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The State of the Ethereum Blockchain with Andrew Koller
00:41:13
Ethereum is a decentralized blockchain platform that was created by Vitalik Buterin and Gavin Wood in 2015. It uses a cryptocurrency called Ether as its native token to power transactions and operations on the Ethereum network.
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- [00:01]
Sean Falconer
In an upcoming special podcast miniseries, Software Engineering Daily sits down with Turing Award recipients, the most prestigious honor in computer science, to explore their lives, achievements, stories and insights. What inspires these innovators who have transformed the field of computer science? And how do their groundbreaking ideas continue to shape technology? Today, we delve into pioneering work in programming languages, breakthroughs in computing performance, revolutionary advancements in chip architecture, and more. Join us this March and April for rare and thoughtful conversations with Turing Award winners and learn about some of the most influential breakthroughs in computer science. Ethereum is a decentralized blockchain platform that was created by Vitalik Buterin and Gavin Wood in 2015. It uses a cryptocurrency called Ether as its native token to power transactions and operations on the Ethereum network. Ethereum's proponents envision a future where the network forms the foundation for a second platform layer called L2, where decentralized applications are run. As we approach the 10th anniversary of Ethereum's creation, we wanted to understand the state of the technology, so we spoke with Andrew Koller, who is an engineer at Kraken, which is a software company and popular cryptocurrency exchange. In this conversation, Andrew talks about Kraken. So security considerations at an exchange, the history of Ethereum, L2, and the future of Ethereum. This episode is hosted by Sean Falconer. Check the show notes for more information on Shawn's work and where to find him.
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Host
Andrew, welcome to the show.
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Andrew Koller
Hey, Sean, thanks for having me.
- [01:51]
Host
Yeah, absolutely. Great to meet you. Thanks for being here. Excited to talk about this. So Kraken is one of the world's largest leading cryptocurrency exchanges, but I think for those that aren't sort of in that market and steeped in the world of blockchain, they might not know that much about it. So to start off, can you tell me a little bit about Kraken? Like, what is it? How is it unique?
- [02:13]
Andrew Koller
Yeah, absolutely. So cryptocurrency has gone through many, many cycles, right? You see it in the news when the price is going up. You also see in the news when the price is going down. And everybody has these, you know, articles that come out that are, hey, I told you so, it's not going to work. And then, you know, two years later, it starts going up again. So I think with any kind of emergent technology, AI included, there's all these kinds of, you know, hype cycles around it of like, okay, we've pushed the limits of the tech. Everybody's been going nuts on improving efficiency and Then all of a sudden, you know, we kind of crash back to earth of like, okay, what's the use case? Like, you know, think of the machine learning in the 2010 time where it's like the hot thing and then there's kind of like a cool off period of okay, actually where do we apply all of this? And now with Gen AI and all the recent resurgence, it's clear that there's applications. Maybe this will be another bubble, I don't know. So just little precursor to, you know, cryptocurrency and kind of like the cycles of it. But Kraken, we were founded back, I believe it was around 2013, 2014, and it was after this exchange that had not really great security practices in Japan called Mount Gox collapsed and they kind of became insolvent. So our co founders, one of them being Jesse Powell, started Kraken as kind of a response to that of like, let's bring some trust into the cryptocurrency space and make a very secure exchange where, you know, people can bring the enthusiasm that they have for this emerging kind of like distributed ledger technology and be able to use a trusted platform that they can conduct their trades on. Over time we've evolved that to getting into basically doing everything that you would do with your finances in a daily life and have very ambitious goals to be kind of like a one stop shop platform for finance, but with a heavy emphasis on crypto. So yeah, that's kind of Kraken in a nutshell. In its place, we're second in the U.S. we're leading in Europe among kind of like the big regulated exchanges and it's a wild ride.
- [04:07]
Host
Yeah, I would think that being part of any sort of startup and technology company, especially going through growth phases, has a lot of ups and downs. And I think crypto at least, like as an outsider, I would think that those things are even more amplified just because the swings are even more wild than even sort of like a conventional startup.
