ZKPodcast: ZKPs & the Dichotomy of Privacy vs Transparency with Josh & Jill

Transcript

[Music] welcome to xero knowledge i'm your host anna rose in this podcast we will be exploring the latest in zero knowledge research and the decentralized web as well as new paradigms that promise to change the way we interact and transact online this week josh cincinnati and i chat with jill carlson a long-standing expert in the blockchain space who was previously at slow ventures we discussed jill's journey into crypto how the old financial system compares with defy on the metrics of transparency and privacy

we explore the concept of selective disclosure jill's move towards dk and how to get privacy into existing systems we also look at the role of regulation and more but before we kick off i want to encourage you to sign up for the zk mesh newsletter this is a newsletter that we send out every month next issue goes out at the beginning of august it's full of updates and new research in the zk space i've added a link in the show notes i also want to thank this week's sponsor leased authority least authority is a leader in the security of distributed systems they provide security consulting services develop open source products and contribute to the advancement of learning and research in the field this month leased authority published a white paper on zero knowledge access

passes or zcaps a protocol that enables users to access services without revealing personal information collecting personal data can be incredibly valuable to some services which is why it's been compared to like new oil but data can just as often be a liability or toxic waste to others the white paper explains the protocol to technical and non-technical audiences alike leased authority has also reached a notable milestone this month with the completion of their hundredth security audit to read their published audits which include multiple projects on ethereum tezos and other notable ecosystems or to check out the zcapps whitepaper visit their website at leastauthority.com

we've also added the link to this in the show notes so thank you again least authority now here is our conversation with jill [Music] first off i want to welcome josh back to the show hi josh hello hi good to be back yeah and for this episode you're going to be co-hosting with me as we interview jill so welcome to the show jill thank you so much it's a privilege so i think starting off i actually want to do a quick catch up with josh because i haven't actually seen you in i think like four months or so and so i want to hear what's new with you what have you been up to since we last spoke back in i think february or so yeah it was that

long ago um i don't i don't remember if i mentioned it back then but so i'm now advising uh and on the board of a few projects i am advising the saya foundation saya for those who don't know is a decentralized storage uh protocol that is is actually it's getting a lot of great pickup and you know one of these projects meant to help decentralize the web in this case the sort of cdn layer of the web and then i i also and this is something i think we're going to talk about a little bit more in the episode is i joined the board of the mina foundation alongside jill and a few others and uh we'll talk a little bit more about mina later but obviously i'm very excited about that project as well cool um but to be you know honest the most

exciting project in my life right now is the fact that my wife and i welcomed our uh second child into the world just last month and that has also been the most time-consuming project of mine um but yeah he's he's a real real cute little baby and just going through all those those newborn steps with him and that's just going to consume my life for a couple more months and you know then then decades yes as we raised raise it so you've you've yeah you've been a little busy maybe outside of the crypto sphere um but i do want to mention something you mentioned back in our first episode of this year we did sort of like a what looking forward episode with james and

tyrone and you made a comment about you were like we're at the beginning of a run of a bull run and i remember being like what because at the time it was like it's too high um you actually called it in a way yeah yeah well i i guess i did that might be the first price related prediction i got i got right um which of course i never profited from because that's just the way of the world for me but but then um i was i kind of can't believe how how high things got and how honestly how high things still are is sort of crazy but yeah it's been a nutty six months for sure cool

all right jill i want to kind of say hello i want to welcome you i invited you to come on the show in part i mean i before this i really only knew you from twitter i've always read insightful posts and what i i think one of the reasons i wanted to invite you on to the show now is i noticed you were moving closer and closer where you've you kind of entered the zk space and so a lot of your content starts to overlap with what i'm working on and i think that's what i want to do with this interview is understand a little bit what has your journey been to the zk space so yeah i think let's kick off fantastic yeah i'm i'm excited to dive in i mean you

actually anna have been a key part of my journey into the zk space despite having run my own podcast at one point despite being sort of big in my own way and knowledgeable i think about the podcasting space i don't actually listen to that many podcasts on a regular and consistent basis but yours is one that i do and so i'm kind of fangirling over here to be on to be on this show that i've listened to for hours and hours and hours of and it's it's funny because i've gotten to know your voice so well uh both in in the sense in the metaphorical sense of your voice in the space talking about all of this stuff but also very literally your voice and now to be

able to put kind of the face to the voice it's it's very cool so thanks for having me there is something funny about being a podcaster audio only podcaster where people once in a while will recognize my voice and i have heard the comment i thought you'd be taller i was like happy too man um but yeah it's better that's better though anna than being known for your twitter where you just kind of don't know what to say when people are like oh i knew you on twitter and you're like i do i apologize right now do i say you know do i try to make it seem like i'm less insufferable in real life but then that might not be actually true as it plays out

i know there's so much more to you than than your persona on twitter um i actually would love to start sort of from the beginning we we did have one meeting before this where we got to talk a little bit about where you what you were doing before but i think for the listeners like i kind of want to get a bit of an intro to you and what you were doing maybe a little bit pre crypto and what led you into it yeah yeah sure so let's see pre-crypto i was pre-crypto it was 2012 2013. uh i was working as a bond trader at goldman sachs i was a few years out of college and i'd done the pretty standard route i would say for a liberal arts major out of college which is to jump on

at least at the time from where i was coming from it was to jump on one of two or three bandwagons it was either to go to law school which was not gonna happen for me it was to go into consulting which i considered but i didn't end up getting offers for any of the big consulting firms or it was to go to wall street and um both of my parents had worked on wall street you know i kind of grew up around the markets i grew up with cnbc on tv and bloomberg news and you know my my parents reading the ft around the breakfast table and so i had some exposure and interest to all manner of things finance that way but i hadn't studied finance at all formally i'd taken sort of you know intro to economics courses but i was a

