Zcash vs. NEAR: Two Very Different Privacy Bets

Transcript

that's lending in a secured way, you know, within qualified custodians, etc., etc. And so, yeah, I think if you compare some of the stuff that's sitting within USD now to where it started, many would make the argument that like holding, you know, a bunch of AAA rated pieces of collateral is actually much safer than a basis trade on like offshore exchanges. The way I like in very simple terms sort of explain it to user on the other side is that uh the end user who's using a bank account doesn't really see the complexity of like a bank balance sheet that sits behind the whole thing. they kind of just see I'm depositing my money and I'm getting a safe reliable dependable saving and se yield for having my money within a deposit account. And for us, I think it's it's obviously not the same in terms of like the risk profile of a

bank. But the complication of everything that goes on within a bank is almost abstracted away from the user who just sees this very simple interface of a simple deposit with uh with a reliable savings yield. And so from our perspective, it's kind of like almost a new form of that which is a tokenized form of different exposures that are sitting within USD but simplified the user as like a oneclick experience for depositing dollars and getting a yield. Yeah, I think it's just because uh you know one of the big lessons that I think we've had in the last cycle uh is you just don't want to be entirely reliant on just the crypto cycle as a business and I think the very best businesses now in the space have tried to untether themselves from just the cyclicality of just is Bitcoin price going up or down.

So I think you know Hyperli liquid here was a great example of you know kind of repositioning the businesses in some sense in the last year where RWA per the per on equities and commodities actually grew to like more than 50% of their volumes I think like a month or two ago and that didn't even exist like 9 months ago as like a category uh within the space. So I think the the learning and lesson I think tether is another example here which is they don't care so much about which direction Bitcoin's going for like the earnings of USDT itself. it's just printing money from like T bills and real world assets that are sitting outside of the space. And so for us it was like the product did extremely well obviously in the in uh the bull market and it was quite reflexive on the

way up uh but we didn't really have like another tool in our arsenal uh when the crypto cycle was down to have you know differentiated and uncorrelated sources of revenue that weren't just connected to speculation within crypto. I believe that if Robin Hood moves an offering to the United States that the SEC will mandate that it includes full security entitlements including votings and dividends and corporate actions and the like offshore. Um do I think that they should I think that yes I think that we should aspire to making sure that the securities that are offered in the market are wholesome and offer all of the entitlement. So, I think it makes sense to go in that direction. And you probably heard like Broadidge is out there trying to offer services to different people tokenizing to facilitate a voting process, but like that also connects to the non-KYC,

right? So, like you have to you have to ask yourself if you're issuing synthetics and they're going to non-KYC wallets, right? All of a sudden the question is like I don't know is this is this al-Qaeda and Hamas who are voting my shares or is this just you know like you know um you know some individual in another country who's who's voting the shares. So I think for voting and even for dividends like in in the United States you you have to know who they are before you issue them a dividend. though I think issuer sponsored tokens are better than synthetics or custodial tokens that have full passrough of entitlements are better again than synthetics that aren't necessarily passing through all of the entitlements that go to investors. But what's interesting in this particular case is you have a synthetic and then you have

meme coins and other things that are even being built off of that. So there's like another derivative. And so in my view, like when I think about what concerns me the most, it's not even necessarily the synthetic product that's been offered offshore. It's all of these other things that are being spun up that are then paired to that. And the fact is that these are trading in markets that are completely unregulated that are happening over the weekend when there's no underlying market liquidity where you know where people are running trading strategies and look there's some people who are probably making a lot of money and there's some people who are getting their faces ripped off in the process right and so how that is unfolding is a concern of mine and I think that that sort of pairing in those sorts of dynamic concern me even more than the

simple synthetic product for example that Robin Hood has issued offshore. I just wanted to wrap this up by saying that I just want to emphasize like when you steal the money period like you're not it's not a white hat situation. There's even if the team is a piece of and they're arrogant as hell and there's no bounty program uh you still shouldn't take the money. Okay? You're stealing people's money. It's generally a bad thing to do. Uh if you insist on doing it, I also, you know, I recommend returning all the money immediately and definitely don't extort people. like you are now like in a double position of power. And so to all the people there's just been like a lot of people on Twitter and I guess like you know Kane you and I have done this for years. I guess in Bitcoin it's not as prevalent

of a situation but like it's just it's a bit odd to see people being they're because they they're they're basically playing in the hacker's hands, right? When you anchor the hack value at say $320 million then you're like for whatever yeah 4,000 Bitcoin, right? >> 50 mil. But the reality is like $50 million taking $50 million or getting a $50 million bounty is that's freaking it's insane. Like we can't that's not how the world works. I'm sorry. >> Think about like the origins of crypto and like Bitcoin itself in Satoshi. Like the one of the parts of the brilliant parts of Bitcoin was a recognition that like humans controlling a monetary system is always going to be corrupted.

It's always going to be an issue. And so one of the brilliant parts was like well what if we put all those rules into math and the humans don't control the system? They all have access. they can all use it but they can't change it. And I think on the AI side there is this like belief that they can really create this thing and that they as humans will somehow be able to resist you know this this power that like absolute power is not somehow not going to corrupt them and that they will be able to just morally you know dish out everything that the world needs and it's it's not recognizing that like you you are relying on this human in the loop of this incredibly powerful system you're creating to not basically be the the weakness point that falls over. I get why they would be arguing here, but

you really need to descend into what's going on to make some of these critiques. And I think they largely reveal somebody who does not understand how markets work, which hypothetically maybe some other things have also revealed in this case in the past. But a good example is this. If we look at what Coinbase is doing, Chris, you alluded to this earlier, which is perpetual futures for tokenized US stocks versus call it an actual stockbacked like deposit token that doesn't pass on governance rights or maybe even not dividends and can be traded by people. Those have two different effects on markets, right? The futures are a funding trade. Maybe they can be used for hedging, but without a party to stand between the futures and the actual price token, right? Or use them in a hedging way. To Rahm's point,

this is largely speculation and what it's revealing to me is unfulfilled demand for US stocks by non US investors. On the other hand, doing the reverse of an ADR is actual demand for capital. You need the underlying AMC shares to do the lock the shares in a box and create a thing off the box. So, in that case, the critiques of, hey, we lose control of our like fundraising is like, no, that's strictly wrong. This actually gives you more people to fund raise from, not less, and expands the audience of people who want to buy your stock. >> Couple things that I'm watching is diesel. Diesel is hitting record shattering prices. I think averaging like 585 a gallon that hits, you know, real America. That hits the truck drivers. And so it's no surprise uh off goes Kushner uh and Wickoff to uh to