- [04:26]
Andrew Koller
Yeah, in the crypto space we always say that bear markets are for building. And right now we're kind of in a bull market. Like Bitcoin is hovering around $100,000 and we are still building. But it's difficult, as in the crypto space, especially when you're kind of like a small startup, to not pay attention to the hype that's going on when you're just trying to build like cool technology and good products. So there's a little bit of distraction that happens. But typically like, yeah, when there's bear markets you just kind of, you huddle up, you shelter and you don't care about price, you just push the technology to its limits because people that work in the space get very fanatical about it because we believe in it.
- [05:02]
Host
And then you mentioned with the Japanese exchange that there was some challenges around like safety and trust. And that's been a big area of focus for Kraken. But given that, at least my understanding with blockchain, the advantage of sort of decentralization, immutability, crypto security, all these things is sort of the focus has been sort of safety and trust. So why was that a problem? Like what was sort of the disconnect there?
- [05:26]
Andrew Koller
For a centralized exchange, you are still taking deposits on behalf of clients, right? So even though they are using a decentralized ledger like Bitcoin or Ethereum, where you don't have to worry about your funds being compromised because you fully own and self custody your private key, if you want to go do an on and off ramp, you have to take that to usually a centralized entity. Because no matter what, even though cryptocurrencies allow you to kind of do your entire kind of family's wealth with, you know, just at your desk without a middleman, if you are plugging back into the traditional banking system, you do still have to do typical AML KYC laws and make sure that you're adhering to it. All the jurisdictions that have their own kind of little flavors of how they handle AML and kyc, so that's kind of where the trust comes in. If I had five Bitcoin and I want to get some USD for it because I have to go pay my mortgage or something, then I'm going to go to a trusted on ramp, in my case Kraken, and make sure I'm all kyc. And then when Kraken takes my Bitcoin, it's custody under our own secure kind of private key storage and infrastructure. So that's like where some early exchanges may have gotten that wrong. And I don't necessarily blame them because cryptocurrency was in an infancy, right? It was, you know, you could generate a private key with just running a command on your terminal and you see the output of the private key and you think, okay, cool, this is secure. But you know, that's why we've evolved to have some kind of so many offline private key generation, a lot more advancements in cryptography with multi party computation and the space is a lot more mature. So you know, a lot of the big exchanges out There you can do a decent amount of trust that they're going to be custodying the funds in the way they should. Otherwise, you know, you get into all kinds of insolvency things. If there's a hack and your funds leak, you're going to be hit with all kinds of penalties and it's not good for the space. So that's why Kraken spends so much money and so much time investing in security and making sure that those private keys that hold deposits are 100% sound.
- [07:29]
Host
Got it. Yeah. So it's less to do with sort of the underlying sort of model of the blockchain, you know, once things are sort of on the chain and secure. But how do I, you know, offload that essentially in a secure way and exchange it for some other, you know, financial currency like a USD or something like that? And that's where sort of conventional security and trust is going to come into play.
- [07:48]
Andrew Koller
Exactly, yeah. I mean, if I talk about the top, you know, whatever 10 currencies on CoinMarketCap, you can very safely say that most of those are what we would consider decentralized. So if I had a private key on my desk and I have, I don't know, x amount of bitcoin associated with it, barring any kind of quantum, you know, like changes in that technology that could like crack a private key, nobody's ever going to get that the bitcoin consensus is decentralized enough where that's never going to be compromised. There's not going to be a cabal of miners that come together to try to censor transactions or anything like that. There's so many people mining, or in Ethereum's case, validating the blockchain, that that censorship just isn't there.
- [08:27]
Host
Okay. And then you've been at Kraken for six years or so and you know, we talked a little bit about sort of the change that's happened in the general crypto market and the ups and downs. But what about from like an engineering and technology perspective? How have things changed for you and your team there over the six year period that you've been working on it?