history major um but lo and behold i i ended up on a bond trading desk uh i was trading bonds and then derivatives so credit default swaps that kind of thing this was just sort of post 08 crisis you know a few years post crisis just to set the scene set the context a little bit so wall street was going through all kinds of upheavals and you know it was this sort of environment where most of the people around me of course were older than me had been on wall street for a number of years and um you know they were all kind of grumpy about the way that things were changing in terms of bonuses being cut in terms of uh new regulations uh coming in and and really changing

kind of the paradigm that they had known and grown up in and built their careers in and so that was a lot of the context that uh sort of got me thinking about just financial systems and you know the structures of these things and why they are the way that they are and yeah kind of sets the stage for for how i ended up getting into crypto you just mentioned you had studied history yeah this by the way is like one of my big hobbies i never studied history formally i did a bit of art history but i like throughout my 20s i basically did a self-study constantly here in berlin there's like a lot of great museums and i you know i've traveled around greece and rome like i've done i've done a lot of

classics oh so so i saw i mean i saw kind of like in doing a bit of research for this that you had written your thesis on something to do with rome but what i want to understand is like how does that transition into finance like you just sort of mentioned that there's these paths for like liberal arts but like did you bring anything well i mean that's that's kind of the joke is that it you know there's no way i think to spin it in which it very directly translates into finance you know you're bringing me back to my job interviews for these things i'm trying to piece together like how on earth i made this degree in ancient greek and latin languages and and histories

somehow relevant to these these jobs that i was interviewing for that was that was sort of the running joke but you know i would say that there are a lot of lessons of history just more broadly that once you're aware of that history whether it's through formal study or whether it's through what you're talking about of just kind of informal you know reading about it and being exposed to it you can't help but sort of mirror things onto what's going on uh today you know we can get get into all of that but you know there are things around like the third century crisis of the roman empire which was this great period of upheaval and you know when a lot of people start to kind of plot the decline and fall of

the roman empire from that i think that you could map onto you know yeah geopolitics today and then you know there's more there's more kind of concrete things i would love to get into the parallels with crypto where you know you're talking about these ancient civilizations experimenting with governance and design communications and networking you know across these broad areas without the technology that we have today so that's a whole rabbit hole that we can go down but i'm also not going to stay here and pretend like my knowledge of of you know the middle voice in ancient greek in any way contributed to any success on wall street [Laughter] all right so let's dive into what i

think a lot of the listeners are here for i feel like we may need to have another like history session maybe over drink sometime but um okay so you're working as a banker broker a bond trader yeah and you started to look around you started to kind of observe changes and you were thinking like basically help help us understand where was the shift towards crypto what was the moment or what was it that got you into it so specifically i would say the thing that got me into it was um i was working with latin american debt and derivatives and therefore i was working with a lot of colleagues based in latin america and specifically argentina which at the

time was going through a default no restructuring i think it was like their third restructuring in two or three decades just a lot of upheaval very high inflation rates in argentina at the time also capital controls were in place so people were not able to freely move their money offshore from the country and all of these dynamics i mean first of all yeah going back to sort of historical perspective for a second you know you can kind of see these things playing out into a crisis for the country just you know knowing a little bit about how these things have played out both specifically for argentina in the past but also for other countries that have gone through similar

and a lot of my colleagues down in argentina were you know aware of these dynamics and being very proactive about it and we're looking for any way to get their money out of the country and and diversified and offshore you know ahead of what they thought would be a hard default restructuring again and again continued inflation and so they got into bitcoin this was sort of early 2013 late 2012 and you know i was catching up with them every morning kind of the first thing you do very bleary-eyed you're getting to the desk at 6am especially as the most junior person there the first thing you're doing is you're getting on the phone with the folks in other time zones who can update you on the markets

so i'd spend you know an hour every morning talking to these brokers of mine uh in argentina and their enthusiasm for bitcoin i was initially so skeptical because i at the time had only ever heard of bitcoin in the context of dark net markets and you know kind of idiot friends of mine in college buying drugs online with it whatever but there you know i was convinced by them okay this is a really interesting thing this is enabling something in a real economic way for people who've never been able to do this before you know these friends of mine would have had very few other options readily accessible to them

to get their money offshore and you know bitcoin was that and so it was through that lens that i was like all right there's there's something interesting here and so with that i kind of fell down the crypto rabbit hole what did it mean for you to sort of start working in the space like what did you do this is actually kind of maybe a question to to everyone out there too it's like when you start in it what like either you join a company but if you don't immediately join a project like what what is it actually what did you do did you join something right away or did you freelance yeah so it's i mean it's such a funny thing it's sort of like oh when do you start counting from like i've actually struggled with this so people ask me when did you get into crypto and i'm

like well do i count from when i first bought bitcoin or do i count from you know when i first decided that i was gonna make this really not just my career but like my life um yeah or do i start from you know the first job that i had i guess what i would start from here was yeah kind of the decision point of okay i want to commit myself to this and pivot you know my professional life in this direction and that came while i was in grad school so after a couple of years uh on the bond trading desk at goldman i started applying to grad school programs in economics and kind of international finance and politics and that intersection with at the time that i was applying a

