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The Holy Grail of Crypto Privacy: Encrypted Ethereum, FHE & Living Forever | Rand Hindi, Zama Co-Founder
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- [00:00]
Rand Hendy
It'll feel just like using Ethereum, right? For developers, it'll feel like just like building for Ethereum. Everything is in solidity and you're pushing your contract to Ethereum. For users, everything's going to feel like Ethereum. You're using a wallet to make a transaction to Ethereum. And that's really how we thought about this, right? It's we don't want people to use something else. We want people to use Ethereum confidentially.
- [00:25]
David Hoffman
Rand, I think everyone listening to Bankless knows that crypto has a privacy problem. We want privacy. We don't have it yet. Here's how you put it. In a recent tweet, you said, go to anyone on the street and ask them to show you their bank account. That's blockchain today. It's obvious we need confidentiality. Why don't we have privacy yet?
- [00:48]
Rand Hendy
Well, I think if you look at the history of blockchain, maybe the first thing we have to understand is why is data public in the first place? The reason why data is public on a public blockchain is because you want public verifiability. If you want anybody to be able to recompute the state, they need to be able to use and see the data that was part of computing that state. And so there was really no other way. If you wanted decentralization and public verifiability but to make the data public. This was never a feature of blockchain, Right. It was kind of like an artifact of not having homomorphic encryption and these techniques 15 years ago. But what you really want is public verifiability. And I think there are many, many attempts to doing that. For example, some early privacy protocols like zcash. Big fan of zcash. You know, being a long time, I've been a long time holder, I'm very happy it's finally happening.
- [01:42]
David Hoffman
It's certainly happening.
- [01:43]
Rand Hendy
Right? It's right. So zcash used zero knowledge proofs as a way to effectively prove that you had the tokens that you wanted to transfer. Right. And so in this case, what you would publicly verify was the proof. You didn't need the data. But the problem is that you didn't have composability on this proof. So you were stuck with basically just doing confidential transfers. And I think this is why a lot of other people started looking at other techniques like fhe, like multi party computation, like teas, to try and create this shared private state that you could build defi on that you could build.
- [02:25]
David Hoffman
Other blockchain applications for the non Cryptographers. Ren just mentioned TES and multi party computation, all of that. Don't worry, we will define those things and I hope we will simplify those later in the episode. But let's stick on this for a moment. So I think you're saying, Rand, that the reason we had public blockchains in the first place and they were constructed as such, is because we were Tech Limited. We didn't have the cryptography at the time. I mean, there are a couple of other explanations I can think of. Certainly Tech limited is one of them. There's also maybe demand. Maybe there's just not demand for privacy and confidentiality. That's a possibility. A third possibility is the regulators wouldn't let us. This is kind of a sort of a counterfactual, historical counterfactual I've often thought of, which is the basic idea that if Bitcoin launched in a private way, governments would have strangled it in the crib. It would have never been able to rise to the, the degrees that it is today and, and get acceptance today. What do you think it is? You think it's all the tech side, or do you think there's a balance of these other two as well?
- [03:37]
Rand Hendy
You know, I, I think that's. That's a very interesting question. I've been in privacy for a very long time, actually. You know, my previous company was already working on privacy for AI so I've been thinking about this problem of how do you make services private? And nobody really cares about privacy because most of your life isn't publicly visible to other people. When you go to your house and close the door, nobody sees what you're doing inside. When I'm on my phone, I'm using an app. Everything I'm doing on my phone isn't broadcasted to the public. So it wasn't really something people had to think about because it wasn't something so visible as it is in blockchain. I think it's not that people didn't want it in blockchain, it's that they didn't really have much of an option. And for a long time we were told that having anonymous addresses was enough, but clearly this is no longer true. You go on a website like arcam, you type your name, you'll see everything that people can find about you on chain. That's really scary, man. I come from France, a country where we had 10 crypto kidnappings. You don't want this data to be public in those instances. I think it's just that we're getting now to an inflection point where privacy is no longer something that people can afford not to have on blockchains because the amount and volume of assets are such that we need to start taking this seriously. And of course finance moving on chain. There's just no way that a bank is going to use stablecoins for bank accounts. If your neighbor can see your bank account, it's just not going to I don't even think it's legal in in that sense.
- [05:14]
David Hoffman
So you think the demand has always been here We've been more tech limited. Maybe I'll talk we'll talk about the the regulator kind of the nation state limitations later in the episode.
- [05:24]
Rand Hendy
I think a good example to illustrate how quickly the mentality can shift around that if you remember before Telegram, before Signal, we didn't have any encryption in messages. When I sent you like a text message over like sms, this data was not encrypted so it was completely visible to anybody on the network effectively. And then Telegram came about around about a time of Snowden made The revelations in 2013 telegram came and said hey, you can encrypt your messages. Everybody started adopting it. Then WhatsApp added encryption by default. Then Signal came out and now it would be unthinkable to use a messaging app that isn't encrypted.
- [06:07]
David Hoffman
I mean thank God, right? Thank God for that.
- [06:10]
Rand Hendy
But nobody asked it. SMS text messages have existed since the 80s. Nobody was asking for privacy until people realized, oh, I can have the exact same service but private. Why would I not do that?
- [06:23]
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- [09:04]
David Hoffman
Updates. And I guess that transformation to end to end encryption over communication that felt very natural, that felt very organic. That was not stopped in a big way. Yeah, there was a moving of the Overton window. I want to ask about terms here because I'VE heard you talk about like privacy, certainly, but then you also use the term confidentiality. And I think we'll probably come back to these two terms throughout the episode. But are they interchangeable? Is privacy and confidentiality, are they synonyms? Are they basically the same thing? Or is there some distinction between those words I'm.
- [09:39]
Rand Hendy
Missing? So we, we use, I mean, I use confidentiality more often than privacy because it's a. It's a larger set of application. When we talk about privacy, we typically talk about personal data. Your bank account, your DNA. This is personal data. You want it to be private to you. When we talk about confidentiality, we include data that is not necessarily about someone, but it could still be sensitive. A company's statement, or maybe, I don't know, like you're playing cards and you want to hide your cards in poker. You need confidentiality for that to even be possible. But it's not technically privacy in the sense of personal data. So confidentiality is just like a bigger, more generic term of which privacy is specifically about personal.
- [10:23]
David Hoffman
Data. Okay, so confidentiality is then a superset under which privacy exists. But when you say confidentiality, you're not implying something lesser than privacy. Are you implying that most parties don't have access to it? So it's non public, but there are some parties that can access the data? Do you know what I.
- [10:45]
Rand Hendy
Mean? I can see how. Because we sometimes think about confidentiality in a business setting where it basically means a confidentiality agreement, but the term confidentiality actually means just, you know, not public effectively. So I use it at least as a superset of.
- [11:03]
David Hoffman
Privacy. Okay. And so we might use these as in the episode, with the listeners understanding that we might be like, use these interchangeably throughout the episode. Now the reason I wanted to have you on today is because I feel like privacy is having a little bit of a moment right now in crypto. Thank God. Which is great. And I think that what you're doing, we'll certainly get into what you're doing. But I, I want to frame this out because the reason we're doing this episode is because I think, Rand Hendy, you are trying to bring privacy to every Ethereum transaction. At least if I said that, if I made that claim. Rand, is Zama your project. Are you seriously planning and trying to bring privacy to every single Ethereum transaction? If I said that, how. How correct is that.
- [11:51]
Rand Hendy
Statement? It's, it's correct. Just. It's not limited to Ethereum. We want every blockchain transaction to be encrypted. So the way that we are building Zama is as a layer of confidentiality on top of existing blockchains. So instead of launching a new chain that would be private, on which you would need to bridge your assets, we basically add this layer of encryption to Ethereum, to, to base, to Solana, to anywhere where people want to run and do something, you know, on chain. And so I think that's, that's a really interesting. Because if I tell you you've got stable coins on Ethereum and you can now shield them into confidential stable coins where your balances are encrypted, the amounts are encrypted, but they're still on Ethereum. You have all the benefits of Ethereum's liquidity Ethereum security without actually the data being public on Ethereum anymore. I think about it a little bit like HTTPs, but for blockchain, you know, HTTPs, when you connect to a website, the data you're sending and receiving is encrypted, but you don't really actually notice it. You're still just connecting to a website. This is the same idea here.
- [12:57]
David Hoffman
For blockchain transactions, bringing confidentiality, bringing privacy to not just every single Ethereum transaction, but also to every single blockchain transaction, whether that's in the solana ecosystem, other EVMs, other layer twos. That sounds like a holy Grail. Okay, and we'll get into how this is possible because that'll be the rest of the episode. We're sort of teeing up, but I want to make sure I understand what you're actually saying. So if I'm on Ethereum and Zama is deployed like this works, then will there be a button inside of my crypto wallet, inside of my rabi, inside of my metamask where I can basically go incognito and send this specific transaction privately? Confidentiality. I don't have to bridge to a whole new chain. I don't have to do a thing. It's just integrated into my self sovereign defi wallet experience. That to me is the holy grail. And I just want to be clear, is that what you're.
- [13:58]
Rand Hendy
Saying? That's exactly what we built. And actually, you know what, I wish I could hire you for marketing because you're saying it in such a way. I got excited just listening to you talk about it. I was like, that sounds like a cool thing. Yes, that's exactly what we actually did. And I know it sounds incredible because it doesn't seem like this would even be possible. Like how can you have privacy on a public blockchain but that's exactly where those new cryptographic techniques like FHE actually come.