- [08:47]
Andrew Koller
I think the biggest change is even around what we were just talking about. So you create these kind of like offline, air gapped places where you generate private keys and hold client funds. And maybe in the early days it's more of like, you know, you're just kind of using an offline laptop or something. But as the space has evolved, the people that provide like HSMs, which are hardware security modules, they get more advanced and they start adopting blockchain technology or the not really blockchain technology on the HSMs, more of like what elliptic curves do these cryptocurrencies need? And the HSMS will then start supporting those out of the box because they know exchanges like us need good tamper proof hardware. So I think one of the biggest changes is, is that private key storage that, you know, I led the engineering efforts building out our qualified custody product started about three years ago and, and we launched that last year and it took a lot of engineering effort to make a qualified custody product that can be audited and can be shown to all kinds of jurisdictions and prospective clients. So they can kind of trace exactly how we're doing private key generation offline. They can see the whole technology stack where if one person has access to it, they can't compromise it. So it's a lot of time in front of the whiteboard, kind of just threat gaming your technology to make sure that truly nobody can ever access this. And that is a constant evolution at Kraken. I think five years from now there will be a whole nother way that we're doing private key storage. We just always have to stay on top of it.
- [10:13]
Host
Okay, can you walk me through a little bit about like how does that private key generation offline system work?
- [10:20]
Andrew Koller
Yeah, not to get too into like the secret sauce, you know, for prospective qualified custody clients, they can definitely jump into it. But if you have like a hardware security module that has a tamper proof processor in it and you want to have sufficient entropy to be able to make sure that you're having good randomness to your private key, then typically it's just sourcing some entropy from that and you know, generating your 32 bytes of randomness that goes into being the seed of the private key. Because at the end of the day on all these curves, the private key and public key are just big integers. And you just got to make sure that you know, as you're generating these, you're not doing it in any kind of predictable way. So using like cryptographically secure algorithms or cryptographically secure entropy, to be able to create these is what's needed. Because there has been over the decade plus in crypto there have been some libraries that come out that claim to be a safe generation of private keys. But say the entropy they're using is from the CPU clock. And people have been able to kind of reverse engineer and see that if you're generating a private key with these libraries, then you can kind of like predict what's going to happen. Like if, you know, somebody generated a private key at like midnight on some date and there's these kinds of processes happening, you might be able to kind of tell what the CPU is doing and then get close to that private key. So as long as we're using those hardware security modules and doing this with sufficient entropy, you can be very confident that it's cryptographically secure.
- [11:49]
Host
And in terms of like CPU security, are you talking about enclaves in this situation?
- [11:55]
Andrew Koller
Yeah. Like, that's another thing is we were huge fans of Intel SGX before and that's like more on the kind of like encrypted memory part. But we were huge fans of being able to have like a hot wallet, which is like a private key that's not in cold storage, because cold storage is where you truly don't have it connected to the Internet anywhere. And it's like you have to physically go there to like perform an operation. But if we had wallets in the hot setting, then utilizing something like Intel SGX is great because at least we would have confidence that if something was compromised, an intruder is not going to be able to decrypt the contents of the process that's happening.
- [12:32]
Host
Got it. And then, you know, it's really like difficult to get encryption. Right. I have a, you know, a little bit experience with this, working previously at a privacy and security company and even, you know, based on some of the things that you're talking about here, choosing the right libraries, choosing the right algorithms, encryption key rotation, like there's all these sort of tripwires that can really creep up that someone could eventually exploit. How did you kind of learn this space and know that you're following the best practices?