Russia and Ukraine because a lot of that's hurting supply. And so if you're Trump right now, your eye is on midterm elections. You don't want to go through impeachment after impeachment if the uh Congress turns. So you need to keep as many seats as possible. How do you do that? You got to attack inflation. There are some things hopefully he can do to help control that visa v the Middle East. He's been trying to do that. It's been difficult. Besset needs rates down which is another challenge. And so to me I don't think anyone's in a position to raise rates under this environment whether they're independent or not. >> $540 million. That's how much concentrated liquidity sat idle in a given week in the first half of this year. About 30% of the DeFi TVL if you're wondering. That's according to

Dune Research commissioned by 1 in. But there's a solution. 1-in Aqua is the new shared liquidity platform. It lets LPS back multiple positions with the same token balance and keep their tokens in their wallet till a swap comes. Why does that help? Because the LPS don't have to split their tokens across positions. They can cover more market conditions and pairs with their full balance. That means more activity across deeper liquidity. See how it works at 1in.com/aqua. Remember that providing liquidity carries risk and fees aren't guaranteed. Heads up everyone. We've now fully transitioned Bits and Bips to its new dedicated channels. So, if you're not yet subscribed to the new Bits and Bips channels on X, YouTube, Spotify, Apple

Podcast, or wherever you get your podcasts, go there and subscribe now. For the next few weeks, we'll play segments of the full interviews on Unchained as a reminder. But for now, you'll only hear those short segments of Bits and Bips on Unchained. No more full episodes. You can get links to all of the dedicated channels with the full episodes at unchainedcrypto.com/bitsandbips spelled bits. Thanks again. Before we dive back in, a quick word about something we make ourselves. If you like the way we cover crypto on this show, cleareyed, no shilling, just what actually matters, you'll like the Unchanged Daily. It's our free newsletter that lands in your inbox every weekday with the most important

stories in crypto written by journalists, not marketers. No jargon, no hype, no number go up cheerleading, just the news you need to stay ahead in the time it takes to drink your coffee. Subscribe for free at unchained crypto.com/newsletters. Hi everyone, welcome to Unchained, your no free source for all things crypto.

I'm your host Laura Shen. Thanks for joining this live stream and first we're going to take a quick word from the sponsors who make the show possible. This episode is brought to you by 1-in Aqua, the shared liquidity layer from 1 in. Back multiple liquidity positions with one wallet balance and keep your tokens in your wallet until a swap fills. See how it works at 1in.com/ aqua. Before we get started, I want to ask you for something. We're making a bunch of decisions right now about Unchained. What we make next, when we go live, what we should be doing more of, and I'd rather hear from you before we make them than after. So, we put together a survey. It takes just a few minutes. It's anonymous, and there's a box where you can tell me what we could be doing better. I read all the

responses. The link is in the show notes, or you can snap the QR code on screen, or go to unchainedcrypto.com/servey. Thanks. Today's topic is privacy, confidentiality, and all things Zcash in. Here to discuss are Ilia Possukin, co-founder of Near Protocol, and Mert Mumas, co-founder and CEO of Helas, and Zcash, influencer. Welcome, Ilia and Mert.

>> Great to be here. >> Well, and co-inventor of LLMs for Ilia. >> Oh, right, right, right. We can't forget that. That's actually really, really important. Um, and I noticed that Ilia's wife today was just reminding herself that that he um has that title. Um, all right. So, let's get into into it, you guys. So, it's a very bullish market right now. Um, Bitcoin Ethan Saul did around 10% on the week, but Zcash and Near are ripping. Zcash is up 32% over the week.

It's near an all-time high, and it's now ranked number nine on Coin Gecko, which I'm super excited about. and Near is up 69% that time. It's now ranked 23 and I'm I'm imagining both of you are super stoked. Um, Zcash also has an upgrade coming up. Near announced a whole bunch of really cool new features recently and both of these coins play super well with each other. So, why don't you each start with like, you know, why it is that you think your coin is doing so well and and um for for Mert, it's uh his Zcash influencer role, not not Salana. um that I'm asking about. So, um either one of you can start.

>> Ellie, I'll let you go. >> Yeah. I mean, for near um we've been effectively building for the past few years this kind of technology that brings not just kind of near ecosystem but all the ecosystem together. And uh Zcash is one of the biggest kind of ecosystems that we're working with very closely but it works with Salana, it works with Ethereum, it works with Telegram, Tron etc. Right. And the idea is really to remove the boundaries that kind of three created and at the end really kind of deliver on this like unified liquidity unified market idea that I think crypto always

been promising but it's always been really hard to experience and as people started kind of interfacing with it trying our kind of first party app.com there's kind of more and more understanding that this is actually kind of how crypto should be working. Uh and importantly, I think biggest unlock has been both Zcash and Near bringing at last privacy on chain. To me, it's always been kind of a biggest bottleneck to use day-to-day blockchain for anything because like I have literally a spreadsheet of 100 addresses on Ethereum and kind of near before we had privacy.