- [14:25]
David Hoffman
In.
- [14:25]
Rand Hendy
Right. This was the missing piece to enable exactly that vision. I've been in crypto since 2013, right? So I've seen many, many, many cycles. I don't want to have to use a new protocol. I'm happy on Ethereum. I've been an ETH maxi for a very, very long time. That's where I want my money to be, but I don't want it to be public. And so, in a way, I just kind of solved the problem for myself by building this at Xama.
- [14:50]
David Hoffman
Too. Well, and the excitement is you're solving a problem for me and a ton of bankless listeners, basically, if this works. Now let's talk about. Because this sounds almost too good to be true, Rand. And so now we get into the. The more nerdy part of the episode. So you used an acronym there, which is a cryptography acronym called fhe, and I believe that stands for fully Homomorphic Encryption. All right, so it's not something that you'll probably be able to bring up in a dinnertime conversation. No one will know what you're talking about. But I want to do a quick 101 on cryptography. So can you take us through the main families of cryptography in crypto and help simplify this? I don't know how you would list this out, but I guess my mental model, I have kind of a list of maybe four families. There's sort of the. The classic cryptography of Bitcoin. These are things like hashes and signatures. Then there's this whole field of Moon math with Justin Drake, just came on the podcast. He calls this snarks, Succinct proofs. Or like zk, Right? ZK Snarks. That whole section. And that has some magic. So that's the second. Then we also have this thing called multi Party computation. I believe MPC is the acronym for this. That's another thing. And we also have fhe, which is what you're talking about. And this is what enables some of the Holy Grail that you've just been talking about. Can you break this down, give us some detail here without getting too far in the weeds? How can a layman think about each of these families of crypto and what are their superpowers? And then we'll get into how fhe fits into.
- [16:35]
Rand Hendy
This. So I think when you think about cryptography as a field, there are, I would say, big kind of ideas. One of them is I want to be able to store data securely in a way that nobody can see it unless they have the secret key. So that's typically what you have with traditional encryption. You know, when you're encrypting data that you're storing in a database, you know you're using AES to do that. Then there is. I want to be able to communicate a message to someone without other people being able to eavesdrop. So secure communication, what the test signal is doing, for example, that uses another type of encryption which is slightly different than what you have in storage. Then you've got the whole field of like, I want to authenticate myself, I want to prove that I'm the owner of that particular thing. That's where signatures comes in, whether it's like, you know, ECDSA or other types of signatures. When you sign a transaction on Ethereum, you're using a key to prove that you're the legitimate owner who's allowed to do that. Right. So that's another field. And then you've got, I would say more like Cryptography 2.0, which is related to how can it go beyond transmitting, storing and authenticating things? How can I compute privately? How can I share a secret privately? How can I prove.
- [17:52]
David Hoffman
It? So everything you just described, Rand, is basically what I call the classic family. And that's what classical cryptography. Yeah, and that's what Bitcoin and Ethereum have been based on to.
- [18:03]
Rand Hendy
Date. Exactly. And then you have what you call the Moon Mat cryptography, in which I would actually include all of those new advanced techniques, zero knowledge proofs, ZK flu homomorphic encryption, FHE multiparty computation, mpc. All three of them are very important, but are used in different ways. ZK is a way to prove that you've done something without necessarily revealing the data that's behind it. So I can prove to you that I have a hundred tokens without showing you that I have 100 tokens. That's what Zcash does. Typically very, very useful in many applications. The only downside of ZK is that you cannot compute on the ZK proof. So you don't have, like, composability. You cannot stake that proof. You cannot do this kind of things. If you want composability, if you want, like, a state on which you can compute, you have only two solutions. Multiparty computation or fully homomorphic encryption. MPC is used very often for wallets, for secret keys, because it gives you a way to split the secret key with a bunch of different people that have to effectively talk to each other in order to do something. So think about it as like decentralizing the private.
- [19:16]
David Hoffman
Key. When people are thinking about decentralizing the private key, maybe they're thinking about something like, you know, the seed phrases to set up a crypto wallet. Right. That's the, the English word mnemonic and is basically, you know, you can derive a private key based on that. So NPC splits those words up across multiple parties. And is it some majority of these parties have to kind of, you know, share the data in order to reconstruct the private key. And what is a private key in crypto? Of course, it's a, it's a key to a safe. You can open a safe if you have enough of these parties, like agree to open.
- [19:53]
Rand Hendy
It. So mpc, the way it works is the key is never reassembled. The point is that the key is never in one place, right? In a bunch of places. But each individual person does a piece of the computation. And when you put it back together, you get the actual result of having used the full.
- [20:10]
David Hoffman
Key. Kind of like a multi sig in a way, like.
- [20:13]
Rand Hendy
Conceptually. Conceptually, kind of like a multi sig. Right. You need all the different parties to be involved to get the actual end result. That is by far the best thing that we know of for managing a secret key. But it's not very easy to use that if you want to compute because it doesn't scale very well with the number of people.
- [20:32]
David Hoffman
Involved.
- [20:33]
Rand Hendy
Right. So effectively the more people are splitting that key, the slower the system actually gets because they have to talk.
- [20:40]
David Hoffman
To each other on mpc. So I think people are aware of like ZK sort of ZK proofs and where that's being used, like zcash, it's being used for privacy. Also we've done a ton of content around scalability. You know, Justin Drake and kind of the next Lean Ethereum roadmap is all about using ZK snarks for scaling Ethereum. So it's really good there on the NPC side. I think I've seen it in different wallet constructions. So Coinbase has some NPC wallets which are fireblocks. Yeah, fireblocks, right. And you know, Most recently that X402 protocol which is just like agent to agent or like machine based, like transactions, which is super cool. I saw a demo of Coinbase where you can sort of attach an MPC wallet to your ChatGPT interface and have ChatGPT go buy stuff online for you from your crypto wallet. And I guess in that construction The MPC wallet is what, like who has the ability to sign a transaction? Is it you locally, and then also Coinbase somewhere or like what is.
- [21:44]
Rand Hendy
That? It depends who are running the different.
- [21:46]
David Hoffman
Nodes. I.
- [21:47]
Rand Hendy
See. So we actually use it in the Xama protocol when we want to decrypt something. Let's say someone wants to see their b, their encrypted balance. On Ethereum, someone has to decrypt this encrypted balance. So the way that we address that problem is that we have the decryption key that is split between 13 different entities. And those 13 entities are extremely reputable people. You know, Ledger is one of them, Fireblocks is one of them, Layer zero is one of them. So you know, we're talking companies that collectively secure 100 billion in assets already which are responsible for like the decryption key in the Zama protocol. You need 2/3 of them to be to participate to get a decryption. So if someone wanted to cheat, they would need to hack 2/3 of those companies. In which case, to be honest, you can probably steal most of crypto custody assets that people have anyways. But if you want that to be performant, you have to use it for very, very specific things. So we only use it for decryption and nothing else. And that's what brings me to fhe. FHE is a way to compute unencrypted data without decrypting it. So I give you a piece of encrypted data and I can now run software, a smart contract, an AI model on the encrypted data and the output is also going to be an encrypted piece of data. So it's like end to end encryption, but for any kind of software that you might want to be using. And so if you're talking about a blockchain, it means that you know your state is encrypted, but you can still have a smart contract that modifies that state without having to actually see.
- [23:26]
David Hoffman
It. Now Rand, I take you as almost a little bit of a fhe maxi, and I say that in a complimentary way. And I think maybe your take is different from some other takes that I've heard you put it this way. FHE for privacy, ZK for scaling, MPC for key.
- [23:49]
Rand Hendy
Management.
- [23:50]
David Hoffman
Exactly. This is the optimal blockchain stack. Yeah. So you really think fhe is the primary cryptography to bring privacy to blockchains rather than zk. And some people will hear that and say, wait, hold on a second, Rand, I thought ZK was not Only the scaling technology, but also the privacy technology. Right. The solutions that we see out in the wild for privacy on blockchain today, they're all ZK based. So The Z&Zcash is, you know, ZK and something like Tornado Cash or like Railgun. These are all ZK type solutions, I believe even the Aztec Protocol, which we'll talk about maybe in a little bit, it's all zk. So why are you doing fhe rather than.
- [24:39]
Rand Hendy
Zk? So when, when you're looking at a blockchain and you want, you know, confidential blockchains, you, you want three things. You want the encryption that you're using to be safe, to be secure, Right? So you want something that can withstand any kind of cryptographic attacks, even quantum computers. So today fhe is secure even against quantum computers. So even a quantum computer cannot decrypt your data on chain. That's really important. It's also the case, by the way, for MPC and is the case for some of the ZK stuff, not all of them. So that's one thing. The second thing is you want public verifiability. People should be able to recompute the state and verify that it's correct. ZK gives you verifiability, obviously, because anybody could verify the ZK proof. FHE gives you verifiability because anybody can rerun the fhe computation and verify that the encrypted results is correct. MPC doesn't give you public verifiability in that sense. And the third one is you want composability. There is not much point using a blockchain if you can only do one thing on that chain. Right? Ethereum's, I would say, big breakthrough and kind of genius was to bring programmability to blockchain, which didn't exist before. If you remember, before Ethereum, every coin was its own blockchain. Ethereum gave you a way to program the blockchain using smart contracts. So you really want this programmable privacy, this kind of composability feature. And ZK doesn't offer that for that, you only have MPC and fhe. So it's not that I'm like an fhe maxi, it's just that if you look at like, how do you take an existing blockchain, not change it, but add confidentiality to it. Fhe is actually the right way to do.
