. Okay, let's let's translate that. I think trying to force them into doing it the other way might not work. We've seen a lot of teams that have tried that and it hasn't worked for them. >> Is ETH systems a startup or a nonprofit? What what's the legal entity behind ETH Systems? >> So, ETH Systems is a for-profit entity. Uh >> for-profit. Okay. >> Yeah. Yeah. >> Okay. Because my question was going to be like, isn't this best done as a startup trying to build a very scalable venturesized outcome? You guys are you guys are a for-profit. Is is that where you guys are?

>> Yes, we are. Yeah. Yeah. >> I was like I was like, okay, wait a second. If you guys are having all of these conversations and you're seeing you're seeing that you can build solutions like isn't this best done with something like with KPIs like TV TVL and volume and you guys take like a cut but this that is what you guys do. >> Yeah. Yeah. So for us as for-profit organizations for a couple of reasons actually is and this is something that we debate actually Oscar we talk about this quite a lot right it was like I think there are a lot of nonprofit organizations in our space and I think they're amazing um but for the work that we're doing um it's going to be a multi-year journey and the most I think cleanest way to sustainably fund it is to do as a for-profit entity that's one

because public goods funding is extremely extremely hard and in my opinion grants should be given to people that really need Um the second thing is that um the types of organizations that we work with in order for us to do the last mile, they actually require you to be a for-profit organization to go through procurement. Like being a nonprofit is actually a red flag sometimes and they just can't work with you. So for those two reasons, we basically went with the uh basically for-profit route knowing by the way that we have so many sister organizations and friends in the ecosystem that are nonprofit and they can kind of take up the mantle there.

And also like just personally like at least for the last um seven years or so like I mostly worked at sort of nonprofits. So I definitely value that and I think there's amazing value in terms of this like R&D and going really deep and public goods and so on. So that that's amazing. I think in this case it's kind of obvious as you kind of alluded to that it's a very straightforward business model. You know there's a customer and they're willing to pay for something and we can help them. uh so I think that's it makes a lot of sense in this in this uh instance especially for the reasons Mo mentioned in terms of commercial counterparty and so on I would add that like uh we're not only doing that so the way we approach this we kind of have these two work streams so one is business driven and

another is open source in ideal world they like 100% sort of uh aligners so on but the business driven work a lot of it is talking institutions and understanding their specific requirements if it's business or legal and then basically mapping that to uh technical constraints and and designs and sort of helping them in that in terms of like if it's like educating them or doing architecture reviews or PCs or production environments and so on. Then based on that we get like a lot of uh business intelligence or details like particular details that are hard to talk about. We take those and generalize that and use that to sort of push out open source building blocks that can sort of elevate the space and also inform people. So it's kind of continuity in terms of the work we did at Ephron Foundation. So that can take

take the form of like PC's like explaining here are some examples of constraints and how you can think about it uh like writeups the service of the space like how how you can get these properties uh open source libraries techn specifications and so on. So we think that's extremely valuable uh both for the ecosystem as a whole but also in terms of like you know just general communication and also attracting world-class talent because open source is like something it's hard to do too much open source uh and and fundamentally a lot of the security properties and private properties they need open source solutions like you can't just sort of hide things and do sort of security bio security. So so a lot of these institutions they actually ask for open specifications and open source in order to be able to trust the system. So that's something extremely

extremely important to us. We try to sort of keep a balance between the two both sort of being very pragmatic in terms of business demand but also very principle in terms of open source work and pushing it out with permissive licensing and so on so so other people can build on on it. >> Yeah. And and just one last thing on that uh is that often times there's these like unintended side effects and one of the great things about kind of the work that we're doing is actually you end up having for-profit institutions funding some of these public goods that then become great for the rest of the ecosystem. So are you guys a like a con consultant dev shop where you guys are hired and paid to build technical solutions for institutions or is it something a little bit closer to um something like I don't

know unis swap or a where you are trying to build systems in code on chain that imbuss institutions like workflows with privacy but you're trying to build like a large scalable structure that I don't know like governs over a system or something something like that. And so like there's a spectrum there where you it's just like you guys are just like you know privately paid consultants and that has like one size like outcome in terms of investment or there's like the massively scalable system where well you guys are talking to all these institutions you're getting a a view of the landscape. you are starting to get a picture of what's needed and then when you guys are ready you guys are ready to build the massively scalable like venture- sized outcome uh and you're and

that that is like a product that you guys build like where are you guys in in that spectrum >> yeah I think this is really clear for us it's definitely the latter which is basically we I we love products like I was a CT of my last company building products Austin has been building products his entire life products are the way to go for like scalable kind of solutions um but like you said it's a spectrum like you need to do a lot of that kind of hands-on understanding of all the various use cases. Um, taking a bit more of like a forward deployed engineer model, sitting down with them on the trading desk and understanding what they're doing. Um, but the goal definitely is to take some of these learnings and turn this into like scalable products that you can roll out in basically mass.