- [13:00]
Andrew Koller
Good question. Personally, I had no formal cryptography training, but I think that's one of the huge benefits of getting enthusiastic about cryptocurrencies and kind of like importing your first few libraries where maybe you're just making a wallet and a private key on a terminal. You naturally have to start to do your own education and understanding of like, okay, Ethereum uses ECDSA on the SEC P256K1 curve. Right. Or Bitcoin has Schnorr signatures that allows the Edwards curve and EDDSA signatures. So when you see the libraries having to perform these things, it naturally makes the crypto enthusiast just go explore. And we never, at Kraken, we would never release a new currency for people to deposit and withdraw and trade with. We would never really put deadlines on them. Because we 100% wanted to make sure it was secure before it went out. So we would have dozens of eyes looking at how we're doing the signing on the hot wallets and everything and inspecting the libraries that these like currencies might have as like a wrapper of a high level SDK and getting deeper into like what library are they actually using for the private key generation for the signing. And you know, most of them use like the audited ones out of the box. Like, you know, something with SEC P256K1 is going to be very popular among all the SDKs. So at least we have some confidence that there's not just dozens of Kraken eyes, there's also thousands of open source eyes looking at this. Unfortunately though, we have to be really on top of it because some of those popular ones can still get vulnerabilities. And knock on wood, we've never had that at Kraken. But you know, if there was a major one that a vulnerability came out, then us and probably all exchanges would need to have like a 24 hour war room where we're rotating some keys and upgrading the processes there.
- [14:44]
Host
Even outside of the, whatever sort of the encryption libraries are you using, what kind of care do you have to take when working in financial space when you're thinking about incorporating a new library, a new service, how do you sort of protect against the risk of some sort of supply chain attack that happens way down through a variety of different library dependencies?
- [15:06]
Andrew Koller
Yeah, first like just on the initial kind of like build out, like say you haven't written a line of code and you're going to look at how we're going to do this new currency or this new storage system. Most of the lower level dependencies we're going to be looking to see if they're NIST compliant, they're audited. We might even fund our own third party auditing firm to go look at it. We've done that a few times. Even though they have some certifications, we just want our own kind of set of eyes on it. And so as I said before, like we have a massive security team at Kraken, I think more than any other exchange because we will rotate people around to just go do our own independent audits even outside of a third party. So every single library lower level, you know, we have our own list that we performed audits on. But we'll look at, you know, anything under the sun to make sure it's up to our standards and then, you know, like care on these, it's like the actual kind of architecture and planning these, I think, can, like for the custody build out of that new cold storage system. I want to say it took maybe four months of just constant iteration, being in front of a whiteboard, filling it out, wiping it and trying again. Because there's so many other considerations outside of just like libraries and generation, where you want to make sure that these private keys don't have access by one individual. So that's where you get into thresholds, cryptography. So you can split these things up and make sure that there's an M of N. Like three to five people have to come together and that I would think that we're not unique there. Everybody has to do some of that because we also have to show to regulators and everyone that no individual, no one person can go to this private key. You must have certain directors with secret material to come together to do something with it.
- [16:44]
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- [17:35]
Host
I want to talk about some of the work that you're doing with respect to layer two protocol. So first of all, can you give a little bit of background on what layer one protocol is, what layer two protocol is? How do they kind of compare and what are the advantages of this layer two protocol over layer one?
- [17:54]
Andrew Koller
Yeah, so earlier when we were mentioning the security of a centralized side, and then, you know, the security of a decentralized side, you know, in order to sufficiently maintain a level of decentralization on a blockchain, you really want it to be as accessible to all people. So if you want good decentralization, you want it so that anybody can go open up like a laptop or spin up a kind of cheap AWS server and go run the binary of Bitcoin or Ethereum or something and be able to start validating and mining blocks independent of anybody telling you what to do. It should be like very cheap to do so. Therefore you can have maximum world participation in that protocol. Some protocols take a different route and they push the technology to its limits and they might do some decentralization trade offs and say, you know what, okay, you have to spend $20,000 a month on this AWS server to run and participate in the blockchain. That definitely limits the amount of people that can participate. And so you kind of run into these little bit of centralization risks. And us getting involved in an L2 protocol and wanting to take Kraken more on chain is really latching onto the decentralization ethos that Ethereum maintains. They really want to make it so that it's super cheap to run something. And to do that, you can't really push the scaling limits as much as you want again, because the cost will go so high if you're pushing that throughput to like 100 milliseconds a block. You have to have some beefy infrastructure to do that. So Ethereum's taking this different route, decentralization above all else. And that's where L2s come in. Ethereum has a scaling roadmap so that on the layer one, which is the base blockchain of Ethereum, you don't push the limits of that. You allow layer 2s to have their own blockchains that actually settle back to the L1 for security. And the L2s can do all the experimentation they want. So if we really wanted to push it and say our L2 by the end of 25 is going to have 200 millisecond block time, it might be more costly to run it. And that can be a trade off that the user then takes is like, I'm going to go participate in Kraken cell 2 with really fast block times. But at the end of the day, I know that the L2 that I participate in and I say I have a million dollars or something on there, it's still secured by the L1. So even if Kraken went defunct tomorrow and people had a ton of money on our L2, they still can cryptographically submit something to the L1 to get their funds back in control at the Ethereum kind of base layer.