view towards doing a master's maybe even a phd program in this space and then coming back and working at a big fancy hedge fund in new york that was you know covering again these sort of emerging markets countries and living happily ever after in greenwich connecticut and all of my friends in new york still joke that i got lost on the way to greenwich connecticut um which indeed i did because basically i showed up at this this master's degree program that again was supposed to just be on kind of mainstream finance and politics and economics stuff that i hadn't studied in undergrad i wanted to fill that gap by the time i got there i'd taken the summer off so i got into this program wrapped up my work with goldman took the summer off by the time i got there

i went into the professors on the first day who were advising and supervising the program and i was like okay i know that this is not what i applied to do but i want to study this bitcoin thing because i think that this is this is the thing this was 2015 i guess you know the likes of the imf were just starting to pay attention to it at that point and thank god they were because i think that that was the only data point that i had to go into with these professors with concretely to be like let me study this and um i ended up writing a dissertation on the use of bitcoin to evade capital controls so this very thing that got me into the space this very thing that i'd seen live and uh that was my

first sort of formal work in the space and then following that or during that program really i started applying to every job that there was out there in the crypto space which of course there were only like i don't know 15 companies that existed total i think at the time and basically none of them replied to me for like nine months and then it was uh it was sort of a deus ex machina moment where out of nowhere in the in the last week or so of the master's degree program i ended up getting a job in silicon valley so that was kind of that journey cool speaking of someone who kind of entered into the the industry again with a very fuzzy

definition of entertainment i also don't know exactly how to define it but but you know for for i think for me the promise of the space or the promise of the industry is still very much tied with that original idea this exists this money or these financial rails that are outside the control of any given governing body in the traditional sense and i'm wondering for you jill like do you feel like that vision is still kind of what what is you know both exciting about what's happening in the industry or has it changed or morphed as you've been here for you know as long as you have yeah no i think that that's a great point josh and

i think that for me from the outset there have always been a few different visions of what this technology cryptocurrency blockchain whatever can offer and the one that we just kind of covered sort of my the origin story i guess of my thinking around is exactly that you know it's this technology that enables people to transact and interact financially outside of the traditional system and is maybe in particular serving those who are disenfranchised by the traditional system and that has always been sort of one thread or theme for me that i think i

i've been very convinced by and that has always in many ways been kind of my own ground truth of like why are we all here what is this all about you know if nothing else i believe that bitcoin and similar technologies are going to persist because they offer this sort of escape hatch for people i think though that there's also another thread that is worth mentioning because i think that it overlaps more in many ways with sort of the privacy and the zk angle and a lot of the innovation that we've seen in the space over the last several years which is not necessarily an alternative to the traditional financial system but

almost like a supplement to it or the traditional financial system just in a better and more efficient and more interesting and more creative form and that's how i think of for example defy that's how i think of cbdc's central bank digital currencies you know which are getting a lot of sort of hype and attention right now you know even things like nfts a lot of the creative use cases really don't have much to do with enfranchising the disenfranchised or offering this alternative um sort of you know exterior path to transacting and financial interactions but they're just these more creative

ways of interacting and transacting that get unlocked by all of this but again those ways it's worth mentioning you know defy i think is likely to be heavily regulated by the end of the day in much the same way that you know i was there sitting on a trading desk watching all of these dodd-frank regulations and you know basil three capital limitations and so forth come into the wall street marketplace i could very well imagine talking to your kids my kids whatever in 30 50 years about oh yeah i remember when you know defy was the wild west before we had all of these regulations and controls around it and i think that

that's totally valid too i think that's actually fine if it ends up like that i don't think that takes away from again a lot of the really cool and valuable and creative use cases that are getting unlocked by it yeah i think you're right that there's this you know i think it's totally fine if that emerges that way and there's some smart regulation that comes with it so that we're not all yield farming only terrible long tail nonsense that results in everything you know the financial system collapsing everything it's great while it laughs yeah yeah it's like oh no my yams are gone and now i can't my checks are bouncing how did that happen not my yams come but but no like you know i i think that

that's that's generally a positive for the that industry you know part of the industry growing up but the thing that i and i know is sort of near and dear to your heart as well as mine is the prospect of that regulation uh effectively enabling more surveillance capitalism right either privately or through you know the governing regulatory bodies and it's it's yeah it almost seems when you look at all of um not not that i'm i'm definitely not an expert in you know us financial regulation but i certainly like know enough of the history to know that every every time there there seems to be a law put in place meant to protect consumers in some way or to prevent you know criminal activity stuff like the bank secrecy act for

example with that comes this tacit acknowledgement that oh you are going to be much more surveilled than you were before potentially even passively and and i'm wondering like to what degree you think it's possible for d5 to evolve that way without bringing with it all of these what i view as like kind of foundational sins of the traditional regulatory framework that we have yeah no absolutely well i don't know if you just teed this up intentionally but i feel like you've just perfectly teed up a little bit this answer that that i'll give you which loops it all back to sort of zero knowledge and and privacy and all of that which is

yeah that i think that in many ways my experience albeit brief of working on wall street kind of radicalized me in many ways about my views with regards to this like this system is so messed up and it's so prone to human error and you know there's all of this sort of compliance burden and overhead being put into things like kyc and aml and it's not actually really clear if you look at the numbers around it and you look at the output of how much good that's actually doing whereas it's very clear that that is keeping a lot of people out of the financial system maybe should or could have access to it

and it's also creating exactly as you said josh this sort of surveillance state around money and financial flows and you know what's what's the old trope right follow the money like money has become the choke point for controlling and enforcing against criminal activity but that comes with it you know all of these implications around our own rights to privacy and i think that that is what so fascinates me about the whole zero knowledge space and around the innovations of of privacy and the breakthroughs and cryptography that are enabling all of this is that we can now rethink what we have to share in order to prove