- [26:29]
David Hoffman
That. So you're not an fhe maxi. You just think fhe is a better fit for purpose for the blockchain constructions that we have. Yeah. Is there Some, like, beef between, like, ZK people and fhe people. I'm, you know, like, I just tangentially view this. But there's Le Bansassen, of course, a starknet godfather of zk, like, absolute.
- [26:54]
Rand Hendy
Legend. I love Eli, by the.
- [26:55]
David Hoffman
Way. Yeah, so Eli says, like some pushback, right? He's pushing back on the idea that fhe is best for privacy. He says two problems with the fhe. You need the nodes of the chain to do the heavy lifting of computing the fhe because fhe gives privacy but not integrity. If you need integrity, either you need to trust the FHE operator or add ZK to the mix because ZK does improve integrity. That's the first problem, he says. The second problem is the silicon and scale needed are pretty large, especially at scale. Like you're talking 100,000 TPS and you don't need to. And you don't need two nodes to run it. This might be a typo there, hurting decentralization and scale. So he's saying it's hard to scale, and he's also saying there's some trust implications when you use fhe. What's your response to.
- [27:43]
Rand Hendy
That? I mean, that's a very fair point, right? And I think, you know, those problems exist for sure. And these are the hard problems that Xama has been solving. So integrity, the way we look at it, this is a blockchain problem. If you run consensus on the FHE computation, you get integrity, right? Like, you know, if 100 people run the computation and agree on the result, you can basically say the result is correct. So FHE in that sense can benefit from all of the existing blockchain paradigms for achieving integrity. Consensus, optimistic proofs, ZK proofs. Whatever the flavor that you're using to have integrity on the state, you can have integrity on the FHE computation as well. So from that sense, I don't want to say it's not our problem, but this is a problem that blockchain have already solved. If you look at performance historically, performance in fhe was a big bottleneck. You know, it took like minutes to do a confidential token transfer a few years ago. But today we've actually made fhe about a thousand times faster than when we started a company five years ago. And we're on track to get a 10x improvement year on year on performance. So we are actually launching now on Ethereum with more capacity than Mainnet can support. So all of Ethereum we can do encrypted in FHE today and moving to GPUs we can get to a thousand TPs. So fhe is not really that compute intensive. If you look at like something like zk, I think actually I looked at the numbers. The cost of an FHC token transfer infrastructure wise is 0.00001.
- [29:26]
David Hoffman
$.
- [29:28]
Rand Hendy
Right. So like 100,000 of a dollar and it takes like 20 milliseconds. So you're going faster than the communication between the consensus nodes in the first place. It's not really a problem anymore. It was a problem, but we solved that.
- [29:43]
David Hoffman
Problem. So on scaling, you have more recently, you know, scaled this up, scaled up performance such that, so the Ethereum network can handle like 20 to 30 transactions per second. You can support far more than that in Zama for instance. Like can you support the thousands of TPS that. Yeah, thousands.
- [30:05]
Rand Hendy
Right. We. So we're launching on CPU first because as much as I'd like Xama to have a thousand TPS on day one, the world doesn't work like that. There's a bit of a ramp up for people to start adopting those new confidential products. But moving to GPU which we're Planning for early 2026, we are estimating we can get anywhere from 500 to 1000 TPS per chain on which we're deploying Xama. Okay, on base, on Solana, on each of them. I think, you know, that buys us quite a lot of time so that we can work on the next phase which indeed, you know, will, will require work is building a dedicated ship for fhe, an ASIC for fhe. Okay, that sounds a little bit crazy to say we're going to build a chip for fhe, but I mean we've done.
- [30:54]
David Hoffman
It. Not too.
- [30:54]
Rand Hendy
Crazy. Bitcoin mining is ASICs basically so and the FHE chip is comparable in complexity to a bitcoin miner. And that will give you 100,000 tps on a single machine in a data center. So one server, one box in a data center would be enough to power global payments on chain with FHE at a fraction of the cost of running a GPU server. So FET is not a problem anymore, it's just a compute problem, which by the way is just a money problem. If you throw more money at compute, you're going to get better compute, you're going to get better performance and bigger addressable market for this.
- [31:31]
David Hoffman
Technology. I mean this seems like a similar story to what, what we're seeing with like ZK Prover times and that kind of thing where it's a combination of software and hardware that's like making that possible. And those are the ingredients here. You guys are optimizing kind of the software layer and also the hardware layer to like, squeeze out as much scale as.
- [31:50]
Rand Hendy
Possible. Exactly. So Zeek and fhe are following very similar scalability paths in terms of making it better. It's just that in practice, there are fewer people that were able to construct secure FHE protocols. I think, you know, today, I think Zama is probably the only fhe protocol that is secure in production. You know, nine out of ten people doing FHE are actually using Zama's technology somehow. And there is a reason for this, is that fhe is a very hard problem. Like a very, very hard problem. And I have no credit for it, by the way. My co founder is like. My co founder is like Pascal Paillet. Like, he invented one of the early homomorphic encryption schemes that, like, the payet scheme has his name. And we've got like 37 PhDs in the company and. And these guys are, like, far smarter than I am. But it's a hard problem. Like, you know, it took. It took years to make it work. It took.
- [32:42]
David Hoffman
Years. So back to Ellie's like, first point. So that's the scaling point, his first point. And you guys use this term integrity, which sometimes throws me for a loop, like, what does integrity mean, actually, in the context of data? I get that it has a definition. This was meaningful to me. He said, you either need to trust the FHE operator or add ZK to the mix. Is the trust the FHE operator. Is that why in the Xama construction you just mentioned, you have 13 different entities, you know, kind of trusted entities that are running some of the Xama nodes, and you have this MCP construction between all of those 13. Is that what he's referring to? Is this something.
- [33:24]
Rand Hendy
Else? No, not exactly. So there are two parts to the. There are two parts of how you build an FHE protocol. There is how do you compute on the encrypted data and how do you decrypt the encrypted data? So there are like two things. Computation.
- [33:37]
David Hoffman
Decryption. And you need to decrypt it because the user wants to decrypt. Yeah. Their own data.
- [33:42]
Rand Hendy
Okay. You want to know how much money you have. So for the decryption, that's where you use the 13 MPC node. MPC.
- [33:48]
David Hoffman
Protocol. I.
- [33:49]
Rand Hendy
See. It's just for decryption, for computation. You can have as many people as you want doing the FHE computation because everything is publicly verifiable. So anybody could participate and can basically say I'm going to compute it and can effectively do a consensus like any existing blockchain. So when you want integrity on the FHE computation, either you just ask a bunch of people to do it and you compare the results, or you can use a fraud proof so one person does it, but anybody could verify it and basically say, oh, that person cheated needs to be slashed. Or you can use ZK and basically do a verification of the FHE computation. So there is absolutely no difference on how you handle FHE computation versus existing blockchain smart contracts. Every single technique that we use for integrity in blockchains, you can use for integrity in.
- [34:43]
David Hoffman
Fhe. Okay. And these sort of, I'll call them, weak points of fhe, that's the entire purpose of Zama. I mean, we'll get into the Xama construction later, but the encryption part and the decryption part, that's what you're sort of, I guess, smoothing out the rough edges there in the Xama protocol and creating a mechanism so that everything is secure and maintains confidentiality in both those parts of the.
- [35:13]
Rand Hendy
Process. Is that correct? Yes, exactly. You want to think about this not as separate things, but as an end to end protocol. You cannot dissociate the decryption from the computation from the blockchain. So for example, you know, the way that you know that someone can decrypt a value is because you have a smart contract that explicitly says this user can decrypt this value. If the smart contract doesn't say so, the protocol will reject the request for decryption. And so you see how everything kind of becomes intertwined, right? Like you have people doing FHE computation, people doing threshold decryption. You have a blockchain where all the logic and access control actually lives. And you have to analyze this as, as an end to end system to know whether it's secure or not. Unfortunately, there are actually mathematical proofs that you can have that the system from a cryptographic perspective is secure. And so Zam actually achieved that. Zamachi was called a strong IND CPAD security. Like it's a mouthful, but basically what it says is there is no known attacks that can break the cryptography of fhe. So the only issue can be a software bug in the implementation, of course, or it could be people didn't do the job they're supposed to do, but the cryptography in itself is mathematically proven to be secure as long as people do what they're supposed to.
- [36:39]
David Hoffman
Do. So does this answer the question of, again, I'm not smart enough, Rand, to field these questions to you, so I'm using other cryptographers by proxy. So, Ian Myers, he's a CS professor, Security and applied cryptography, he said this. There's no such thing as fully homomorphic decryption. Of course we've been talking about fully homomorphic encryption. He says there's no such thing as fully homomorphic decryption. Anytime you see a system using FHE to compute on your sensitive data, remember someone has the key. And if it's not you, do you trust them? This is the 13 entities essentially in the Zama protocol that do have the.