>> How far along are you on the uh research and perving the landscape and gaining information uh side of things? like how how how complete do you feel in terms of informing a product that you will eventually build later or is there still more like research and development to do? >> As I mentioned before like the institutional sales cases are quite long. So it's the kind of thing where it it's actually quite useful to take your time a little bit in terms of actually doing multiple collaborations with PC's and architecture reviews before sort of uh going deeper into one or a few product bets. So we have a lot of active collaborations uh but it also takes a little bit of time to actually see those

through and sort of see okay so what is the exact thing where we have a sort of competitive advantage and so on that makes sense to sort of go double down on >> yeah to ask point basically we do have a couple of ideas already like some that I think could be absolutely quite gamechanging but it requires more testing of the thesis going in there and really understanding whether or not those fundamental questions that we have have been answered and we're not quite there yet. And I will say by the way there's already examples of like venture scale type business for example private RFQS right I think Zama did something recently where I personally think that's a huge business and actually up until they did it I don't think there were many people that are doing it at at that level of scale and there's other

opportunities I like that will stop I I I'll make a prediction over the next 24 months you're going to see a whole number of businesses pop up that are like that and the reason why I say 24 months is because a typical institutional engagement will take kind of at least 18 months you like it takes you a number of months to get to talk to them and educate them and almost to go through procurement and then like almost a year to kind of get the initial version out. >> What's the appetite these days for institutions to actually come on chain and do things do things in like the the decentralized public blockchain context and like clearly the answer is some. Uh, but when you guys have conversations, is it a little bit more of like you guys are going to them and being and trying to

like convince them to come on chain or are they coming to you and being like, "We really want to come on chain, but we can't because of these constraints." How much selling do you guys have to do to get people to come on Ethereum? >> Oh, so this going to sound terrible, but actually I'm a really bad salesman. So, most of I'm not the worst. I'm actually, but I'm not the greatest. Um, and most of the demand has been inbound. So I think for first of all it's one thing that's amazing about that is that they understand the value of blockchains. Secondly I think I got to give credit to DeFi here. They can see what's happening in DeFi and that really really interests them. So the things like Ave and Unis swap and lido they want those things but they want to do it in a way that they're

compliant. So to your point um like the demand is absolutely massive like it's huge. Um, and the thing that they're looking for is in some ways I'd even kind of classify as institutional DeFi like and you'll see for example various organizations and DeFi protocols basically making forks of their products to do this but it's huge and it's coming and what you'll find is that the ones that have been looking at blockchains for the longest time so up until recently with Clarity coming and like um genius act um they were looking at it with almost like oh my god this would be amazing if we could do it and then the floodgates started opening up so we don't do much selling And to be completely honest with you, um we do think a lot of the demand is uh it's

basically intrinsic to basically these businesses. They used to do proof of concepts. They used to have basically like innovation teams that try things out. But last year something really changed where sometimes a CEO would basically pick up the phone, talk to the innovation team, be like, "Hey, look, you guys have been working on this for 5 years. Uh we actually want to do business now." >> Maybe one way that this unfolds is we we have the DeFi ecosystem, the main core like campfire of Ethereum. the unis swaps, the ave, the stable coins, you know, the the pendals, morphos, like all that kind of stuff like that. I I'll call that the center of Ethereum. It really feels where all the heat is and institutions are looking at that and be like, well, that makes sense. Let I want to go play there.