that we are not engaging in criminal activity or that you know we are not we are not doing things that i think that we can probably mostly all agree on you know we can get into sort of the fine-tuned debate of of the libertarians in our space who would say well you know jill you have to go all the way to the heart of it and say that the problem is that you know the government shouldn't have control over any of it to begin with i don't actually believe that i think that there are certain things that again probably most of us can all agree on we don't want those types of activities taking place and it's actually maybe even good that we can trace and track some of this but again i want to be able to prove those things by sharing with banks enforcement agents

government whoever as little as possible and i think that that's where a lot of the really interesting breakthroughs are gonna happen and and start to come through here and this is where the zero knowledge proof because sort of the advent of it and the inclusion of it in blockchain systems it starts to offer what you're describing because like exactly before even though i mean there have been attempts through other means i mean there is this really compelling idea that you can prove something to be true without revealing anything else simple idea here but like if you can do that is there a way to function within those systems and like actually also potentially show you know show

your honesty show your legality without showing anything else you don't have to reveal everything to everyone at any time exactly and this is something that again you know going back to kind of the the wall street days which as you can tell we're very informative informative in all of this but i think about the data sharing that you would have to do even just on daily basis right so at the end of the day you would have to reconcile all of your trades and you would have to acknowledge to your counterparties you know who you are and so on and so forth for a lot of the derivative products and there are a lot of good reasons why you would have to do that for example you would have to make sure that you didn't

have uh an excess or outsized amount of counterparty risk with whomever you were facing on some of these swap trades poor controls around those types of risks were basically how in part anyway how lehman brothers happened go back and watch the big short it's kind of a great demonstration of of how a lot of these uh lack of risk controls ended up building up into all of this but the problem was as soon as you would disclose to your counterparty who you were so that they could keep track of their own risk you were then basically showing them your poker hand you could come back and use that against them the next day they could come back and use that against you the next day you know there were all of these types

of dynamics where some form of selective disclosure would have actually solved a lot of the very real problems and dynamics as yeah traders are facing each other as banks are facing each other on these trades and so you know that was a whole other side i often talk about oh the argentina story and you know this colleague that i had but a lot of this more kind of nitty gritty almost like the really boring details of like how back office reconciliation works which of course i hated having to deal with at the time you know but as the junior kid on the desk like it all flowed downhill and it was my problem at the end of every day that was actually as informative i would

say in terms of how i think about where a lot of these applications might be interesting and become real as sort of the argentina story i want to kind of continue on this topic because like what we're talking about right now is the idea that like by enforcing some kind of kyc aml or like some of the regulation actually discloses a lot but your experience in the financial industry to me as somebody who has not worked in it and who actually has like a little bit of like a negative view of it since i was quite young yeah to me it's the in-transparency of it that is so dangerous and so it's it's so interesting that like what we're talking about now is the transparency the attempt at transparency

is the problem but like can you talk about that flip side and maybe where does where does the zkp flip it the financial system is in transparent and yet privacy wrecking it sounds yes yeah that's so weird totally that is such an interesting way of putting it anna and that actually just this is why i was so excited to come on here in this conversation because that actually crystallizes something that i think a lot about which is that to date you know sort of prior to the commercialization of things like zero knowledge proofs the way that we talked about privacy was basically black or white it was this privacy and transparency were

both these very crude tools that we could use to go after problems but in every regard you would end up josh as you just said with the worst of both worlds right and i think that that's very true in uh the financial services industry where you're absolutely right you know so much of it by necessity i think in many ways is so in transparent you know there isn't one big auditable record to show that all of these banks are solvent and to show even exactly how much liquidity is in the money supply of a given country or given currency you know there are all of these ways in which it's so opaque

and again i think in many cases there's actually decently reasonable uh reasons for that but then in other regards in an attempt to make the financial services industry functioning uh and in order to be compliant and meet all of this sort of regulatory overhead and so forth we bring in this very crude tool in this case of transparency and implement things like kyc and aml and implement capital requirements on banks and implement you know requirements of counterparty disclosure and all of these things that again it's weird to say that transparency is causing the problems

but because it's such a crude tool and because we haven't had this ability to fine-tune what gets disclosed to who and when and why because we haven't unlocked this whole kind of spectrum of possibility around privacy and transparency both sides of it cause problems and that's actually not something that had even really clicked into place for me until you just said it anna but i think that it's a really great demonstration of the problems and there's one other thing that i think the financial system has done up to date too and that's to be very patronizing to small investors i think you really witnessed it this year so it's like let's let's say it's in transparent except when it uses transparencies like

a hammer but then it also patronizes folks that they be like that are believed to not know their own ability to invest correctly without intermediaries by the way you're just describing my general feelings about the financials um which is why i went to business school but i had a bad attitude about it so i was like a punk rock kid in a business school being like man and yet still had to get good grades and pass the test so i was meanwhile like the the scared kid wearing an ill-fitting suit sitting in this like new york bank being like what am i doing here like this is messed up i kind of hate this

but like very quietly and all the time like with a smile on her face so yeah i i respect the the open blatant punk rock attitude i wish i'd been cool enough to to adopt that anna um well you probably got better grades because it's a weird attitude to have a university program i also realized at the end of all of this it's like what am i trying to do and i'm like business wait what i wish i had studied history but anyway back to this so the patronizing like that this is i mean this is my projection on the financial industry as it was let's think about and talk about like what what has changed i mean blockchain brought transparency