- [37:17]
Rand Hendy
Key. No, so, so Yan is right. Right. And at the key someone has to decrypt. And so instead of having like a trusted central party do that, right. That key is split between 13 people. Those 13 people, everybody knows who they are. Ledger fireblocks, all of these guys, if those guys cheat in the Zama protocol, first of all, you know they have to be able to do that, right? So you need to, you need to have 2/3 of them colluded. So we're talking about, we're talking about 10 out of 13 of the most reputable companies in crypto that are responsible for a hundred billion in assets calling each other on the phone and being like, hey guys, let's cheat to read to, you know, to know how much money Ryan has. I mean, sure, right? It's not ideal, but it's as good as it gets. And it's actually how most of the world works. You know, the Internet people, it's crazy. People don't realize that, you know, when you connect to a domain name, right, bankless.com, that domain, bankless.com is converted to an IP address so that, you know, the Internet knows where to send the people. There are 13 companies responsible for this. So the Internet runs on 13 companies. That's insane. And it works. So I think we're doing the best we can with existing techniques. And today Zama, the way it's implemented, this is as state of the art and as secure as cryptography allows you to build. We didn't take any shortcut. If anything, we've actually done things that were never done previously anywhere in the world, cryptography.
- [38:55]
David Hoffman
Wise. Yeah, I like it. I mean, there's definitely a practical implementation that you've done. And I mean, just to be clear, so these 13 entities, it would require 2/3 majority. You really can't imagine them calling each other on the phone and just being like, hey, I really want to decrypt Ryan's.
- [39:11]
Rand Hendy
Blockchain. If they didn't get caught, the business would go to zero. Like who would use a ledger wallet if ledger cheats in.
- [39:18]
David Hoffman
Zama? But let's push back on that a little bit because it probably wouldn't happen that they are all kind of in a cabal and turn, turn evil. The way it would happen really is like some government, right? You could, you know, ofac calling you the, the three letter agency calling you and saying you, you gotta decrypt this data. Okay, we'll bring court orders against you. We'll make life really hard for operating in our country if you don't. What you're doing is illegal unless you decrypt it. It's probably going to be nation state level attack which is like I'll put that out there and I'll just say that's going to be fine for the majority of use cases that, that people do probably, you know, but that is a vector that they could get into. Something like Zama for.
- [40:08]
Rand Hendy
Instance. That's a very fair point. And so, so I think about this a lot. Like a lot honestly. Like I think I'm, I'm spending hours a day trying to think about how to make this thing more resilient to global catastrophe and attacks against it. So the first thing you can do is those operators, you can try and pick them in a way that they're geographically distributed. Some us, some Europe, some Asia. So the more geographically distributed the harder is for a government to do this. So you would need like a coalition of governments to do this kind of stuff, right? So sure. You know, is it possible that the U.S. you know, has a deal with 50 other countries on surveillance maybe? Right, that's possible. But you see, you're already adding like one layer of complexity because you're talking about global political coordination to do to make this happen. The second thing we're doing is we're actually locking out the operators from accessing the secret key that they're holding. So the way we're doing this is the MPC nodes, alter team companies, they have to run inside what's called a hardware enclave. So the actual software is running inside a container that adds another layer of security. So it's not just that you would need 2/3 of them to be corrupted, you need 2/3 of them to break the hardware faster than they would be detected. And the protocol would basically kick them out. Right. And on top of that there's also encrypted communication between those different nodes to make sure that they're running the correct version of the software, each other. So they would need to run the incorrect version of the software to break, you know, the hardware. Kind of like container they're in. They would need 2/3 of them to collude on an international coalition of governments to make that happen and not get caught during that meantime that, you know, we would just basically kick them out and replace them with other operators. I think to be fair, like if that's your threat model, you're probably not going to be using the Internet for anything. Let's be honest. Like you know, there are far.
- [42:22]
David Hoffman
Fewer or I mean you're probably like North Korea or something like that.
- [42:26]
Rand Hendy
Right? I don't think North Korea can pull this off. I don't think North Korea can pull this off. Like the truth is no matter how much people don't like to talk about it, you know, there's always going to be, when you talk about security, when you talk about anything, there's always going to be a trade off somewhere. The question is you have to make, you have to make the trade off so high that it's either extremely unlikely or extremely expensive or extremely, I would say like disruptive for someone to actually do.
- [42:58]
David Hoffman
That. Yeah, I think that sometimes people think in terms of binaries. Right. And they don't think in terms of good, better, best. Right. Things that are. And if you just think about the status quo, which is we have no confidentiality on any transaction and if you actually want confidentiality for the practical crypto user, I mean they're doing something like their, you like moving their assets from one address to Coinbase and then moving it back out in an attempt to kind of obfuscate their traffic. I mean like what is that the upgrade of just having a confidential button inside of your wallet that has these like that uses Zama, that is just like a 10x100x better than the status.
- [43:47]
Rand Hendy
Quo. I mean look, it solves problems that are unsolvable otherwise like like the trade off that Xama has to make. There is no other solution. It does not exist. You cannot have composability unless you figure out a way to have like a shared secret state. And the way we are doing it, honestly like it's, it's. Most people think I'm over the top and how many layers I'm adding to this thing to make it really, really, really, really hard for people to kind of read your.
- [44:17]
David Hoffman
Balance. Well that's the thing. If you make it incredibly easy, like current privacy solutions are pretty difficult. So even something like zcash, you have to go to an entirely new chain in order to do that. And you have to, basically, if you want your store of value inside of zcash, you have to like, buy a coin. I mean, Amin Soleimani put it this way. It's like, I shouldn't have to buy someone's Ponzi scheme in order to get privacy.
- [44:41]
Rand Hendy
Right. I wouldn't call Zatasha.
- [44:43]
David Hoffman
Ponzi. Use you a little tongue in cheek. Right. But it's memetic money. It's. I shouldn't have to buy another store of value asset that could fluctuate, you know, 10, 50% in a given day in order to just get some privacy on the, the assets that I really want to.
- [44:59]
Rand Hendy
Own. No, what you want is encrypted. You want, you want encrypted dollars on.
- [45:02]
David Hoffman
Ethereum. Yeah, that's right. That's right. And so if you're bringing this to more people and creating an easy button for that, that's a net win, I guess. So we've talked about these families of cryptography. Are there other ways to kind of smush these things together? So you're talking about, like, every operator has a secure enclave. I don't know if that's like tee or what that is, but, like, are we able to like, even, even the tweet I was referencing from the StarkNet founder talked about, well, you could just add ZK to some of the fhe stuff and get even stronger guarantees. Can we layer this cake somehow and get even.
- [45:37]
Rand Hendy
Better? I mean, this is what we're doing. You know, it's funny because people think about Zama as a purely fhe company. So, you know, out of like 30 or so researcher, I have like six, seven of them doing MPC, five of them doing ZK. Like, you know, Zama uses FHE for the computation part, but actually in the protocol, as I mentioned, there is MPC for the decryption. There's even some ZK stuff we're doing, like, for integrity security stuff. This is not like the primary component. These are like Lego blocks that you're putting together to build an end to end secure privacy.
- [46:16]
David Hoffman
Layer.
- [46:17]
Rand Hendy
Right? So, yeah, 100%. Like, as I said, I'm super pragmatic. If tomorrow someone comes up with a better technology than what we've got, we're just gonna, you know, we're just gonna use the ideas and then try to implement it to make things better. Like, you know, we. Whatever works. That's the bottom.
- [46:32]
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- [48:21]
David Hoffman
Information. Whatever works. That's the bottom line. You also have another bottom line tweet. The bottom line is that FAT is the only technology that offers security plus verifiability plus composability. It simply adds a layer of confidentiality to existing chains. I love that part. Without changing how we build and use blockchains, you don't need to bridge to another layer two or another chain just works with existing chains so that's the vision here? I want to ask you a cultural question because we're sort of having a bit of a moment here in crypto, I'd say. I mean, some people have called it privacy season. Not sure how long this lasts, whether this is a, you know, a trader narrative. But it has been good, I think it's been kind of wholesome, actually, to watch zcash rise in price, right? It's like rather than go speculate on some stupid meme coin that a celebrity launched, right? Zcash, it's cool technology. It's going up. It has gone up 4,000% in the last six weeks, which has been pretty crazy. What do you think is driving this focus on privacy? Is this trader narrative, or do you think there's something deeper here in.
- [49:24]
Rand Hendy
Crypto? I think there's something deeper. I think fundamentally people don't care more about privacy than they did before. I think one of the major driver is people started paying attention to finance. Moving on chain. Okay, we want dollar to be on chain, we want banks to be on chain. We want the $100 trillion of assets to be tokenized and put on chain. But when you talk to financial institutions, they're just not going to do that unless they have confidentiality in their activity on chain. And so I think the push and the adoption of blockchain by finance is what made people realize, oh my God, we need to solve the privacy thing if we want this to actually happen and if we want blockchain to become the global financial rails of the world. So it was very honestly like, I think people were forced to look at privacy again as a kind of requirement for the realization of on chain finance. And so the downstream effect of that is we get privacy as well as users, right as people. But I don't think that the initial motivating factor was I want to protect my data. I think the initial motivating factor is JP Morgan wants to protect their trades on.