So I can track where who did I send money which address did I use how much gas I left on that address like it's like a it's a nightmare of like accounting system to just keep track of you know to make sure I don't blink anything you know go through sex you know make sure I don't have timing attacks on like amounts etc and all that it gets solved now that we have Zcash engineer really delivering kind of like how do you have a private experience using blockchain and so I think like all these things really coming together now uh as more and more people actually starting to use blockchain right financial system is moving to blockchain kind of never before and so um at least that's my explanation why things are really uh really starting to appreciate

>> mer what do you think >> well to go back to the question of you know why am I excited the reality is I'm not that excited I have sort of a mental problem where when things go Well, I'm not that enthused about them, but when they're meh or they're going bad, that's more exciting because that's sort of where the work is for for now. I would say, well, you know, if I'm to rationalize sort of the price action, obviously people are more risk in general. Um, and so all of crypto benefits and so you have to look at what outperforms the general market, which Zack and Near have done. Now, there are many reasons cuz people buy

tokens for different reasons. Not everybody has the same reason. For Zcash, I think the similarity to Bitcoin, but being encrypted and quantum secure is probably the easy one. It's extremely easy to tell anybody that knows anything about crypto because they already know Bitcoin. And so, if you just say it's encrypted Bitcoin, that's pretty much all you need. Um, the privacy aspect and and same with Near as well. So, it's interesting because obviously near benefited from Zcash going up, but it's questionable that Zcash would have went up as much if it weren't for near in the first place, giving it utility on the wallets, for example, to be able to do actual usage of the coin instead of just literally

holding it on an exchange, right? And obviously, you know, there will always be people, probably the majority that hold it on exchange, but there are the diehard ones who generally are, let's say, much bigger holders who are actually the missionary types who do benefit from using the actual benefits of the chain um and and in these systems that are built, right? Otherwise, they would have just used um something else by definition. And so w with with Zcash and and we'll get to this later, but I I don't think it's privacy. Um I think there will be this sort of sort of temporary time period where privacy is sort of a distinguishing edge, but sooner or later more and more chains

will start adding privacy. And so with Zcash, what matters is that if you start from first principles, you can't actually have the best version of a store of value without that asset having the ability for privacy, right? If you have a store of value, by definition, you're expecting it to have little surprise. And one of the things that goes into that is obviously privacy, right? Whether that surprise is regulatory or responsibility or whatever it might be, right? And so I wouldn't say for Zcash it's the privacy aspect specifically. It's just one of sort of the colors on the whole, you know, painting. It it it can it can't do it on its own because otherwise, for example,

um you would have Monero as well doing the exact same price performance or something like this. Um but it's sort of the entire story of privacy, quantum proofing, store of value, scale, etc. Yeah, that makes a lot of sense. Honestly, when I was looking at what was going on, the vibes I was getting was like this is like the dream of Bitcoin DeFi actually coming true, just not on Bitcoin and not a Bitcoin layer 2, but with Zcash. Does Does that make sense? I I hope like Bitcoin people don't get mad at me but but I was just feeling like so Zcash and Bitcoin are very similar obviously

except of course Zcash has the ability to have these shielded transactions and so if you look at it in that way then Mir is what is like enabling people to kind of you know use DeFi with with their Zcash with their store of value. Um yeah what do you guys think of that analogy? Well, I I would say yeah, I think it's like obviously analogies are always imperfect, but I think that's like roughly correct and that was sort of for example um we led the listing of Ze on Salana but via Near, right? And so if you can kind of say that Zcash is an alternative to Bitcoin and some people

will say it's a better Bitcoin, but perhaps you can just say it's different with different trade-offs for different people. You can I think also make the same argument that near is sort of what Ethereum aimed at being right if you remember this the sharding road map right where Ethereum wished to scale via sharding well who actually did that okay Near did and then what about sort of this being the hub where you connect different sort of chains well near is demonstra demonstrabably doing that right now um via Near intense and so there's kind of two parallels to both Bitcoin and Ethereum Um, as as far as I can see, >> IA, what do you think?

>> Yeah, I mean, I think our our goal always have been I call it nonzero sum. How do we actually enable all of the amazing innovation that's happening to really get to the user and become really interesting experience and I think as you mentioned right Bitcoin kind of been trying to do that over pretty long time but it it always kind of stayed in this like pre-locked in ecosystem and I think part of it is part of it is lack of privacy part of it is um like seen as more of star value.

There's like less of less of demand to create kind of interconnect with other ecosystems. I think Zcash by virtue of being private, people want to spend it. People want to kind of participate in economy around the world. And at the same time, you know, people on different chains now that you know, we're we're in pretty different world than when Bitcoin kind of been growing up, right? want to have access to it and want to participate in it. And so there's kind of this both demand demand from both sides to really participate as you said in kind of broader DeFi uh for it. And so Mir is as I said like kind of this universal

liquidity layer that that really connects all those things. >> Yeah. Yeah. That makes so much sense. I mean, especially if I think about, you know, whales in the industry. Um, not going to lie, like for me as a journalist, um, I don't love the idea of, uh, that activity being more private because it makes things harder if I want to look into something. But obviously, if I'm the person transacting, then of course that's what I would want to do. And especially in this kind of situation where I am engaging in activity that could potentially multiply my money or or you know maybe I take some kind of gamble and I lose money. Um and you know you just wouldn't want people to see

that you know like we have all those accounts that will tweet about oh so and so you know you know they bought this coin at this price and then they lost you know whatever $50 million like three months later when they sold or you know whatever. So, um, all right. So, let's just talk a little bit. Oh. Uhhuh. >> No, I just I just want to double click on that. I think obviously the speculation has been the biggest use case of blockchain thus far. I think what's also happening at least like from what I'm seeing over the past, you know, year, year and a half because we're actually getting people starting to use this for real businesses, right? And this is both you know kind of globally banks and fintex adopting blockchain as well as for agents that is the interface

right that the easiest easiest right cloud player is adding aic payments that going to be on blockchain right we see this kind of across all all of the different stack of services right one way or another they're adding different options and the thing is like while you were speculating yes the visibility of the trades were you know was a problem, but it is like kind of, you know, people were okay with that for the most part. when you're starting to actually use it for real business like or you know if you're paying like if I'm paying for coffee like if it's if the coffee you know uh if the coffee shop sees my you know balance my net worth during that transaction if anyone else in the world

right can observe that I spend money in this coffee shop like that's a massive like security issue and for businesses it's massive business operations issue right because everybody sees who they paid, you know, what is their like cost of goods, how much they sold, right? Like that becomes a massive business operations. And so I think privacy is really, you know, people ask like, oh, nobody cared about privacy. Like Zcash existed, right, for a long time. Nobody cared about it. Nobody cared about privacy. What happened, right?