in a massive way right radical everything yeah yeah and at the same time it had pseudonymity sort of like seeming privacy but that has been all but debunked at this point as anything real josh what would you say do you do you think you can still exist pseudonymously on the blockchain yeah yeah you can but the amount of effort that it takes to me it's like similar to the amount of effort it takes to browse the web and pseudonymously or anonymously like you know you you really have to put the work in to do it right and and i certainly felt that way you know i would say that and obviously i'm a bit

biased from my experience but like i would say zcash is one of the examples of like the easiest possible path toward preserving your anonymity if you just use shielded addresses but even the act of just using shielded addresses and the educational challenge of transparent versus shield i mean all those things are just like it's a giant can of worms that i i still think to this day is not really resolved on zcash and certainly not resolved for privacy approaches atop other blockchains that have easy base layer data tracking or data collection ability for for lots of folks so and it's i definitely had personally this uh misunderstanding when i started early on thinking that like

bitcoin was a purely private system and i think lots of early bitcoiners uh had that impression when they what did you do josh yeah you know it's written on the blockchain now it's there you just have to you know i'm sure uh if if you see men in suits leading me off off camera tell my wife and kids i love you uh no but i i uh but i i think that that is certainly the impression that most most people have and then once you kind of wait it's sort of like i think people that are somewhat on autopilot about the way that that their activity on the web is tracked like you don't really understand it and then they do and um that doesn't make the tool of you know the web as it exists today or

bitcoin does it exist today any less powerful but it does change the way that you perceive it and interact with it and then i think start to approach well how can we fix these things what are what are ways in which we can improve this and i mean yeah to be honest like and i'd love to hear jill's thoughts about the state of d5 today but the way that d5 works today like terrifies me absolutely terrifies me let's go back to that finance to now it's like the transparency is there so it's not as in-transparent as the larger financial banks and entities like these big power makers now we know their addresses we know the power makers addresses and it's far less patronizing to investors

in a lot of ways there is about the boundary is technical yeah yeah i guess you're right but like in general like you know a lot of people can jump in if they want to if they want to put in the time they're not actually blocked at the door because they don't have enough money which the other system seems to block them but i want to continue on the question that josh just asked because on the privacy front it's the far end of the transparency spectrum the privacy transparency oh it's a matter now yeah it's i mean i was just talking a moment ago about how on wall street it was this issue of at the end of every day you would have to disclose you know who you were and sort of your identity basically and then therefore kind of your whole poker hand of what

you were doing to your counterparties who to be clear are like your competitors sitting across the poker table from you defy is like that on like a continuous ongoing rolling basis like you can see in real time who's doing what and where and you can back into why and you know minor extractable value is is you know just one of many things with this yeah such a topic almost worried i'm almost worried about having brought it up because i know that you've gone into so many deep dives on this on your show and i will not be able to to hold water but you know just just to bring home the point though of why this is such a problem

like you can't have that level of transparency in a really functional and incentive aligned financial system but you do need to be able to have some degree of like auditability within that system optimally in order to prove that you know okay the system is working and you know there aren't bad actors sort of breaking the rules within the system and you know there's sufficient liquidity and and so forth and so that paradox of how do we keep the right things private but also make other things auditable and provable like that is where it gets really interesting

and that's where again to me i just come back to like we have somehow been endowed with this like magical math that that can seemingly enable some of this and that's the area that i'm really excited to be exploring i want to add one more thing though just quickly which is to josh's point though it's such an educational barrier in the first place to educate people about why this is needed and why bitcoin and and other cryptocurrencies and blockchains are not in fact private they are fully transparent and fully auditable you know every time i talk to someone who's not directly in the crypto space i am always sort of simultaneously frustrated and also blown away by the

fact that i'll say to them oh well like you know how bitcoin is not actually private like it's fully transparent and i'll have people literally reply to you know very little context on the crypto's face be like no jill you're wrong it's fully private i'm like oh it's actually really good and then you know you have moments like the like the ransomware thing a few weeks ago that was tracked down i think i think using chain analysis or at least a similar tool within a matter of like hours and the whole mainstream media is like how is this possible it's like well this is kind of a known thing about bitcoin at this point and so you know josh i think that you bring up

a great point that the first hurdle in a lot of this when it's when it comes time for actual adoption is just going to be not just education but almost actually like bringing people back a step to unlearn what they think they know um and so that's a really interesting challenge of all of this as well so going back to kind of the the d5 paradigm it not having privacy baked in at all like it's not it doesn't seem to be one of the core tenants of defy be private no way like everything is very public in a way like this the games and the strategies no the actors know that they're public they they may even use it as marketing tarou's brought that up a couple times

where like they'll make they'll do a strategy to get people to follow them but one of the points i i mention this kind of all the time on the show but the idea of trying to put privacy on after seems to be very difficult how can we bake privacy in at the beginning like i don't know that we can do it in the existing d5 games but maybe in something else like do you have any ideas on how how to do that that's a huge question i realized yeah it's interesting it actually reminds me of and kind of brings me back to really where we started the show 45 minutes ago where i was talking about you know i started working on wall street in this sort of post 08 paradigm where all of this new regulation all of these

new protocols around what needed to be disclosed and recorded and so forth uh were coming into place and the old system you know the old guard was kind of railing against it and you know to a lot of people it didn't really make sense then there were also just major major major logistical challenges of implementing these new protocols and and rule sets and what have you you know if you look at the budget that went into compliance across banks between like 2008 and 2012 i mean i'm sure it was uh just astronomical and i think it's always interesting to think about those parallels of like i'm convinced