- [50:36]
David Hoffman
Ethereum. Yeah, I think they do want to protect their trades on Ethereum. I think that's kind of the game theory of this. So if we have the tech now, the fhe tech and the confidentiality tech, and there's certainly the demand, institutional demand, retail demand, it's always been here. Let's bring back the nation state, let's bring back the regulator conversation and address that. So during this privacy season, it's been interesting to observe, just last week there was a private Bitcoin wallet developer, the Samurai Wallet, got five years in prison. He pled guilty to charges that's in the United States of America. We've been following on Bankless over the last couple of years. The Tornado Cash Roman Storm case. Of course, his case is still outstanding. I. I tweeted this recently, which is just like, I wonder how privacy developers are feeling. Developers behind the Aztec Protocol, which is a ZK privacy layer. Two developers even within your company at Zama Rand, when it seems like the DOJ and the US Government is somewhat arbitrarily picking out privacy developers and prosecuting them, someone replied and said, well, you know, look at the Roman Storm case. It was like, it's. It's an okay outcome. I mean, he gets to, you know, present his case. Ruin that man's life. Okay, it's ruining his life. FBI raided his home in front of his daughter. You know, like, arrested him. This is happening the United States of America. And I'm kind of wondering, like, how you personally feel about this? Like, do you feel safe to develop privacy tools and the Zama protocol in the United States of America right now? Or like, what's the underlying feeling.
- [52:20]
Rand Hendy
Here? So obviously it would be nicer if we had clear rules to go by. Right. Then you know what you can and cannot do. The way I think about compliance is that there are two ways to build a protocol. One way is I'm providing the privacy features directly to another cache, for example, and people are using it. The other way is what Zama is doing is we're providing a way for people to build confidentiality into their tokens and applications. The Xama protocol in itself doesn't offer any kind of privacy feature natively. Right. We're just giving you a library that you can use to write a solidity smart contract in which things can be shielded and things can be public. So it's kind of up to the developer and token issuer to decide how they want to be compliant. You know, Ethereum didn't get sued because Tornado Cash was running on Ethereum. And so the way we're thinking about this is like, okay, so instead of like forcing a privacy model or a compliance model on everybody who's building on top of the Zama technology, we're going to create tools in the protocol so that people can decide how they want to be compliant at the level of their own users and applications. So I'll give you an example. I'm a stablecoin issuer. I'm a regulated entity. I want to offer confidentiality to people on my confidential stablecoin. On Ethereum, I would give the user the ability to see their own data, their balances or transactions, obviously. Right. You want to know how much money you have. But I could also give myself as a token issuer, the ability to see the data of my own users in my contract, and I can program that in my smart contract directly. And if you're doing that, what you're recreating is tratfy compliance model. The user sees their bank account, the bank sees the bank account to their users, but your neighbor doesn't. And if you're creating this like you're just, again, you're just recruiting traffi, then you know, the token issuer can go and comply with OFAC and whatever they want to do. Like, it's their problem at that point because they're the one deciding the spectrum of compliance that they want to implement. And I think that's the key part, programmable compliance at the application level. We don't force you one way or.
- [54:40]
David Hoffman
Another. Do you feel like that's enough of a bright line that you're not worried about this at.
- [54:45]
Rand Hendy
All? So another thing that we're looking at right now is a way to basically kick out applications that would be obviously used for legitimate purposes. So the way to do that is you're literally just like stopping the contract itself. And then people can withdraw their money. Right. So you're never freezing the money or anything like that, but at least the application is no longer usable. I don't even think that this is necessary, to be honest, because the way I'm looking at this, most of the volume right now is starting to go through services that companies are building and companies want to be compliant. Right. So I think that it's kind of like the Internet. 99% of the Internet is compliant and 1% is the dark web. And most likely, as much as we want that or not, it's likely to be something similar with DeFi. 99% of stablecoins and DeFi protocols are going to be compliant stablecoins and DeFi protocols. And 1% might be just not caring at all. We are building our protocol for that 99%. We're not building Zama for the 1% of North Korea money laundering use cases. And that's a choice we're making. We're very clear about that. Our business are legitimate financial use.
- [56:02]
David Hoffman
Cases. I still feel like there's something simmering here in the background. And we had Marc Andreessen on the podcast a couple of years ago, and he talked about the early cryptography wars and how the original cryptography behind SSL HTTPs was on the US Munitions list, basically. And so it. He was like, it was not legal for him to export Netscape to Europe with those protocols in place. Right. And so it took a while for the US to get its head wrapped around encrypted digital communications. And I don't feel like we've had the national conversation about encrypted financial transactions. Like, that's another step. And it feels like the last administration, maybe members of the last administration, took a very dim view on financial privacy completely. And it wasn't just North Korea. It was just like, we don't want anybody to have financial privacy.
- [57:04]
Rand Hendy
Right. I know. I'm taking strings just to illustrate the point. But in practice, of course, the people who are the most asking for confidentiality are the financial institutions. There is no chance, no chance that dollar stablecoins will be used as banking rails unless you have confidential balances and confidential payments. It's just not going to.
- [57:28]
David Hoffman
Happen.
- [57:29]
Rand Hendy
Agree. Right. So again, I think this is not like a Zama versus the US kind of thing or versus anybody else. This is like everybody has to come together and be like, we want this thing to exist. This is how we're going to make it happen. And we are going to follow along the lines of the people who need this technology. Right. So Zama will participate as much as it can in helping to shape how confidentiality and blockchain can actually be built in a compliant, sustainable manner. As I said, I'm a founder building a company. So my goal is to do whatever is best for the people who are using my.
- [58:07]
David Hoffman
Technology. I think that's the way it'll work, honestly. And I think that's the way we got cryptography through the early Internet. It was basically like tech companies and said, hey, the Internet is not going to work unless we have confidential communication. Right. Anyone can browse this web traffic. You crazy. And the U.S. government said, well, we want the Internet to work in America. We're going to be pro innovation, pro building, pro gdp, pro job growth. And so therefore will allow this to happen. I think in the same way institutions coming onto public blockchains, stablecoins, that's a big carrot for the US Government. I think that'll move the Overton window in our direction, but it's a dicey game to play right now. It's still feeling a little unsettled and I worry about this.
- [58:51]
Rand Hendy
Sometimes. I'm very confident that the way we're approaching the problem is the right way that we have to approach a problem. We're not trying to, to pretend this is Not a problem. Right. But the good thing is again as I mentioned, people really want.
- [59:06]
David Hoffman
That. Let's talk about Zama itself a little bit more. I think we've described it in a few places in this episode, but maybe we can put it all together because there is something going mainnet I believe relatively soon. Perhaps you can help us on the dates and I think this is my understanding of it. Zomb is a protocol, so it's a set of smart contracts. The very first place you're going to deploy these smart contracts and underlying kind of protocol network is Ethereum and that is going to allow on Ethereum mainnet for confidential transactions at some stage. I hope and I'm sure that this is your intent for the confidential transaction button to be in all of our crypto wallets via Zama. But this is going to mainnet relatively soon, correct? Like can you tell us about that? What exactly is going mainnet and when and what will we have the ability to do once it.
- [60:03]
Rand Hendy
Does? So we are launching Mainnet early December, so imminently I would say on Ethereum first and then we're going to go multi chain in 2026. The first use cases that we're focusing on are give you concrete examples because I think it's always better to give you like clear app examples. So there is a company called Raycash which is building an on chain bank that cannot rug you. So the idea is that your money is on stable coins on chain. So even if they go bankrupt you can always withdraw your funds to a different wallet. Right? So like you own your assets effectively but because you're using Zama they can have confidential stablecoin. So your actual money in your bank account on chain is confidential. People don't know how much you have or how much you're spending, which is a very important point. But because again they're using fhe those confidential tokens are composable so you can stake them to earn yield on your bank account. You can swap them for other crypto or tokenized stocks. You can also have of course a debit card and wires on top of it. So every single feature that you have from like a modern fintech app like Revolut, you can build on chain with confidential stable coins in a way that's completely self custodial. That is huge when you think about it, right? That is absolutely huge because in a country where you've been rugged by your central bank or financial system, like I come from Lebanon, Lebanon a few years ago central bank went oh sorry, no more Money, we're freezing all of your dollars in your bank account. Boom, done. This would never happen with an app like Raycash if it existed. Cyprus in Europe a few years ago, Argentina, Nigeria, Vietnam. There's so many places where people cannot actually claim that they own their money and this is a good solution to that. So that's one example. So that's going to be coming out relatively soon. Another use case that we're doing for Zama itself, actually, which I think is amazing, is a confidential vesting and distribution of tokens as a, as a crypto team, you know, like I'm going to distribute tokens to the Zama team, to the Zama investors. We're going to do that with confidential tokens, which are going to be in an on chain vesting contract, which itself is confidential. So, you know, your people don't know how much each other are getting. But everything is on chain, everything is vesting. That is solving such a huge problem that everybody has right now, which is like, oh my God, like, how do we actually keep this information confidential? Because it's actually kind of like very private information. Like your salary is not something you want people to know publicly. There are also a bunch of other things. But I think these two things are very interesting because they show you how simple things that we do today could be do much better on the same platform that you're using right.