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Host
How does that work? The part where essentially of getting the funds back from the layer one?
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Andrew Koller
Yeah, like, you know, there's this concept of bridging in the scaling roadmap of Ethereum So if I have funds on Ethereum right now and I want to go to Kraken Zeld 2 Inc, then there's a contract that you actually send the funds to. And a contract is like a smart contract, basically a program that you can deploy on chain and the validators are all participating in the computation of what you want to do on chain. So if there's a contract deployed, it's usually called a bridge contract. And you know, I would send funds to it and the contract will lock my funds and then actually mint you the equivalent on the L2 because the L2 is posting data back to the L1. So there's a bi directional communication there and the L2 will understand. Okay, Andrew sent funds to this contract. It's locked there. Now I'm going to credit him on the L2 for the equivalent amount and then you can go participate in the L2 with those funds. And then when you go back to the L1, it does the same thing. The Ethereum on the L2 goes away, your balance goes to zero, and then you get released the funds back on the L1. Yeah.
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Host
So there's essentially sort of built in backwards compatibility.
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Andrew Koller
Yep. And again, if you know when to wait, tomorrow you could interact with that contract on the L1 and you can do a proof that you know the blockchain is not running and posting data to the L1, then that will allow you to actually unlock your funds on the L1. So it's a beautiful kind of like trustless system where you really don't have to trust Kraken here to maintain ink and you can get your funds off even if we turn off everything tomorrow.
- [21:50]
Host
Are there new problems that get introduced with this new protocol?
- [21:54]
Andrew Koller
Fragmentation, I think is the biggest right now. And that's what we're all thinking about pretty much every day in the blockchain space. So you want to maintain decentralization, great. That means you need to kind of scale horizontally in all these L2s. But fragmentation comes into place if we, you know, I think globally there's like 100 million people interacting with decentralized ledgers. And so that's kind of a small fraction of the world still. And if you have a bunch of people using Coinbase's L2, you have a bunch using ours, and then there's like 50 other L2s that people are dabbling in. The liquidity of funds kind of gets fragmented all these places. And you might have the same, say, lending protocol deployed in multiple places. Well, you can't really tap into the liquidity. If you're on Inc over to Coinbase's L2 base and this is a huge scaling problem that the blockchain researchers and the whole community is thinking about is how do we make communication channels between the L2s such that if I'm on ink I could use liquidity on base and vice versa without the user even knowing. And I think a lot of those kind of interoperable research projects are going to start coming online in about mid 25.
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Host
Was the learning curve for L2 a challenge above? What you'd experience with L1 L1s are.