that there is very little that is new in the world that we're doing for for truly the first time and i think that that's a really interesting parallel to draw of like okay if we were to try and introduce sort of you know new protocols around privacy and what has to be private and what has to be transparent into cryptocurrency and into the defy ecosystems like what are the instances where these types of shifts have happened uh in other places and other financial systems and i think that's one of them and i think it does speak to the challenges there now to get to your question of like how do we actually go about that i mean i think that there are a few kind of principles

that i have around how this will have to play out and then there's a lot of unknown space i would say one of the principles that i have though is that you can't just come in and reinvent something wholesale altogether at this point you have to be building off of what exists already and that goes you know very broadly we could be talking about anything really in technology broadly but i think it certainly applies here to the d5 space where liquidity is king right it doesn't matter sort of what features and functionality you have if you don't have liquidity and if you're not tapping into

and connecting into that liquidity that already exists you're gonna have a really hard time of it and so i think that that's one thing that i think about is just as we seek to roll out and implement some of these privacy solutions that are coming down the pipeline like we have to be thinking about how those can interoperate with the existing system and how they can draw liquidity from there that's probably the key principle really that i would point to in terms of how i think about these things being brought to market the other thing that i would say is just you know you have to make sure that you're solving the right privacy problem for the right set of users

because again to this point of like we're suddenly for the first time opening up this whole spectrum of possibility around privacy of like what is private to whom under what circumstances and when and then what is still auditable and transparent and there are so many little devilishly tricky ways i think to get that wrong and so you have to be really clear about okay am i serving the person in the hyperinflationary country who's trying to get their money offshore and is worried about the government being able to have insight into that or am i serving the big bad crypto hedge fund who doesn't want to be leaking all of their alpha or be dealing with mev problems you know those are two very different privacy paradigms not to

mention you know the the whole kind of scope of other players in the space that you could imagine applying this to but i think it's really important to be very specific about who you're serving and what that looks like do you see privacy as taking a place in the defy ecosystem or could you i know i'm asking you to like predict the future here but like do we want to see privacy in every part of defy systems i think yes and no i think there are certain areas where it is very clear to me that privacy will play a role and will have to play a role i think that privacy is one part perhaps one small part of solving mev problems um i think that privacy is going to become very

important again as the players in the space become more sophisticated and become more sensitive about leaking their trades and sort of leaking that alpha not to get too charcy on that but then i think that there's also going to be a myriad different ways in which the no longer quite so blunt tool of transparency will also still play a very important role and so you know just as today just as we have you know sort of on one end of the spectrum fully private z cash and then you know we have things a little bit more in the middle although really today it's it is still sort of the two ends of the spectrum fully private zcash or monero or whatever and then on the other end of the spectrum

you have things that are fully transparent i think that that spectrum is going to open up in terms of just like what assets look like in terms of the traceability of them i also think that applies to defy applications where i could imagine a fully private dex that's operating effectively as a dark pool i could imagine you know basically uniswap as it exists today and other decentralized exchanges but then i can also imagine a whole range of things in the middle where you know privacy is being applied maybe to make trades private to sort of the broader universe but maybe maybe there are still certain things being proven to counter parties

around the liquidity profile of those counterparties or around even like the jurisdictions of those counterparties i could imagine some of this auditability functionality or you know even disclosures being made to whoever it is that's running the decentralized exchange uh to bring it into compliance while also still maintaining privacy to the broader world like there are a lot of different ways that i could imagine that playing out and so i guess hopefully to kind of answer your question anna like i don't think it's gonna be a blanket thing in one way or the other but i think that there's gonna be yeah this whole spectrum of things and i think that it's going to be then a question

of educating people and making sure that it's transparent i guess of like what people are interacting with and what the regulatory and compliance paradigm of that is and then what they're giving up on the other side of that um that's how i would imagine it playing out within d5 do you think that given what you know about the existing large players in the financial space do you think that privacy is actually a must-have for them to adopt crypto or do you think they will just like ignore their past ways of doing business and jump in yeah i think that these large financial players you know especially on the hedge fund side where it's a

little bit more of the wild west still there there's not quite as much scrutiny as for example the big banks are under i think that they are going to go wherever they can find returns and i think that even if privacy is not rolled out in the way that that they might want it to be you know even if they have sort of outstanding concerns about data leakage and scrutiny and whatever i think yeah they are uh sort of capitalist sharks sufficiently to the extent that that they will jump in but that having been said i do think that you know even just from like a compliance point of view

there are certain things around data privacy right that a lot of these big companies just have no choice again from like a legal enforcement perspective to comply with and so i think that that's where a lot of the limitations will come in and i think that also just from a comfort perspective you know never has anyone been able to marry the type of functionality in terms of openness in terms of auditability in terms of whatever else that the crypto space can offer with both data privacy and also compliance before and i think that if i look at the space today

and i look at who the major players are within it which is still really it's like a lot of individuals on some level it's a lot of funds kind of informal funds if you can even call them that that have cropped up around the space and then also more formal funds you know whether it's venture funds hedge funds whatever that have cropped up around the space but not a lot of big incumbents are using this stuff you know not a lot of big incumbents are using decentralized exchanges you don't see big corporations using stable coins for you know cross-border payroll or anything like that yet like you know there's still so much space to grow uh the user base of this ecosystem

and i do think that that more broadly will come with the ability to marry again data privacy on one side and compliance on the other side and i think that that's again to the spectrum idea i think that that's something that that gets opened up there cool a quick follow-up to that do you think that it's possible to given that our industry is so keen on clever incentive alignment right and i think we've talked maybe there's been a little discussion about this on the podcast before but i'm wondering if your view of like do you think there's there's anything that we can do from a cypherpunk perspective uh that's purely incentive alignment based to encourage people to