First, there's going to be a a very distinct parallel, dare I say even siloed ecosystem that gets built out for institutions that is private and fits their form factor of needs because directly integrating into those things is probably like too too soon, too ambitious and we need to do just we just need to have things going out in the wild first. And so before before there's like deep privacy institutional integration to kind of like the core DeFi apparatus of Ethereum, there's first going to be a distinct siloed separate arena, separate playground, separate sandbox for institutions to

come in and do their business logic on chain in a private manner. And then they're going to see like, okay, this is working out for us. Uh I like what we're doing here. So, and then maybe somebody can build us a a system that integrates what we're doing into Morpho in a compliant way. And then and then later these systems start to intertwine and grow a little bit more together rather than being two separate versions of Ethereum. But that's kind of how I see the path playing out. You guys are slightly nodding your heads and so like first it starts off completely separate and then we figure out how to intertwine the market will figure out how to intertwine these things. Do you guys agree with that sort of like logical? I wonder if you've been in been in our meetings or something because that's

that's exactly how I think it's going on because if you when you talk to them you notice that they are they're like there's like a path right and they are some are further along and some are extremely sop investigated and they already thinking about this like they have they're thinking deeply about like how do we integrate with these institutions of D5 how does this composed with all of everything else so that's naturally happening uh and that's something that we see the more sophistic actors are already starting planned for but they sort of need to learn right because it's a new system is new world. They need to sort of level up in terms of their thinking and like a lot of it is also like translation work because a lot of these companies they've been around for likeund 100 years or something like that and they have a

compliance officer and and the legal framework they're operating under was written for for for the old world. So all of that needs to update and that goes into like has everything to do with like policy work and like how do you even map this to technical abilities and that's like a decadesl long transition that's happening all across the space and it will continue to happen. And it will take take a while, right? Uh but obviously the sort of smarter money or more sophisticated money will sort of try to front run that a little bit and sort of get ahead of things. But that's definitely how we I think at least that things will. I mean I've talked to asset managers. I'm talking about like traditional asset managers that that will come to us and say hey look we want to put these products on chain. We can

see what you guys are doing. We just need to figure out a way to do it. like there there is a lot of I think especially the more forward thinking asset managers and uh they are definitely definitely interested in doing this and I have this conversation almost every single I would say week or two like people are saying hey how do I do this >> what gets unlocked like paint paint a picture for me I know this I know privacy is hard and crypto moves I think slower than it did in the past when we were you know trading meme coins but paint a picture for me in like 2033 so 7 years uh a and you guys have done the job that you have needed to do.

Institutions appetite continues to increase. Paint a picture for me of what that world work looks like with institutions and privacy. Like what what's the ambitious optimistic case in like a seven-year time frame? >> I think what you'd want it to be is that for the vast majority of people that are not crypto native, it should be invisible. Like the best technologies, you don't see them, but you get the affordances of it. For example, imagine I could trade uh US stocks without being in the US, without giving away my identity because I have digital, you know, I have like a DID system. Like that'd be amazing, right? So, I think the way that we like to think about it is that not only is like basically trillions of dollars on chain, but beyond that, like all of this stuff is visible, but I get the all the amazing

benefits that we currently have with DeFi. I think that's the way I like to think about it. um you know you could access any stocks in the world, you could access any kind of these assets um and you get all the benefits of a blockchain essentially. You can do transferability, you have like ownership of the things that you that you want. Um so yeah, I think that that's basically how we see it like in seven years it's very realistic that the vast majority of financial infrastructure is going to be on a blockchain. It's happening right now. All the biggest players are already doing it. Um hopefully that happens on Ethereum. What some of the core properties that we really really like in crypto and on Ethereum is transparency, auditability and verifiability.

Uh going back into some older days, I remember would I would debate with Bitcoiners about the adoption of lightning network >> and and and they would say like you private like lightning channels are private. You can't see the volume. There's actually insane amounts of volume going on on Lightning, but it's private, so you can't see it. And all the Ethereum people are like, "You guys are bullshitting us." Like, Lightning is a joke of a product. And just because it's hidden behind, you know, privac private state channels doesn't mean we can't, sure, we can't verify it, but like I there's nothing going on back there. Uh, and so like I just use that as an anecdote of just saying like okay well if you if we make things like asset

transfers private and we hide TVL and AUM like that's also private and we remove some of these core properties that make DeFi interesting and like trusted in the sense that we unders we can inspect source some of some of our DeFi systems. If we hide everything, how do we know anything's actually going on? Uh, how would you respond to that? Yeah. So I think a question I'd have is like um I think some people often mis mistake privacy to be meaning hidden. I think privacy really is who can see what when and how. Um and you know for example when I do a transfer my bank account right now I can see it. The person receiving can see it but you know the public can't see it. That's great.