uh and I think there is a diff the change that came is like people actually starting to use it for day-to-day stuff starting to use it for running businesses the kind of global financial system is starting to get integrated and so privacy becomes really enabler for this to be like not an op massive OBSAC issue not a massive kind of business operations issue so I I do I do feel there's like a transition that's happened as well uh and and kind of Zcash and Near both are really delivering on that on that value prop >> one anecdote I'll give also is I use it pretty aggressively pretty frequently when I'm traveling so a lot of people take obviously currencies usually Tron honestly which

is sort of fascinating but a lot of Tron usage but when you're booking flight tickets or hotels or whatever concier stuff it's actually very helpful to be able to use near intense via Ze and sort of tighten up your OPSAC, especially if you're going to like a France or something where I believe it's 80% of all crypto kidnappings or some Um, and so being able to actually use it for that. Um, that's I I religiously use it for that. Um, it's been very helpful. >> And actually explain that a little bit because um, so first of all, it's a two-part question. So did you literally mean that people are taking TRX or did you mean a stable coin on Gant Tron.

Here's Dion Tron. >> Okay. >> Yeah. >> And then but then how so how many merchants out there are accepting? So So I don't know. So you so you use your ZEC with near intense. So then what what does the merchant see? >> So I mean ideally they accept Zcash directly but obviously that's a pretty big ask. Uh because most of the folks who deal in crypto for whatever reason they already take USDT on Tron. Uh maybe it's more of an eastern thing. Uh but you know, as soon as you find one or two of them, then that's pretty much all your needs anyway. Uh assuming uh like depending on what you're doing, right?

Like if you're doing travel, the travel people will take care of pretty much anything related to travel, judging, uh ranging from flights to taxis to uh booking things, whatever it might be, hotels. Um, and so you can, >> so you're using a travel agent. You're not paying for the hotel directly. Like you're not paying the hotel directly. >> Well, I mean, I guess you could, but yeah, in this case, you're not. Uh, you're you're doing a sort of a private concier, so to speak. Um, and you can just do that via uh like just because obviously for something to be like a store of value, you need to hold value in it, but then you need to also be able to do things with it to an extent like things backed

by it. And so I think like the most underrated thing that I'm upset that like not everybody uses it, but I think a good enough amount of people use it such that it does make a difference is sort of like if you use a Zcash wallet, they all have the pay feature which integrates near intense which then lets you pay on any chain, right? So you can also I also do Salano USDC with this for example or you can do Ethereum or you can brush to Robin Hood, whatever. Um, and it's just super convenient and like it's not like a regular bridge where you can just go back and be like, "Oh, it came from this other address. Okay, now my private concierge knows how much money I make and therefore now they're going to upsell me on all these sort of different shit."

Yeah. Yeah. This is something that I think about because um let's just say I've had some weird experiences when buying things with my name and it has made me realize like oh man I probably need to figure out a way to like buy things more privately and I know that there are credit cards and I have done that occasionally but it's a hassle you know like um so I I love what you are saying here. Um, so let's actually talk a little bit more about this privacy thing because like obviously um, you know, we we've said for a long time like just crypto people generally have said that privacy is essential for adoption.

Um, and what's kind of interesting is like so I I definitely agree with that. Um, you know, I' I've long said that. I' I've never been that person who, you know, broadcast all of my Venmo transactions. But at the same time, like so many people, you know, in surveys, they'll say they care about privacy and then when it comes down to the actual actions, they they don't care. They would rather have convenience. So, um, you know, I'm just curious to hear you talk about like whether or not you really think that the like privacy and confidentiality will be big drivers in this next adoption cycle and um and and you know why and how you square that

with this behavior where like by and large a lot of people will give up privacy for convenience. >> Yeah. I mean I would say >> yeah I would say that generally people prefer convenience and then for any kind of privacy product the idea is we need to build a better product that's always I mean it's always been true even for web 3 in general right I think we've been like oh why are people not adopting web 3 for past 10 years and the answer was always like well you need to actually have a better product across the board right not not just you know in theoretical way that if you you know if you know what you're

doing you can sign an ROP you know transaction you can read you know hex hex encoded address make sure that you know uh you understand the last four four digits in the beginning and the end of the of the address like that's not a good product right that's not you know how Venmo works it's not how uh you know some of your normal banks work so we kind of need to build a better product and then deliver privacy as a kind of powerful add-on for people to to leverage and then and then it becomes it's not an on boarding tool, it's a retention tool in a way. Right? Now that you are private, it's actually really hard to go back because privacy actually

brings I call it like a psychological safety. there's like a level of kind of uh I don't know like anxiety that just goes away when you know that the product you use is private like you know that nobody can go and like track down or see what you're doing etc. And I think that this is true about, you know, financial. It's about true about AI. It's true about everything. Like as soon as you know that like you're at your home and nobody's looking at you, you, you know, you're dealing with your money and nobody can stop it. Nobody can take it away. Nobody looks at it, right? You have like reduced level of anxiety. So that's why I call the retention in a way. People will stay with this if