- [62:46]
David Hoffman
Now. Can you talk about the diffusion of Xama and FHE on top of Ethereum? So those applications and use cases sound very cool. The challenge with them is they're kind of like ground up. It's something net new, right? It's not something that people are using today. I think what people really, really want, like back to the Holy Grail conversation, is in my gnosis safe or in my Metamask wallet or in my Rabi wallet or whatever. When I'm depositing a position into trade in Uniswap or I am interacting with the AAVE protocol, I want some sort of confidential button where I can go incognito and all of the existing apps and protocols and the existing Ethereum ecosystem just has that like has a confidentiality button by Zama embedded in it. How does that happen? Like do does every single app individually have to build this and opt in and put it on their roadmap or can this happen in a faster.
- [63:48]
Rand Hendy
Way? We, we actually created a standard with OpenZepelin and another company called Inco. We created a standard for confidential tokens, the ERC7984, which effectively, well, standardizes that specifically because we wanted people to be able to integrate something once and for all. The VRC7984 token standard is not just for FHE, by the way. It works also for MPC tokens, It works for TE tokens and to some extent ZK tokens as well. So it's like a general confidential token standard. Of course it's going to take a bit of time for people to start doing that because, you know, it's like a new, like it's a new standard. So we are working today with multiple wallets who are currently integrating it. One of them that I'm using personally is called Braun Fantastic wallets. It's not like one of the existing big ones, like a new one that just came out recently and they did exactly that. You have like a shield button to convert your ERC20 to confidential tokens and then you can do confidential transfers in a very streamlined kind of way. So I think it's just a matter of is going to take a bit of time for the adoption to kind of like take on like everything else. But for having been in crypto for such a long time, I don't think I've ever seen so much interest in adopting something new that just came.
- [65:05]
David Hoffman
Out. Yeah, certainly there's interest. So in that case, you would have to basically take your USDC ERC20 token and then let's say Circle kind of adopted this or something. I'm not sure who would have to adopt this. Then there would be another ERC confidential ERC standard that they would also support. You basically have to take your ERC20 USDC and swap it into the confidential ERC20 asset and then it would be confidential, is that.
- [65:33]
Rand Hendy
Right? Yeah, exactly. So you can shield and unshield your ERC20 tokens so you can convert them back and forth to confidential tokens on Ethereum directly. Right. So this is not happening off chain. This is like on Ethereum. So yeah, in the beginning, at least that's how it's going to be until confidential tokens become the.
- [65:50]
David Hoffman
Default.
- [65:51]
Rand Hendy
Right. And then ERC20 will be the exception when you don't have a choice but have to leave the confidentiality ecosystem. In the beginning we're going from ERC20 to confidential tokens. But the same way that the Internet is encrypted by default now, at least HTTPs or messaging apps, the same is going to happen with tokens and transactions in the future. So public tokens is going to be an exception, not the default.
- [66:14]
David Hoffman
Anymore. Right? It Wasn't always this way. Right. There was a lot of HTTP that had to gradually convert to HTTPs essentially. And that didn't happen all at once. That happened over many years, I believe. And so maybe something.
- [66:27]
Rand Hendy
Happens. We have time. You know, I think it's. I'm not building this as a short term project. You know, privacy is something I've been working on for decades and I think this is one of the most important thing that anybody could be working on right now, especially if they're working in blockchain. And so however long it takes, however much resources we have to throw at it, we're going to make this happen. This has to happen. This is too.
- [66:51]
David Hoffman
Important. So if I have inside of my crypto wallet, if I have USDC and this is supported and I then shield my usdc, what's actually happening in the background? Are there some smart contracts on Ethereum that are I guess getting triggered? Is the Xama network activated? Are there additional like transaction fees to do this? What you take me through the.
- [67:17]
Rand Hendy
Flow. Okay, so let's say you have USDC and you want to turn that into confidential usdc. The first thing you have to do is shield those USDC by converting them to confidential usdc. So this is just a smart contract on Ethereum. So you're basically sending your USDC tokens to a smart contract which then mints confidential USDC on the other side. Right. So think of it like as a wrapping contract, kind of like when you have eat versus wrapped eth. Same idea. USDC to confidential.
- [67:48]
David Hoffman
Usdc. So there's some smart contract gas fees for this that are common to any sort of smart contract on the.
- [67:54]
Rand Hendy
Cds. If you're on base, for example, the gas fee will be zero. Right? Right. Even Ethereum actually was 0.1 Gwei yesterday. So it's never been. I remember man def summer 200 Gwei transactions like that was. That was something.
- [68:09]
David Hoffman
Else. Yeah, I see some doodles in your background. So I don't know if those were purchased with, you know, very high gas fees. But yes, I'm sure you.
- [68:17]
Rand Hendy
Understand. Yeah, so that's the first thing. Right. So you shield those tokens just as transactions. So you pay whatever fees on Ethereum. You have to do that. Now that you have a confidential USDC token, you want to be able to send that to someone confidentially. When you want to send tokens confidentially, you need to encrypt the amount that you want to.
- [68:36]
David Hoffman
Send.
- [68:36]
Rand Hendy
Okay. To encrypt it, you need to use the public key of the Xama Protocol, so you're encrypting it, but you also have to pay a small fee to the Xama protocol to prove that you've used the correct encryption key to encrypt the inputs. So basically you know, the Xama protocol has to verify that you've done the encryption correctly. This is actually one place we use zk, by the way. Right. You produce a Z, a zero knowledge proof of the encryption that you've done and then you request a verification for the Xama protocol. And here you're paying a small fee with Xama tokens and that's where.
- [69:08]
David Hoffman
It'S going to, I don't know if I should call it the Xama.
- [69:10]
Rand Hendy
Network. The operators. Yes.
- [69:12]
David Hoffman
Exactly. The operators. Yes.
- [69:13]
Rand Hendy
Exactly. So when you do that, you're sending that, the operator is verified a proof, they send you back an attestation and this is what you're including in your transaction to Ethereum to say, hey, this is a proof that I'm allowed to send this encrypted amount. The contract does this thing and then when you want to decrypt your balance again, you just call the Xamac protocol, paying a small fee for the decryption and that triggers the MPC threshold decryption and then you get your balance back. So we don't charge for the computation, we charge for the basically encryption and decryption of.
- [69:43]
David Hoffman
Data. Very cool. So while it's confidential, I suppose there's no charge, you just charge, you know, when it becomes confidential or when it, when you're decrypting.
- [69:55]
Rand Hendy
It. Anytime you're encrypting data in a transaction or decrypting data that some states you pay something, but the actual transaction on the L1 or L2 you're using, you just pay the gas fees of that L1 or.
- [70:07]
David Hoffman
L2. Very cool. And that the operators that you were mentioning, Those are the 13 entities that we were speaking about earlier, is that correct? And they're, and they're running some sort of ZAMA infrastructure basically to do this encryption and decryption. And of course it takes a 2/3 majority for them to decrypt anything. And so I'm sure reliability uptime is important. I'm sure that these, I don't know if you call them validators, I'll call them operators.
- [70:35]
Rand Hendy
Maybe. Yeah.
- [70:36]
David Hoffman
Okay. Yeah. So these operators have to have some uptime guarantees and certainly have to be, you know, like credible, high reputation entities. So how does that side of the network work and how are they.
- [70:48]
Rand Hendy
Incentivized? So they have to Stake.
- [70:50]
David Hoffman
Tokens.
- [70:51]
Rand Hendy
Okay. And so it's a kind of traditional proof of stake type thing. You know, if you cheat, if you're down, you can get slashed, all that kind of stuff. And they get rewarded by Zama tokens as well. So users are paying fees for encryption, decryption, Zama tokens, and then we're also giving rewards to operators who are staking in Zama tokens. So the Zama token is a very vanilla utility token used for fees and rewards.
- [71:16]
David Hoffman
Effectively. I was going to ask about this. So the Zama token is coming out soon? It's not out yet, but that's going to come out with mainnet because you need this for operators, is that.
- [71:25]
Rand Hendy
Right? Correct? Yes. So we're actually launching the mainnet with the Xama token and everything early December, so any day.
- [71:32]
David Hoffman
Now. Very cool. All right. In what conditions does an operator get slashed? What types of bad things could they do to get.
- [71:39]
Rand Hendy
Slashed? You know, that's a pretty open ended conversation. Depends who you're asking.
- [71:44]
David Hoffman
Right.
- [71:44]
Rand Hendy
Okay. The way that we're addressing slashing and design protocol is actually through governance. So we think, you know, there are different situations and people can, you know, they can be offline for different reasons. Maybe their data center blew up. Right. Like in that case, it's technically not their fault if that happens. So instead of just having like a blanket slashing for any reason whatsoever, the idea is that the operators between them can effectively look at what happened and decide what's the appropriate course of action. Should we just, you know, kind of like consider that to be like a one off bad luck kind of issue? Was this malicious intent? Should we kick this operator out. Right. And replace them by someone else? Should we slash them? Should we, you know, pause the rewards from some amount of time? So we're basically using like a governance system to decide the appropriate thing. Kind of like, you know, it's like a jury in a way.
- [72:40]
David Hoffman
Right. Can you maybe contrast this and thinking again from a user perspective from other privacy solutions that are available on Ethereum today and kind of the, I guess the pros and cons or how this would work. So on Ethereum today I could. Well, actually I don't think I can use Tornado Cash legally anymore. Or they may have taken that off the OFAC sanction list. I'm not.