That's great for me and that's what I would like. Um so the question I would have is like I think transparency people want that so they can have a level of trust. But if you if you could get trust without having to see people's details, I think actually that's a better product where it's almost optional like you can get all the same affordances that you have but it's kind of selectively disclosed. So my question to you David Dave would be like imagine you could verify anything that you wanted to like whether someone's doing the right transactions. It's you know it's it's like the right thing that they said the TVL is above a certain amount like it's like good but it's still somewhat selective where you can't see everything. Wouldn't that be great?

>> Yeah. The things I would want to retain in verifiability and auditability is things like trading volume and market cap of an assets like TVL. And so when these private assets get deposited into Morpho, Morpho gets to like report the AUM of those assets in question. and or when like you know assets are traded privately privately across unis swap or some sort of prop amm the actual metrics of the activity is still like reportable and beyond like who's trading uh the assets I I don't really care and in fact like uh just as as an anecdote like today's Friday August 7th uh there's like this Ethereum whale with $55

million t-wapping into like lit on the main unis swap layer 1 and everyone is like Oh, look at this guys. Like then the price is front running this individual because we see $55 million of stable coins t-wopping into this token on unis swap and everyone's b also buying to get ahead of this whale doesn't feel right in terms of just like that's not how finance should work. And like the the other example that's happening is like there people are like looking at all of these traders on Hyperlquid with regards to like Robin Hood meme coins and they're seeing this one account with a trading history who traded all the correct meme coins ahead of Robin Hood listing. In this case, it's actually really nice that we have the auditability, but still like you shouldn't be able to see people's trades

and and like accounts and all of their trading history that the fact that that's fully transparent is like an interesting property and it makes for a lot of drama on crypto Twitter. But like that's fundamentally a constraint for institutions. But I still want to see the volumes and I still want to see the assets being traded and there's like a bunch of other stuff from removing of like you know the individual accounts. There's a bunch of basically everything else I still want to see and retain. And so like as so long as I can verify all of that stuff then then we can get the best of both worlds. >> Yeah. And I would say you definitely can like they're not contradictory because especially with like photography and proof and so on you can get that you can sort of prove sort of um these aggregate

um metrics that you care about. So there's no contradiction there like you can definitely have a system where you sort of get transparency on the things that you want to be transparent and then privacy over the things you want to be private. Because I think a lot of also benefits of something like Ethereum, public blockchain and programmability and so on. You can actually get these properties. You can design the system in such a way that you get the best of both worlds. >> Bankless Nation, we've built something for you. Introducing the Bankless MCP. Chad GBT and Claude are great at a lot of things, but ask them anything beyond the basics of crypto about protocol mechanics, tokconomics, or just what happened last week in crypto, and the gaps will start to show. The problem is context. Bank list on the other hand has spent almost a decade building one of

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notes and once you become a banklist premium member, you can hop into the Banklist Discord and let me know how you like it. Some exciting news, we are launching a new podcast to help people figure out the crypto cycle, how to navigate it. The best crypto cycle investor I know, his name is Michael Nato. He runs the DeFi Report. This is the guy that sent me a sell alert before the 1010 price drop happened. His cycle analysis has been absolutely on point. I've been following him for years. And this year, we started recording weekly podcast episodes. Each one we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes, they're short, they're punchy. I think this crypto cycle is harder to navigate than

most. So, let's do it together. Go subscribe to this podcast. Search the DeFi Report wherever you get your podcast. YouTube, Apple, Spotify, or find a link in the show notes. There's a new episode waiting for you. Now, >> I love smart contracts. Uh what can who can help you uh unblock you the most about certain things. I feel like maybe there's two directions here. There's there's the broader DeFi ecosystem. Uh so like I I don't know what this looks like, but like you know, Morpho off a unis swap. maybe they can help you guys make privacy with those systems easier and more accessible. Is there something that you guys need from like the Ethereum community or the Ethereum DeFi ecosystem to make your jobs easier? And then also on the other side of the spectrum, the Ethereum

foundation and the actual Ethereum protocol, are there like EIPs or upgrades to the actual Ethereum protocol that would also make your guys' life easier? Basically, how can Ethereum help you? I can start maybe the the ecosystem ecosystem like so we already know a lot of the faults in this ecosystem but like for example if you're mofo if you're a um we already talked to some of them already like definitely talk to us because we would love to be able to like look at your products and see how we can kind of like uh basically modify them in ways that would be suitable for very specific types of use cases that can be incredibly large. So I think for me it's like come to us, talk to us, you know, let's let's look at the products, let's see what we can do to work together and