bored. So there's as as far as I can tell I think there's two things here. One is there are certainly cases where privacy actually makes the product more convenient and it improves the product itself. Right? The dichotomy of well if you add privacy then it's a worse experience is not necessarily a true one. It's more of an implementation shortcoming from past let's say attempts. Uh but in the case of for example Zcash, why would you not want your store of value where the thing where you're storing value to be private, right? Like what what is why would you not want that, right? And and assuming you can get it in a

technologically feasible way. And obviously when ZK first sort of went to market, the tech was pretty obviously it was I mean Zcash was the first implementation of a snark in in in the planet on on uh especially for money. And so it took many years to actually get to a point where the latency is sort of bearable to to be able to um use in a mobile setting for example, right? Where your phone can actually do the ZK proof. Um and so all things equal then why would you not because privacy is just optionality. It's choice, right? Right? If I have a thought in my mind, it's private by default, but I can wish to publish it on the internet. If I take a picture, I can share it on socials or I can keep it on my phone. Right? And so with money is sort of or store value is

sort of the same thing. I want it the optionality because I want choice, but then I also can do whatever I want with it. I don't have to make it private. It's just up to me. So because if you don't have optionality, then you have coercion in some sense. uh in this case it's implicit coercion because it's not like somebody's like forcing you to do it but that's how this game forces you to play so to speak. Now the other aspect of this is I'll actually take the other side. Um like Ilia is right that it's a retention tool but it's also an onboarding tool. And so you may look at something like the minority rule here, right? Which is to say there are it's a it's a necessary but

insufficient condition for onboarding, right? which is to say there's always going to be people who have the limitation that they cannot come on chain unless they have some sort of uh private option. So institutions come to mind which is the ironic part because a lot of the institutions actually have this as a hard requirement uh due to how they're regulated they cannot uh disclose certain information certainly not customer information and so it's a literal requirement right it's a bit like um when I say the minority rule I mean something like a peanut butter allergy right which is to say if a certain amount of people literally cannot do something because of a blocker well then the system has to basically

mold such that it can allow for those people to onboard. But then once those people do onboard, then you don't lose anything by having that optionality, right? Because let's say like the the set of users who uh the set of eaters who must have peanut butter is much smaller than a set of users who don't care and just want to eat food. And it's sort of the same thing with privacy. Okay, that's super interesting and that makes a lot of sense. Um, all right, so in a moment we're going to talk a little bit more about the specifics of what's going on with Zcash and Near, but first we're going to take a quick word from the sponsors who make the show possible.

$540 million. That's how much concentrated liquidity sat idle in a given week in the first half of this year. About 30% of the DeFi TVL if you're wondering. That's according to Dune Research commissioned by 1 in. But there's a solution. 1-in Aqua is the new shared liquidity platform. It lets LPS back multiple positions with the same token balance and keep their tokens in their wallet till a swap comes. Why does that help? Because the LPS don't have to split their tokens across positions. They can cover more market conditions and pairs with their full balance. That means more activity across deeper liquidity. See how it works at 1in.com/aqua.

Remember that providing liquidity carries risk and fees aren't guaranteed. Back to my conversation with Ilia and Mert. So as we have been talking about both Near and Zcash are taking off and it looks like you know we have this kind of stirrings of this bull market when you look at the broader crypto market. Um but it it sort of seems at least at this point that privacy and confidentiality are going to be themes of this upcoming bull market if if that is what we're what we're seeing. So just talk a little bit about the difference between privacy and confidentiality and which one is important to have when >> uh well

actually I'm not sure exactly Ilia maybe you can start because confidentiality has different sort of references depending on >> yeah so I I think there's like few different levels of privacy or or or sources of privacy technically And uh we've been using word confidential as a way to kind of show the difference. Um so Zcash is kind of as Mer mentioned is based on zero knowledge proofs and specifically it's a zero knowledge proof that a user generates and submits to the network where effectively only user knows their balance only they can decrypt it and they can submit effectively prove that

they send some funds to somebody else which means there's no shared state. There's no way to effectively compute over shared state which also means you cannot do a lot of kind of smart contract and kind of more traditional things that you do on the blockchain beyond just you know sending money and kind of few other simple operations. We took a different approach because we want to deliver effectively a fully programmable privacy, right? And kind of as uh we're trying to build this like programmable private DeFi, you need the more than just you know zero knowledge user generated proofs. You need a way to have a shared kind of private computer.

And so we're leveraging a combination of multi-party computation, secure enclaves and zero knowledge proofs to really create uh this environment and we call it confidential because indeed it's different from kind of more userfacing um privacy that Zcash is offering. So that's kind of our uh I guess terminology that that we use. And so as part of this you know you can have payments you can have trading you can have you know earn we just launched you can actually uh put money to work directly from your confidential balance on near and we just add that confidential per you can initiate per

positions uh from your confidential balance and there's more and more features are coming and we actually uh want to open it up to more and more developers to actually build different financial applications re really creating this confidential DeFi as a place where you can build you know indeed for the consumers that care about privacy and indeed for institutions who've been actually waiting for tap into DeFi and sitting on sidelines because they were not able to participate in onchain kind of traditional onchain economy and so I think there is a huge opportunity to really leverage this kind of private confession computer that we built with our private shard and uh kind of all the near intense economy that's built on top

of it. >> And wait, there's one thing that I maybe didn't fully understand. Um so some of that because it is hardware, does that mean that some of it is literally tied to the device or or No, you if you lose your device, you'll still have access. >> No, no. So we we're we run we're running a uh effectively an a whole set of near nodes, but the near nodes running inside secure enclaves. So instead of running kind of quoteunquote in plain text how all the other blockchain nodes are running they themselves running in secure enclave meaning even if you have physical access to the machine you cannot actually see what's going on there >> and then all the communication to it is being encrypted by the multi-party computation and then kind of the proofs

that have been submitted out zero knowledge proofs. So people don't you know they know something happened and this is you know you can prove to anyone this specific outcome but you just have a proof that was constructed inside secure enclave so nobody was purview to the shared computation that happened inside >> okay okay I understand and mer so did you want to talk about the other part of my question um like I I was also asking if or maybe it doesn't even matter I don't But I was wondering if it's more important to have one type of, you know, privacy versus confident confidentiality for different either types of activities or, you know, in

different circumstances. >> Yes. Well, you sort of had to work backwards from the user need or at least the user need that you anticipate. But with a store of value asset, it's pretty clear you just need max security, right? Again, it goes back to minimizing the amount of surprises. And so you need full anonymity, full security, quantum proofing, all these different things such that you have this this this confidence that okay within 5 to 10 years similar to gold, nobody's going to be able to hack it or they don't have information or they won't be able to do anything to me, right? Whatever you do on chain can will be used against you.