- [73:02]
Rand Hendy
Sure. I think they took it out, but I think it's still from the bot.
- [73:06]
David Hoffman
Okay. All right. So something like Railgun, right. Which is a privacy pool. It's not in the OFAC sanction list. And so basically it's somewhat complicated, but you can kind of like shield your transaction that way. Does require some gas fees. That's one possibility. On Ethereum, there's other privacy pools as well. So there's the privacy pool type of.
- [73:28]
Rand Hendy
Camp.
- [73:29]
David Hoffman
Yeah. And then there's something that Aztec is rolling out. They're going to Mainnet soon. This has been a long awaited Ethereum project that's a layer two. It promises privacy. I don't really have a sense for how that's going to feel from a user perspective, but I guess, my guess is it'll feel somewhat like bridging to an L2. It'll be that whole experience and then when you're on the other side of that bridge, you kind of enjoy, you know, privacy for everything, but you still have to go through the bridging process and it breaks composability, it breaks liquidity. So those are the two general streams of options I see on Ethereum. For privacy and confidentiality, you're adding a third. So how will the third feel for users compared to those other.
- [74:13]
Rand Hendy
Two? It'll feel just like using Ethereum. Right. For developers it'll feel like just like building for Ethereum, everything is in solidity and you're pushing your contract to Ethereum. For users, everything's going to feel like Ethereum. You're using a wallet to make a transaction to Ethereum. And that's really how we taught about this. Right. We don't want people to use something else, we want people to use Ethereum.
- [74:34]
David Hoffman
Confidentially. How confidential is this? So we've talked about sort of the encryption decryption side of things. I'm fine there. But in the process of going from unshielded to shielded, am I leaking any other data in that process? Is there other stuff like, you.
- [74:51]
Rand Hendy
Know, I guess when you're shielding, it's a public operation. So people know how much you deposited as confidential.
- [74:57]
David Hoffman
Tokens.
- [74:58]
Rand Hendy
Right. I mean, same thing if you're bridging to a privacy chain, you're or even to railgun like you know, the, the deposit is public, once it's shielded, then everything is confidential. So of course, you know, the idea is that people never unshield. Right. It's like, you know, you shield once and then that's it. But even that, to be honest, I'm a little bit, I don't like it. Right. The fact that the shielding is public. So what we're currently working on is finding ways which you can have on and off ramp with confidential tokens. So when you're getting a stablecoin minted, you would get natively a confidential stablecoin. So there'd be no shielding necessary. When you deposit tokens to an exchange or withdraw from an exchange, you deposit and receive confidential tokens. So technically you could use an exchange as a way to rebalance between multiple.
- [75:49]
David Hoffman
Addresses.
- [75:50]
Rand Hendy
Right. If you have this confidential on and off ramp, then the shielding thing is no longer an issue. Very cool. I mean, arguably Coinbase would see how much you have because you send them the confidential tokens, but that's an acceptable trade.
- [76:03]
David Hoffman
Off. I think this is what you've just described is the thing that's coming to Ethereum, Mainnet and then to other chains later next year. That's the Xama network, the Zama protocol. There's also, my understanding is there's other projects using Xama technology and achieving some, enjoying some of the benefits of FHE and what you guys have developed, but taking it in a different use case in a different direction. I'm not familiar with many of these, but one I'm somewhat familiar with is Phoenix. And my understanding is they were originally an L2 that was completely private. Maybe they've moved to being sort of a CO processor now. Maybe. Maybe use Phoenix as an example of how are they using fhe. And I should say it's Phoenix with a FHE Phoenix, not Phoenix. Yeah. So what's that doing? What's that project up.
- [77:00]
Rand Hendy
To? I mean, I know, I know the team at Phoenix very well. You know, we're very close and they're one of the best teams in privacy. Guy, one of the founders, this is his third privacy.
- [77:10]
David Hoffman
Protocol. Guy, one of the founders, the other co founders, also named Guy, which is kind of.
- [77:15]
Rand Hendy
Fun. So these guys, I guess so one of them, One of them, Guy Iskind, he started Enigma, which was an MPC confidentiality.
- [77:25]
David Hoffman
Protocol. I remember.
- [77:26]
Rand Hendy
That. Then he started Secret Network, which was also a confidentiality protocol. Now Phoenix, I think he's one of the very few. He must be the only one who launched three privacy project. Like, he knows what he's talking about. Like, you know, this, this is like, this is a serious guy, no pun intended, you know, that we're, we're talking.
- [77:42]
David Hoffman
About. It's two serious guys.
- [77:43]
Rand Hendy
Right? And the other guy actually was working intel on fhe stuff. So, like also coming from like that field, honestly, I would say that, like, you know, for us, they're one of the best teams out there for sure. And so they're using Zama's cryptography to build their own confidentiality protocol and co processor so it's the same underlying fhe tech, but it's a very different instantiation that they've built on.
- [78:09]
David Hoffman
Top. Interesting. This has been very helpful, Rand. I've really enjoyed this. Maybe often, I think conversations with founders about projects like this start with like, hey, what's your bio? And you're like, what are you doing? I wanted to get right to the meat of what you're actually doing for confidentiality in crypto. I feel like we've done this so now we can get to the bio part of the episode because you have a very interesting, like, the. The way you got here and what you've been up to in life is pretty interesting. So you have a bioinformatics PhD. You've also been in crypto since 2013, since the early years. You also. My understanding is you have some interest in kind of the degen side of things, like meme coins. And I, I see some NFTs in your backgrounds. You're doing all of that. You're also involved with, like, longevity and biohacking. I don't really know where to start in this, like, set of questions, but, like, tell us a little bit about yourself. Like, what are you up? What are you up to? How'd you get.
- [79:10]
Rand Hendy
Here? I started coding when I was like 10 years old. Built my first company as a teenager in the 90s. It was a social network at the time. And that's actually, by the way, when I started caring about privacy the first time. Because when you build a social network and you see the amount of personal data you're collecting, you're like, oh, my God, this is wrong on so many level. And then eventually ended up doing machine learning. Did a PhD in AI, applied to biology, bioinformatics. I loved bio and AI. For me, like, bio and data was always like, two of my favorite things to work on. Decided to go down the route of AI and built one of the first AI companies in Europe already focusing on privacy, which is where I discovered fhe and met my co founder, Pascal.
- [79:50]
David Hoffman
Payet. When was this, by the way? When we were doing the AI.
- [79:53]
Rand Hendy
Thing. 2015 to.
- [79:54]
David Hoffman
2019. So this is before the whole LLM.
- [79:56]
Rand Hendy
Breakthrough. Yeah, yeah, yeah, yeah. Actually. Actually, I sold that company in 2019. Oh, wow. In hindsight, good timing, because now that I see what it took to build AI, I mean, you know, we. We didn't have the funding to do that. We were thinking not a hyperscaler. We were thinking tens of millions, not.
- [80:17]
David Hoffman
Billions. Yeah, right. In the.
- [80:19]
Rand Hendy
Trillions. Now I'm pretty sure in the trillions now. So that went great, you know, made a bunch of money selling the company. And so since then I've been investing also quite actively. So like I've invested in about a hundred companies. I like to invest in super deep tech complicated projects. So my kind of like line to founders is if they go to a VC and he doesn't get it, they should come and pitch me instead. I love that. And so yeah, so crypto since 2013 mostly. I like on the, as you said, investor trader, DJ inside. This is my first crypto project as a founder for sure. So like it, I would say, like it's not what privacy is obvious because it's something that has been like a red thread in everything I've done. But to be honest, Zama could have gone the way of confidential AI or the way of confidential blockchain. And in fact for, for a time we were building both. It's just we found that the need for confidentiality in blockchain was much more urgent because there is no other way to build those use cases we.
- [81:22]
David Hoffman
Want to build with finance, maybe come back around to AI at some point. I actually I'm having the, the founder of Proton, you know, the ProtonMail and the Suite of services there, of course. And one of the topics I want to discuss with him is like, hey, what's the state of AI privacy? I mean they rolled out sort of a, you know, AI privacy sort of feature inside of the Proton ecosystem. What's your take on this? I'm deeply worried about it. Like As a daily ChatGPT user, I'm like, I've read the terms and service. No, I had chatgpt read me the terms and services for terms of service for ChatGPT and it's not great. Like different people with different access can get your information in ChatGPT. I mean like when I talk to a doctor, there's things like hipaa, right? There's confidentiality that I have baked in. If I talk to a lawyer, I know the lawyer is not going to sell me out. I know, I know it's going to be confidential and people are having these conversations with ChatGPT and have no idea where the data is going and what their civil protections of that actually are. Can we change that? Like, what's your assessment of the current state of AI and.
- [82:34]
Rand Hendy
Privacy? I think it's going to happen. So, you know, I know a lot of the AI founders just, you know, by virtue of being early in the space, right. Everybody wants confidentiality in their AI.
- [82:45]
David Hoffman
Products. The Founders.
- [82:46]
Rand Hendy
Do? Yeah, yeah, the founders do. Yeah, they.
- [82:48]
David Hoffman
Don'T. They, they don't. You, you think they're genuine in that they're not trying to data mine us and you know, steal our, steal our.
- [82:54]
Rand Hendy
Data? No, no, no. 100% like data is toxic for a company. It's liability. Right. People need it to offer a service, but nobody wants it. Right. If people could offer a service without having access to the data, they.