um yeah, just like that's the that's the one ask I would have like definitely come to us and we'd love to talk to you as well. We're very open doors here like come come and then actually another thing I would like to say is that because we do have public goods like we we basically release a write up every three or four weeks. Um if you've done amazing work and I and honestly this is good for you as well. Contribute to our open source repo. I will tell you right now the number of banks that look at it is pretty large. So if you have a product, you have a if you like you've made something that's really kind of intuitive or cool or you go DeFi protocol, come to our repo, contribute, it's open source, fork it if you want, change it however you want, but

basically contribute it's going to be great for you. >> I would add like so we talked to like a lot of people in the ecosystem and so on. I think one thing that we started seeing the last year or two or so is that people are starting to being a little bit more open-minded about like what the users might be like and maybe this is partially because of sort of retail movements and and the cycles and whatnot but I think that's another thing where try to sort of yeah be openminded about like what who who might might best benefit from using your product and and protocols and so on and think about what kind of requirements and constraints they're already under. So that's something we tried to sort of make a bit more public in terms of our privacy market map. But one thing we noticed a

lot and it's something we noticed at the fear inflation is there's a massive massive disconnect in terms of what the institutions are asking for and sort of what the ecosystem provides and we try to sort of help uh bridge those and sort of create a feedback loop between the two but there's definitely a lot more work uh that can be done and this is like a ecosystemwide effort and one last thing I want to add and by the way this is something that Oscar brought to the table and I think the position that we often have is like cipher punks in the boardroom like that's super counterintuitive because these are the two types of groups that normally don't talk to each other But what we would like to be is like that bridge where those defaults that could be generally good for humanity have them built in.

But the only way to do that is to get into the rooms that these decisions are made. >> Yeah. One thing that made me very optimistic uh was hearing a lot of Danny Ryan's reporting from like inside the room and like Danny Ryan's a cyber punk >> and he's talking to the banks and they're talking the same thing but with different words. It's kind of like it's kind of like the horseshoe theory >> where like Danny's like decentralization is really important and the the inside the bank is like I want to remove all my counterparties and people like these are the same things and I feel like there's a there's a lot of synergies with you know the powers that the needs of the powers that be of the world and like cypher punks and uh like the these

things are like coming together and like touching it's like completely opposite ends of the like the political spectrum or some sort of spectrum. from but like the the wants and desires and needs and products that they're building are actually synonymous. Is that your guys's experience as well? >> I would say so and I would say it's like you have uh a lot of the tools that you use are the same and a lot of the affordances that people care about whether individuals institution they're often very much the same in terms of sensor resistance and and privacy and open source and security and so on. And I think one of the great things about the film that you can you can both have people go like cuz some people who listen to this they might be extremely skeptical and like oh you know trad systems that are like super cyber punk

like uh no KYC uh 100% anonymous and all these things and build it on top of Ethereum and and that works great and but you can also build these other systems that sort of uh have similar properties but maybe designed under different constraints. like for example the legal framework that a specific company is operating under and I want to say that like I think people might uh judge some institutions quite harshly uh because of the regulations they're operating under but if you talk to them a lot of them they do things like regulatory arbitrage and they they also they they're operating in an environment just like any individual like any individual might be like oh I'm not going to do a private payment when I buy a cup of coffee because it's not worth it for me the same way an institution is like well this contract I'm going to do

it in this legislation, this jurisdiction, because that's sort of where I get the properties I care about. So, it's not that different if you if you think about it from like a high level. It's just a matter of like operating in different environments and and if you can give them what they what they need, then they're happy. >> Mo, Oscar, you guys are doing God's work. Thank you for doing what you're doing. I wish you guys the best. Uh, privacy is still unfortunately in 2026, uh, a problem, something that the space is lacking. And so the more people working on this problem and building towards solutions uh the better is probably going to be the biggest unlock for Ethereum specifically that that I can think of. So uh I'll let you guys get back to work and thanks for coming on the show.

>> Great. Thanks David. >> Thanks for having us. >> Bank, you guys know the deal. Crypto is risky, but that's why we're here. The institutions have landed, so we are going even further west. This is a frontier. It's not for everyone, but we are glad you are with us on the bankless journey. Thanks a lot.