Can't happen to me. Um and so however obviously if you want to go the full extreme privacy route and by extreme I mean like you know encrypting network traffic using you know uh using uh onion routing and all these different sorts of things that is obviously useful for um that one use case. However it is it comes with trade-offs. Uh one of them is like obviously you can't run an order book on Zcash, right? Like that that would just not be feasible. And and so when you have different needs like that, right, if you're when you're going from a store of value to something more like let's say programmable finance um in that case you need to architect

the solution differently and like IA mentioned being able to uh do computations over shared state which you know simply just means being able to do DeFi um or you know just being able to do more complex things other than just holding and doing payments. Um, in that case, you'll obviously need to change your architecture. Um, and also like you'll need to because your customers as a smart contract platform are different, right? With a with a store of value asset, they're just investors and holders and people who want to use it as money. With a smart contract platform, they could be startups, institutions, uh, you know, ETFs, whatever it might be.

uh there's many different ranges and so you need to do something that can flex specifically depending on their needs, right? And that can't be completely extreme like you know tour routing for example. Um and so that that's really the difference. Um I mean fundamentally I don't think you need extreme anonymity like I mean some people will and there's certainly ways to do that with near um but for for for the most part confidential and it's also a regulatory thing right like um on Salana for example like confidentiality means something very specific which is that the to and from are not encrypted but the asset and

the balances are encrypted. So you can see sort of where the money went, but you can't see how much of it of what token went anywhere. Um, which is specifically useful um for like individual teams for example, not necessarily blockchains. Uh, because then you'll get Roman stormed so to speak, right? Where the feds will just come after you. >> All right. So now let's dig into some of the details around the new intense connect which we have been alluding to but we haven't really like dug into the details. So Ilia, do you want to walk us through what one of those transactions look like? Like so let's say that I'm a user. I show up. I want to swap, you know, some asset, let's say on Salana for some asset on Ethereum. Explain like

what happens on the back end, like what does the user experience feel like to me? Um, you know, how how is it kept confidential? Explain all those things. >> Yeah. So there's actually a few things here. I think uh connect is actually a little bit one step further. So yes, first you have like a regular swap where you go from one asset to another indep and it doesn't matter which chain it's on. And so uh the way kind of in the simplest case it works you're effectively saying hey my intent is to get you know let's say some uh bitcoin or some zcash and I'm willing to get to part ways with you know salana right and so you effectively broadcast it to

solvers solvers then bid on this and say hey I will you know get you one zcash for you know this number of salana And uh user can select other quotes. There's some matching that's happening. There's like multiath. There's like all kinds of kind of smarter ways to to do this. But at the end user effectively select the best quote for them signs on that. And now you have so-called uh kind of signed intent where you have effectively two sides saying cool you know I'm willing to part my ways with this. I'm willing to part my ways with this. Right? So that goes to a settlement system. Now there's an important aspect which is because all of the things live on different chains near

has this multi-party computation network which is part of the part of the near kind of validator set that is able to sign transactions on different chains which means there's effectively addresses that are controlled by near smart contract itself uh across all chains that it supports and if you deposit to that address near smart contract knows that it effectively receives money on Salana or Ethereum on Zcash etc. So that is kind of what what enables this experience to be so smooth is that we can effectively like what normally things centralized exchanges or even custodians do. We effectively put that on chain and we made it programmable. And so now you can build

applications as if you were building a centralized exchange but in a fully decentralized smart contract way. And so that enabled this experience to do. And is that called the verifier contract? >> Yeah. So well the verify contract is what sits in the middle on near and now in a private chart on near that actually tracks effectively it's a ledger of all you know uh who who has how much who deposited how much and it verifies this signed intents and effectively updates balances right so let's say you know uh I'm you know whatever uh two salana for Zcash you know solver signed on that I signed on that that goes to verify contract act and then that settles

whenever I deposit funds into a near controlled Salana address and in turn releases the funds to either my near balance or directly already on Zcash and it can release it directly into Zcash shielded address right so I can give it a shielded address directly so you kind of near facilitates all of those transactions kind of uh and that smart contract is what uh decides on uh updates of the balances. >> Okay. Yeah. I think like people are obviously quite excited about this. Like I was noticing um so Near Intense has $190 million worth of TVL and from Zech alone it's 71 million. The I got these

numbers from DeFly Llama. Does that sound right to you? >> So I think they're missing the confidential. So like we have right we still have non-confidential and confidential because we kind of obviously launched with non-confidential added confidential and defy llama right now missing the confidential balance. So alto together the TVL is now over 200 uh 206 million and then uh I yeah I mean I think Zcash across both of them is yes 70 million. >> Oh okay. Okay. Well, um then yeah, I actually think if you're saying 260, then the 71 million is uh on top of the 190 that I mentioned.