- [83:05]
David Hoffman
Would. But isn't that service ads? They want our attention, our eyeballs. They want every know everything about us so they can sell us more.
- [83:12]
Rand Hendy
Stuff. You can do confidential advertising, right? Okay. The point is people want things like FHE for AI, but it's just that right now the way the AI industry works, the compute is so, the size of molar is so big and they're already like so, so limited in how much compute they can access. Like there's not enough energy, electricity production in the US for AI demand. Okay. They cannot afford any extra computation cycles for confidentiality. So right now the economic model of AI doesn't allow you to bake in confidentiality. Even if it worked. Even if it worked. So until we find a way to make AI models smaller or to make GPUs cheaper and less energy consumption consuming is going to be very difficult to make that happen. So it's not, it's not a question of whether people want it, it's just a question of economically right now is just.
- [84:07]
David Hoffman
Infeasible. So it's basically back to a tech problem again, right? Back to, back to why we haven't had confidentiality and privacy. Blockchains is not because the demand isn't there. It's not necessarily because of regulators. It's because we don't have the tech and scale to actually pull this.
- [84:21]
Rand Hendy
Off. I'm convinced, to be honest, I'm convinced that, you know, the same way that we went from no encryption to encrypting data with HTTPs, we're going to end up encrypting data end to end in everything we're doing, including AI, including blockchain. And the day that's going to happen, nobody's going to care about privacy. Not because they gave up, but because it's going to be by default in everything we're doing. And that's the end goal. You know, like when I think about Zama, when I think about fhe, when I think about all of these technologies, I don't just think about it for blockchain, I think about it as like a technology for everything that you're Doing on the Internet down the line. Blockchain just turns out to be a great way to.
- [84:57]
David Hoffman
Start. Rand. I was just relistening to an episode we did with Brian Johnson. Don't die. You know, are you. Are you in the kind of the Brian Johnson camp of longevity? I. I actually haven't.
- [85:08]
Rand Hendy
Read. Yeah, I am, actually. So my latest longevity score is 0.68. Wait.
- [85:14]
David Hoffman
What'S. What's a longevity score? What is that? Is it that called the Done.
- [85:17]
Rand Hendy
Amp ranking for the Dunedin pace. So basically, they measure the pace of aging. So how fast are you aging versus calendar months of the year? So if you're like, you know, 0.68 like me, it basically means that, like, you know, you're aging 0.68% of a full year per year, effectively. So, like, you're aging slower, which is great because, you know, 0.68 puts me like, in the top 20 on Brian Johnson's leaderboard.
- [85:45]
David Hoffman
Wow. You're really listed on the top 20 of Brian Johnson's.
- [85:48]
Rand Hendy
Leaderboard. I haven't updated my score yet, so I'm like in the top 50 still. But when you update my latest score, it will be the top 20.
- [85:55]
David Hoffman
Yeah. Oh, my God. So you're serious about this? You are a longevity athlete.
- [85:58]
Rand Hendy
Sir. Oh, dude. Like, I. I'm. I'm. I'm like full on biohacker. Like competitive.
- [86:02]
David Hoffman
Biohacker.
- [86:03]
Rand Hendy
Right? You know, it's. It's a thing, man. Competitive biohacking is a.
- [86:07]
David Hoffman
Thing. How often do they take this? The score or do you submit the.
- [86:11]
Rand Hendy
Score? I do it once every.
- [86:13]
David Hoffman
Quarter. Okay. Is. Is there some ability to game it? Like, how do they. How do they verify the integrity? Oh.
- [86:18]
Rand Hendy
No. The company that does the test uploads the.
- [86:20]
David Hoffman
Score. I see. Wow. Are you Brian? Like Brian Johnson? It feels like he's doing this 24 7. It doesn't seem sustainable for the regular.
- [86:30]
Rand Hendy
Person. I tried doing that, man. Actually, I tried both ways. I tried to be very unhealthy. At some point, I did an.
- [86:37]
David Hoffman
Experiment. Yeah, we tried to be unhealthy.
- [86:40]
Rand Hendy
Yeah. So I wanted to start a company doing AI for nutrition. But a problem is I was fit. And so I needed to find a way to be unfit to get.
- [86:48]
David Hoffman
Fit. You did a super size me.
- [86:50]
Rand Hendy
Thing. I did a supersize me. I gained over 70 pound in a year. That was a lot. That was a lot. That was a lot. And. And then my mom started freaking out. She was like, please, I beg you, stop, stop. I was like, no, I'm gonna. And then I stopped. And then a year later I got fit again. And then at some point I was like, you know what, I want to try the other way around. Like, what does it take to get ridiculously fit? Like, you know, to, to a point that makes no sense. Yeah, well, I, I called up a friend of mine who's a coach in LA and I told, hey, you know Mike, what are you going to do for the next few months? He's like, not much. I'm like, come to Paris, live in my house and train me. You know, for six months, like hardcore style. So for six months I had a live in coach that was basically training me everything, you know, food, workouts, mindset, like every single thing. 24 7. Wow. So obviously I got like extremely healthy and ripped. But it was, you know, 20 hours a week of efforts going towards that. So completely not doable when you're building a company. And so now it's more like an 8020 rule. So I do 20% of what I used to do, but I still get 80% of the.
- [87:56]
David Hoffman
Benefits. Yeah. To be able to be a founder and fully dialed into that and Then also top 20 longevity score. I mean, you must have found some secret combination.
- [88:05]
Rand Hendy
Here. Yeah, well, I mean, you know, it's actually not that hard if you know what you're doing. So there are six things that you have to figure out first. First, sleep well, eat well, exercise, don't smoke, don't drink, have friends. I swear, these are, these are the.
- [88:23]
David Hoffman
Six. That's.
- [88:24]
Rand Hendy
It. That's lifestyle wise. That's all you have to.
- [88:27]
David Hoffman
Do. And that helps you live longer. That will, you'll get to increase your.
- [88:30]
Rand Hendy
Longevity. You'll get to 100. Just that. Right. Then the question is how do you get, how do you get to 120 or more than that? That's where you get into supplements. That's where you start getting into biotech, into interventions and protocols as Brian, you know, calls them. So my protocol is pretty simple. Like I'm basically optimizing for immune system, for blood flow and for energy metabolism. The logic being that your body knows how to fix itself. So if you have a good way to fix it, enough energy to fix it, and you know, good blood flow to make it kind of like spread around, let the rest happen naturally. Biologically, are you fully on board.
- [89:12]
David Hoffman
With the whole like, you don't think you're going to die type of thing? Like, do you think you actually could live.
- [89:17]
Rand Hendy
Forever? Well, I'm certainly hoping that, you know, technology will get us there, but I do have a Plan B, in case it doesn't happen, which is being cryopreserved. So, you know, worst case, you know, there's someone's going to put me in a nice box and wake me up in a thousand years. Who cares? You're dead anyway. You don't see time pass. I've invested in that company, by the way, you know, because I was like, look, if I'm going to be a customer, I might as well know that this is legit great company based in Germany called Tomorrow Biostasis. I know it seems like far fetched, but look, it's a plan B, right? Plan A is live for as long as possible, healthy, happy. Plan B, you know, you get hit by a bus, at least you know you have a tiny, tiny chance to make it.
- [90:00]
David Hoffman
Back. If you're living for hundreds of years, do you think this can be achieved biologically? Or is there going to have to be some silicon biology sort of fusion? Are you envisioning a world where maybe you are encrypted inside of a data center somewhere your mind is there. Hopefully it's encrypted, right? Hopefully it's got some fhe behind that. So someone can't hack your.
- [90:20]
Rand Hendy
Mind. I think there is a camp of mind uploads, right. I'm more in the camp of fixing biology like you fix a.
- [90:29]
David Hoffman
Car. You kind of like your body the way it.
- [90:31]
Rand Hendy
Is. Yeah. Keep it the way it is, maybe replace a heart here and there. Right. But like at least preserve a biological kind of like baseline. That's what I want to.
- [90:43]
David Hoffman
Do.
- [90:44]
Rand Hendy
Right? Like maybe it's fun to be in a computer, but I don't know, I just think it's fun to be here right now talking to you. So I want to keep that going as much as I.
- [90:52]
David Hoffman
Can. Yeah, that's my feeling too. I mean, I really like blockchain. I'm not sure that I'd want to live inside of a blockchain, whatever that would mean in the.
- [91:00]
Rand Hendy
Future. Imagining, you know, coming back as a meme coin, like how does that.
- [91:04]
David Hoffman
Feel? That'd be called hell. I think. Ran, this has been really fun. Maybe just last question for you, 2026. What progress do you think crypto is going to make in terms of privacy and confidentiality? What should we look out.
- [91:17]
Rand Hendy
For? I think 2026 is really going to be a turning point where privacy zama hopefully. But also other things are going to go mainstream and are going to start to be integrated by default. I think every wallet, every exchange, every defi protocol, every stablecoin is going to have a confidentiality feature because it's net better for everybody to have.
- [91:38]
David Hoffman
That. That is good. That is bullish. That is great news. Thank you so much for joining us today. Bankless Nation. Got to let you know, of course, none of this has been financial advice. Though if you do have finances on the blockchain, you'll want to make sure to keep them private. You'd lose what you put in. But we're headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the Bankless journey. Thanks a lot.