adopt privacy preserving technologies because when you look at like the things that exist you know on like for example tornado cash on ethereum is significantly more expensive to use if if you want to transfer money that way even though it provides the cash right privacy guarantees right and so i'm wondering like do you think it's it's possible for that kind of uh solution to emerge where there is this incentive somehow that is not like a regulatory incentive although i do want to touch on the regulatory thing in a bit but but but yeah i just wanted to get your thoughts on that so i love that notion i am skeptical though and i you know this goes back also a little

bit to anna's question earlier around how do we go about bootstrapping privacy into things that already exist you know in many ways that's what tornado cash is doing you know creating this privacy oriented stable coin i think that incentives i think in the way that you're alluding to josh of you know sort of like airdrops and like like look i think that they play an important role or you know maybe it's even more complex than airdrops right like maybe it's something more ongoing but i think that they can play a crucial role in bootstrapping a user base around an application or bootstrapping liquidity around it that has clearly played out very well for a lot of projects in the d5 space

but i think that with something as hairy and as ideological as privacy and in some cases also as practical as privacy i think that that is at best a short-term solution to sort of get a flywheel going but if that flywheel isn't going to keep spinning on its own in the sense of people continuing to want to use this then i think that we're going to be challenged i think that the more important thing to focus on is just almost like user experience parody i would say uh as opposed to creating incentives of like oh you're gonna get like this

frosting and the cherry on top and whatever it's like just make the underlying cake as good as the pre-existing one if that makes sense and so you know i think that you're right to mention the challenge with tornado cache of of the cost of using it i think as opposed to creating some sort of incentive or rebate around it we just need to make the user experience of it as good as that of using something like usdc if we want to worry about adoption which is challenging but given sort of the pace at which breakthroughs seem to be happening in the space again to be clear i'm not a cryptographer myself but my understanding of these things i i'm optimistic that we're heading in the right direction

yeah yeah same here it's kind of a cool way of thinking about it it's you're sort of sneaking it in yeah people don't need to know that it's there but it's actually changing the paradigm from the web to kind of data mining version of everything i i mean i think that's that's true sort of broadly if you think about how we tend to conceive of privacy or lack thereof in the way that we use technology today like you know sure in the last few years you know especially with cambridge analytica and so forth like privacy has become more of a topic but i'll be honest even though i kind of love this campaign i think that the whole apple campaign around privacy is weird to me it's like i yeah

i don't think about privacy really when i'm using imessage or when you know i'm taking photos on my iphone like i do i so do i'm not doing a very good job but i'm totally aware every time i send a message that's like silly or at all like something i wouldn't say on twitter i'm like super like oh man like i constantly make jokes about someone reading my tw like texts and yeah it's always on my mind i don't know about you josh i feel like you're further on oh yeah no i'm not i'm crazy about it but i know i'm crazy about it right like i know i'm paranoid and not but but no that is but but there is i do wonder because i think that both views are valid in my

it's the people that i interact with on a daily basis you know like there's some people when i tell them i don't want to use zoom for obvious reasons to me and they're like what is wrong with you like i want to be able to just video chat let's do it right so i can see both both perspectives there's like a whole thing here to unpack that i so want to dive into i'm running out of time but i feel like that's i feel like this is a really interesting dichotomy between me and and the two of you about how we sort of approach technology and usability and you know what we're optimizing for and where privacy sits within that that i think is actually indicative of

sort of the two camps that crypto users tend to sit in of like for me i want the thing to work and i want it to be delightful and i want there to be reasonable privacy assumptions around it but i at no point want to be thinking about like the optimization of privacy within this thing that i'm using whereas i think that the two of you are probably more representative certainly of the audience of this podcast but i think you know possibly also more representative of the crypto industry in general where like privacy is something that you are actively optimizing for

and i think that there are two almost sort of different design philosophies almost as as you look at the way that privacy should play out i would i would make a pretty strong distinction though i think josh and i are not on the same level because i do use zoom and i i think for me it's like i'm conscious of it i want usability so i won't go to the lengths that maybe josh you'll go to to preserve privacy or not like i i have to like i want to move quickly i need things to work quickly and i'll but every time i do it i'm hyper aware of it and that might also be because i have this podcast because i talk about it all the time but like i'm i'm just aware like i just i have the idea that somebody could always be

watching it's kind of screwed up like it's not the best way to live well and i take it like for me it's it's you're not for me every time i send an obfuscated cryptocurrency transaction and it's usually for something trivial like sticker packs or merch you know um but but it's a political act of i'm sending this you can't look at it or it would take a lot for you to look at it and i and i get a lot of intrinsic enjoyment out of making it like a political act every time that i you know send a transaction that is supposed to be like you know cash to me but electronically and i

think i think that's how i felt you know when i was doing you know when i was doing early bitcoin transactions without realizing that they weren't private um josh do you feel like that kind of was that did you feel like you were rug pulled a little bit on that like did you feel fooled when you found out no i just i i felt uh i felt ignorant i guess okay early on you know because i wasn't i wouldn't call it like a a rug pull necessarily as much as it was and a teachable moment for me and and most you know i i'm still a huge we all went through that we all went through it and i think i think people who are still i'm still a huge bitcoin fan because i think they're features of the bitcoin system that actually aren't emulated in any other

protocol and we're probably very difficult to emulate another protocol despite i think the perception that it's a old and boring you know protocol there's a lot if you you've been here for a while there's a lot that you find very uh appealing and strong about the way that it's a very socially resilient protocol in a lot of ways but it is it is i think that everyone everyone that that appreciates it that way also understands like there are fundamental privacy issues that can't be solved easily compared to newer problems and you just have to like live with that that knowledge and be a little sad about it you know it's just it's all part of i think you know just like learning the web