So, um well, uh I did want to then ask, you know, because uh when you have privacy, there's not as much visibility. So obviously we saw in June, I guess it was that um that can that can create some really freaky vulnerabilities that pop up all of a sudden out of nowhere that have been around for a long time, nobody noticed. And um it sort of opens the door to exploits that could happen without anybody being aware. And of course, here I'm referring to uh what happened with Zcash, where there was a vulnerability that was discovered that could have allowed somebody to just mint a whole bunch of counterfeit Zcash. Um

based on the way events played out, it sort of seems like nobody actually did exploit that, but you know, um yeah, I I don't know if we can be 100% sure yet, but um you know, I wonder like how you think about that. How do you think that users who want to engage with this should um like what best practices should people follow to ensure that when they are transacting privately that they are doing so in a secure manner? Um well there there's a lot of actual nuances in there but for example with Zcash

the counterfeit vulnerability was confined to one pool and the the reason that's a problem is because you can mint coins within the pool given the protocol right um which is to say uh anyway so Hopefully that's clear enough, which is to say the orchard pool itself since it's a fundamental pool or was a fundamental pool in Zcash, you could print new coins in there, but then since it's not like a uh like a system where um like you don't necessarily know what went in or what went out because it can be born within. Um that's a unique problem and the the solution to that

problem or one of the solutions is a turn style where um you just add a simple system that says what goes out can't be more than what went in uh to prove that you don't actually mint uh undocumented amounts within the pool. And so I mean now we're we're pretty we're I mean you can never say 100% sure but you can I can say 99.9% sure because we migrated it right. And so Ironwood or orchard was migrated to Ironwood. Um the vast majority of funds, I don't remember what it was, but over 90% uh migrated, but then also there's a forced migration there where if you were to do a transaction on uh Orchard, it would trigger the migration to Ironwood. And

and then on top of that, it was formally verified three times over with also a new proof that shows that undetectable counterfeit bugs mathematically cannot exist, right? And so you can be about as close to certainty as you can get keeping in mind that all math is math and all math is probabilistic to some degree in the age of AI. Um and so that specific part is absolutely no more. Now, but that's a very Zcash unique problem in the sense that for example um for like a smart contract platform on a different chain, you can usually see the amount um like the the highle top

level stats of a token and you can have controls over that token um and and certainly you can have um you know uh in in the case of NPC it's a or or like the the specific problem is if it's fully anonymous then it's hard to even patch the issue after the issue has happened but if you have ways of mitigating that which I think most protocols would other than like a Zcash um then you can at least retroactively patch it and so it wouldn't be fatal to the network right so that's sort of the difference but that's like a very specific problem to uh like an extremely anonymous protocol Yeah, I agree. I think the well there's

the whole level of of things here to discuss, but indeed Zcash because it's on a further spectrum of there's nobody who has like there's no computer that has a full state of what's going on. Meaning indeed if there is an issue, nobody even knows that there is an issue, right? There's no computer that can actually detect the issue. And so that is indeed very specific to Zcash and kind of the approach of kind of every client uh producing the proofs. Our approach is kind of in the middle where we do have effectively set nodes that are computing um the state of the of the kind of private shard dates themselves are private but they inside

can effectively do all of the checks do monitoring uh and including alerting and actually kind of reach out back and say hey guys something is wrong you know let's let's uh you know investigate. So, so there's like a a different level of um kind of monitoring that's impossible for these types of scenarios. On top of this, as Mer said, we're moving to a new paradigm. The paradigm where before code was secure if some smart people looked at it and wrote a PDF about it is kind of starting to um disappear, right?

because the you know smart people looking at it doesn't really qualify that there's no bugs right it's just that they they this specific people didn't find it and now with AI everybody can effectively send you know high IQ computer scientists to review any code so forification becoming a must for any kind of critical software uh that's been built right now and uh I mean we've been working on a bunch of this we actually also published some of our uh results on some of the more traditional benchmarks showing that we can do 250 times cheaper form verification than what's right now in the market uh with kind of traditional like uh open AAI uh systems but generally formification becoming

accessible and can be run directly while you're developing now and you can verify kind of critical properties that indeed there's no money spent there's no double spends there's no uh kind of waste to extract money in some malicious way and that in if it's done correctly can cover the whole host of bugs that we've seen in in D5 over the past year uh where you know there's all kinds of issues that people have been exploited so I think that that's kind of more fundamental that in general this is not about privacy per se this is more in general we need to take security seriously and there's tools now and they are AI driven but they combine formification and

mathematics to do Yeah. And Ilia, I also wanted to ask you um like if you could walk through some of those backend points that we discussed earlier to help people understand, you know, so when they want to engage with near intents, like what are some of the um you know, points where there's either certain risks or or just for them to even understand how you're addressing security? Cuz you know, I kind of tried to ask this before about the the verifier contract. like I'm assuming there's maybe like an upgrade key or just just talk through like um yeah uh maybe the solvers like you know I don't know if there's risk

there just yeah walk us through each of the ones so people kind of have full awareness if they're going to engage with that like what they're dealing with >> for sure yeah so and then we have documentation for that for for uh you can you can send your agent to do research uh that's generally the best approach now but yeah high level is at the core there is a multi-party computation right so this is the distributed set of nodes uh that live across jurisdictions geographies uh that are together can sign transactions right they sign transactions when some smart contracts issue a command right so this is this verifier contract can say hey you know send the bitcoin transaction and you

know spend some bitcoin to this address or send the salana transaction and send you know USDC on Salana to this address right so that's kind of the core uh risk system for for most of the asset holding that are on near intense kind of across near ecosystem so that's the biggest important piece this is effectively you know to compare with what a traditional custodians are using right but they're running it all themselves internally we have it fully decentralized with you know high quality uh kind of operators, some of them are financial institutions who actually running the system and then you can program it on top. Then indeed you have

a verifier kind of contract. You know again think of it as the like internal ledger of the of the system where it tracks who has how much balance of different addresses of different assets. Uh indeed there is upgradability for that. uh there's time log, there's multisig, there's dowo, there's kind of all the traditional infrastructure to uh prevent kind of uh things happening that are not supposed to and uh that kind of carries the kind of internal balance. Um there is additional guard rails, alerting, there's a lot of systems that u kind of uh run around that to make sure that there's nothing uh happening there. We've been running like Rainbow