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Andrew Koller
That'S just like you launch a blockchain and it's there. Right. And you have whatever block times and kind of centralization or decent trade offs. L2s introduce all kinds of, I think new complexities because they had to hard fork the L1 to be able to support this kind of communication channel where the L2s post data back to the L1 so the L1 can look at it and say, okay, INC performed all these actions in the last hour. I'm going to bundle them up and post them to a block in the L1. So it's now immutable. That kind of learning in getting into the protocol changes for that was a, that was a huge feat I think for, for all of us because we weren't protocol engineers to start and we really had to dive into some complex go code and rust and all that to really understand how this is working so that if we do any modifications of the protocol we don't mess it up. And that's like in crypto kind of financial engineering. That's the thing that can maybe make you sprout a few gray hairs early in your life. Because one small change, one small mistake on the protocol level, you could be compromising people's funds. That's maybe why some people perceive cryptocurrency moves slow on the research side because you really have to get this right.
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Host
Yeah, I mean I think that's the case even with sort of conventional or like non blockchain based financial services and fintech is essentially the consequences of getting it wrong are massive.
- [24:40]
Andrew Koller
Yeah. And you will always see in the news that some protocol was hacked or and it's not, you know, I kind of scoff a little bit at the headlines because it's not really a hack like somebody has breached a system and you know, like stolen traditional like database data and those database leaks. But it's really just looking at the assembly code on the Ethereum virtual machine and noticing that somebody doesn't have a lock correctly coded on a liquidity pool or something, so they find some roundabout way to be able to drain these funds. You know, it has a lot of bad press, but like that's why the auditing firms in the blockchain space make so much money, because they have to have that hardcore expertise to review these.
- [25:22]
Host
Things from an engineering perspective. Like what do you have to do in order to do everything within your power to sort of reduce the risk of oh, we misinterpreted this particular part of the protocol and we ended up with a situation where we just did risk somebody's money.
- [25:39]
Andrew Koller
I think this is just not even trusting yourselves. Because we can engineer everything and build out this beautiful change to a protocol or making our own smart contracts, but then it's like a multi month process of getting just as many eyes as you can on it. And so that's why things like Uniswap, which is one of the biggest decentralized exchanges on the Ethereum virtual machine space, they build entirely in the open and they have dozens of audits on their contracts. And the hope is that more open source work in this space is going to catch these things earlier. There's some protocols that the build closed for a while and I think a lot of the hacks or a lot of the exploits have been from places like that. So kicking off that process of after we're done with something to just kind of give it out to the world for a while and just see what comes back that's key to this process. And I think, you know, hundreds of other startups that engage in this.
- [26:38]
Host
So outside of like some of the stuff we're talking about in terms of, you know, the attention to detail that you need to have in order to do this right, what were some of the other technical or conceptual challenges with this build out?
- [26:51]
Andrew Koller
So we use something called the OP stack, which is this optimistic rollup stack. And so you can Google just OP stack, op stack. And you can see that this is one technology stack that people have created to be able to launch an L2. There's other things like Zksync which uses zero knowledge proofs. There's Arbitrum which is also using optimistic proofs like optimism. And they all kind of have their own flavor of how they're allowing this kind of rolled up data be posted back to the L1. And so some of the challenges were like thinking how do we differentiate in the space if everybody's deploying these roll up stacks that are very similar to each other at the end of the day, then how do we push the limits of the protocol to make sure we're differentiating without violating any kind of consensus? So that's where, you know, if you run the OP stack, you are locking yourself into all the other people that run the OP stack and you all have to agree on any protocol changes together through like a decentralized governance. And so a big challenge is like, you know, if we want to push the limits of the block time and maybe make this go down to 250 milliseconds, which is a target for us by sometime in 25, then we have to develop all kinds of sidecars around this binary. And so if the OP stack is sequencing blocks on the L2, we now kind of have to make a little bit of a Frankenstein to say transactions come to our sequencer. Now how can we reroute those to some other binaries that we either use from externally or we create that can reorder the transactions in an efficient way so that we can keep optimizing that block time? And I really think with small changes to these kind of sidecars that we put next to the sequencer will enable us to incrementally start shaving off block times. As we learn and as we get more in depth with or into the efficiency of transaction ordering and block creation, then we'll be able to announce that, okay, we're now down to 900 milliseconds. Hopefully a month later it's like we've optimized this down to 100 or sorry, 800. Yeah, that's like one of our biggest technical challenges is fitting within the consensus of a protocol while still trying to differentiate.