wasn't really that private it's sort of the same kind of journey that people go through to switch gears for a little bit jill you've talked about how regulation is going to be a core part of d5 in the future i would love to get your perspective on how we can educate regulators in such a way that we get the ideal kind of regulation for for defy and also i want to know in your view like what does that ideal regulation actually look like and as you know as close to brass tacks as you can get in terms of how you know you would even go about you know deploying some sort of like regulatory compliant uniswap for example

how does that look to you yeah yeah no absolutely so i guess first and foremost i want to say when i say i think that defy is going to be regulated that is not in any way a normative statement on my part that's not what i want that's not what i think should have happened necessarily are you going to regulate d5 i think it's i think it's coming sure um yeah i mean i think that there's a huge opportunity there to educate policymakers and regulators about what this is as an enabling technology to enable new types of oversight and enforcement

that weren't possible before and again specifically what that means to me is regulation and enforcement that only collects the necessary the bare minimum information that you need in order to make a judgment about what someone is doing on this system or within this within this paradigm and so you know what you can imagine there is something like a credentialing system right where i might get onboarded via say coinbase as you know an american who is kyc and aml'd and i might be issued therefore a credential to whatever my my address is that then ideally

i could go around the web3 ecosystem and demonstrate this credential uh within the various transactions that i'm doing that could then be audited by sort of select parties to be able to verify like okay she was onboarded via coinbase you know because coinbase issued her this credential like she's good to go and good to be doing the transactions that she is you could also imagine even taking that one step further where maybe i've also been onboarded via coin list and coin list has also issued me like an accredited you know back to your kind of the finance the financial system patronizes people anna

i've also been issued maybe an accredited investor status credential and that would allow me to go around and and invest in private offerings and things like that that is a huge leap from the system as it exists today that's asking regulators to revisit all of their standards around pii and and personal data custody and who has to have it on their books and who has to be kind of the book of record on it and all of that this credentialing system that i'm describing is not at all how things work today but i think that that would be an example of like a very favorable outcome for everyone

because companies don't want to have all of that data necessarily on their books all the time you know the interoperability between companies around kyc and and identity management is a nightmare as it exists today and i as the the user don't want to be having to to re-verify my data with with everyone as we go but like once something like that happens i to me just bringing it back to ckp's because that's where what you're sort of saying is like that might come into play where you have to get accredited somewhere but i love the idea of like so sure you were accredited somewhere in some capacity exactly but then having the ability to use that

in all sorts of places without revealing anything else exactly someone legitimate that according to the system said you're okay exactly that being a little bit your passport but yeah private yeah that's where yeah i mean exactly that's a very important point and to bring it back to where zkp's come into this and i think that that is the real crux of this to me of how can we make this such that i'm not broadcasting that information to everyone all the time as we go yeah and maybe that's where privacy becomes like key to defy maybe it's through regulation coming in it's almost like if regulators could be educated

to understand that cool dynamic that ckps offer maybe they would be up for it because it's like okay you want some sort of kyc type thing and you have the onboard ramps okay but let's make sure that we actually also are protecting people they talk about protecting investors let's like really understand what protecting investors means protecting business interests protecting all sorts of things that they care about use their knowledge proofs on all the kind of other levels potentially for that yeah this is my hope yeah we don't have enough time to go into it enough i'm so you know rushing against the clock and i think that you know i think that it's going to be an interesting question as we move

forward here of just how do we frame all of this because i do think that framing it as privacy technology even though i've used the word privacy 800 times in the last 45 minutes here i think that that could pose challenges to people who've come to learn privacy as a bad word and so instead we need to be reframing things around the combination of auditability and data security and protection all of that but for another time yeah consumer protection i think would be a pretty awesome angle yeah even though i don't want to i don't want to live in a compliant world but uh i understand i understand why it has to be that way all right so we're pretty much at time but there is one topic that we have to mention

because it's kind of awesome that the three of us are on this call together and we are also all involved in an organization josh you mentioned this earlier so the meena foundation you are a board member there jill you're also a board member there and i'm actually an advisor to the project so that's something that kind of brings ties us all together i am curious like what is this experience for you being part of a project a zk focused project already josh has obviously had that experience before mina is the the first but not the last uh zk oriented project that that i i'm working with and i think for me it's just crystallized some of these challenges around you know

really defining your user and your use case and i think that that's something that in many ways the mina foundation has done an amazing job of and and o1 labs and the rest of the the community around the project has done a great job of really identifying the problem that they're going after which in this case is a combination of privacy and also unwieldy blockchain sizes but it also just crystallizes for me again how early we are as an industry in terms of kind of educating around and evangelizing around these types of problems and i think that there's a lot of scope for opportunity there and i think it's coming cool in the next few months

i hope to be doing a full episode on the mena project as well to explore some of those use cases it is known for ex very experimental very kind of like new use cases for zkps and privacy tech and i'm excited to dig into that sadly we don't have enough time on this show to go into it with the three of us but i thought it was worth mentioning anyway so we're at the end of the interview but jill thank you so much for coming on to the show and having this conversation with us thank you so much this is a pleasure and josh thanks for coming back yeah i hope to see you again soon yeah yeah likewise and maybe in the coming year you'll have more time for crypto stuff yes abs absolutely i have i have i have

plans once my newborn starts sleeping okay that makes sense very cool all right i want to say thank you to the podcast producer andre the podcast editor henrik and to our listeners thanks for listening