Bridge was kind of the first version of this that we launched in 2021 and so we've been running this kind of systems for a a while now without losing any money. Now important part if you're just using for example Zcash wallet right and you're sending money to Tron or Salana you're actually only taking risk while like in any of this component of the system while your funds are moving right so effectively as soon as they arrive to destination address right you're effectively done and so for a lot of the use cases where people are integrating your intents into their own applications into their own wallets uh you're actually taking minimal risk and effectively only engaging with this. At the same

time, if you do want full like privacy for your kind of assets across all chains, you can actually integrate the full near confidential and uh then you get balances, transfers, payments, you know, per etc all together. But indeed then you take in kind of risk of this uh NPC stack and uh kind of smart contract upgradability. So those are indeed you know there and kind of very similar to you know traditional DeFi uh with with kind of some of the additional uh inspection tooling that we have because I think like the important piece that different with you know Ethereum DeFi when something happens with Ethereum D5

it's too late right transaction already went out and you know money is gone right it's usually atomic uh because intend to have this like request a quote process like there's actual interaction uh there's a lot more AI we can run actually to analyze the situation and uh we have this system called shield which runs both detection and prevention and and even pauses some of the transactions when it thinks something is really outside of the normal and so uh it's effectively kind of our AI driven system that is trying to monitor the whole infrastructure transaction s quotes and determine if something is off. So, for

example, when light litecoin had a fork, a malicious fork because somebody dosed their nodes and exploited a nimble limbo pool, their privacy pool, and did double spend. uh we had like a some part of money went through but then our systems detected that something is wrong and effectively disconnected that network and said like hey we're not going to re we're not going to be accepting any new transactions for now until system stabilizes. So that's also additional system we're building that is more proactive in security than just kind of you know hoping uh because like we sitting across all these blockchains right there's kind of issues across all of them that we need to determine.

>> Yeah. Yeah definitely sounds really tricky. Um, so we're up on time, but I actually just before we go want to ask one last question because Zcash is looking at another upgrade soon and I imagine that some of this news is maybe also why the price is pumping. So Mert, do you want to talk a little bit about what is in is it new 7 or NU7 or I don't know how to pronounce it, but um yeah, there there is an upgrade that people seem to be excited about. So do you want to talk about that? >> Sure. Well, I mean there's a there's quite a there's a few obviously they're not all in this release, but just long-term directionally speaking, but not that long term. So, within the year, let's say, uh, obviously, one of the big

ones is the speeding up of block times from 75 seconds to 25 seconds, which will actually also help with uh near interoperability as well because it'll sort of help get more confidence that the transaction was correct in lesser time. And so uh this this this this idea of being able to use the actual thing enabled by privacy in near and Zcash it becomes much more uh real. Um, obviously the one I'm most people are the most excited about, which obviously had to take sort of a a delayed approach given the new Ironwood pool is project.

And that one is undoubtedly the most important, the most exciting one because it, let's say, it solves a problem that paves the road for Zcash to scale 100x, but it also makes it fully quantum proof. So today's quantum recoverable meaning if something were to happen you can recover. Um but quantum proof means you're completely secure as in like you can actually just keep doing things. You don't have to go through some recovery process. Um so on top of scale and quantum proofing there's always going to be a new shielded pool. That new shielded pool is going to be in simple terms

a simpler ZK circuit. So ZK circuits are basically just a bunch of math. And the more complex they are, the more possibility of let's say errors and obviously higher risk. And so the simpler you can get the circuit, the less moving parts, the lower the risk, the higher the security, right? And so it's also going to do that. And so more security, more scale and quantum proofing um are coming. uh but also um that you know there's discussions on for example governance and all these sorts of things which I'm not going to talk about too much but I think they're heading towards a better direction in terms of like coin holders can actually privately vote which by the way is not a

primitive that exists many places private voting um or sort of you know signaling what should happen on the network u which I think is pretty cool because it's like super cyberpunk oriented where like you can privately express your opinion with skin in the game um on like pretty interesting things. So those are the things I'm excited about. There's more things in that update, but honestly there's too much stuff going on for me to keep full track of. >> Yeah. Yeah. Well, I mean we didn't even get to all my questions, but you know, I'm sure a lot of people are using this to um trade on Hyperlquid because obviously that's um one of the Yeah. one know that that's you know just those

three words put together Zcash near intense and hyperlquid pers that's definitely uh 2026 buzzwords I guess you could say crypto buzzwords um you guys this was super fun um this is like such an exciting area of crypto right now and yeah thank you so much for coming on the show >> thank you for having us >> and for everyone who's here stick around because Rom Um, Chris and Austin are going to be diving into Bitcoin at 85K and some heating up of the war. Um, and they have a lot to also discuss by AI as usual, so stick around. Nothing new here on Unchained is investment advice. This show is forformational and entertainment

purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit unchainedcrypto.com. The risk profile has changed quite a bit

through time and the composition of what we do within USD I would actually argue has become like safer through time rather than more risky which is kind of more slanted towards real world assets lending in a secured way you know within qualified custodians etc etc and so yeah I think if you compare some of the stuff that's sitting within USD now to where it started many would make the argument that like holding you know a bunch of AAA rated pieces of collateral is actually much safer but then a basis trade on like offshore um exchanges. The way I would like in very simple terms sort of explain it to user on the other side is that uh the end user who's using a bank account doesn't really see the complexity of like a bank balance sheet that sits behind the whole thing. They kind of just see I'm depositing my money

and I'm getting a say reliable dependable uh safe and seal my money within a deposit account. And for us I think it's it's obviously not the same in terms of like the risk profile of a bank. But the complication of everything that goes on within a bank is almost abstracted away from the user who just sees this very simply