- [29:04]
Sean Falconer
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- [29:45]
Host
Does the faster execution times help with sort of, I guess like usability of the platform as well as, you know, someone who's, who's actually using breaking for doing exchanges?
- [29:58]
Andrew Koller
Yeah, that's huge actually, you know, Bitcoin has 10 minute block times. And personally my philosophy of Bitcoin is that's okay. I really don't want Bitcoin to push the limits of speed because Bitcoin has kind of taken this evolution where it feels like more of a store of value and it's almost like a savings account where you're participating in this, you have some bitcoin and the, you know, the price is appreciating because there's so much going on in the world with inflation. So it's a hedge on, you know, governments behaving nicely. Right. And not inflating their currencies. Some of the other ones like Ethereum or Solana, where you can actually put your programs on top of it and say like, you know, I'm going to build this decentralized lending protocol or I'm going to build a really efficient exchange that nobody ever has to create an account for. You just plug in your wallet and you're like using like NASDAQ on chain that requires some significant throughput because you really want traders to be able to execute orders, you know, in millisecond time. Because that's, traders really need that efficiency and that throughput to be able to like time their market making correctly. Have 50 different, limit orders up quickly, cancel orders, remake the orders. And you can't do that with like a, you know, 10 second block time or something.
- [31:14]
Host
Do you see these ideas around sort of the shift towards, you know, decentralization on chain operations? Do they have, you know, the potential for even larger impact outside of this to how we think about software stacks?
- [31:29]
Andrew Koller
Yeah, like I think one of the coolest parallels is the early days of the Internet where everybody had like a geosites page or you know, just random websites for their dog or something like that or people running their own email servers in the 90s and you know, before like Gmail kind of took over everything and it's like really difficult to start your own email server now because the moment you do there's just all kinds of thousands of spam and things that hit. So like you have to kind of rely on these centralized entities like Google or whatever or Apple because they have all the millions of dollars into the spam filters and algorithms that are going to just keep your inbox pretty sane. And I think that blockchain technology is like getting us back to what it felt like at the early Internet where you can actually take this beyond just vanilla kind of finance and trading. And there's going to be throughout the next decade, I think a lot More just applications that feel like the Internet, but behind the scenes it's running on an immutable blockchain. So people that are worried about database hacks or any kind of compromise to websites, you have confidence that this is running in a decentralized way. It's completely transparent, it's immutable, and hopefully that level of security kind of propagates to the world that this is a new Internet where I can just plug in my finances instantly and go interact with applications that might be doing a streaming service where I want to have my wallet connected and only pay for the video for every second I'm watching it. So it just kind of like streams your cash. So if you turn it off halfway through and you don't ever watch it again, okay, you only paid for half the Netflix show or something like that. I really think that this is kind of like a new resurgence of a decentralized Internet again with just a finance layer on top of it.
- [33:20]
Host
Yeah, so it sounds like, you know, if you could get to that, to a world where you're able to do that, essentially you're, you're able to open up almost like new forms of like payment or new business models or ways for businesses to make money. You know, going back to your example in terms of like, hey, like it's almost like serverless or you know, consumption based pricing, but for, you know, a streaming service that you're watching a video on.
- [33:43]
Andrew Koller
100%. Yeah, like remittances are huge right now. Right. Like everybody, you know, there's tons of people in the US or even in Europe or whatever that are wanting to send money back home. And the traditional kind of ways of doing that are like Western Union or you know, things like it where somebody makes like $100 a day for some kind of, you know, work and they want to send a good portion of that back. These companies charge so many fees for it. So like if you have 100, what goes back to your family is probably like 50, $60 or something. And that's a huge rip off. So like the payment space in the blockchain world is just with stablecoins, with decentralized stablecoins. I think that like the remittance side and kind of onboarding and letting like other developing countries know that this stuff exists, there's a huge opportunity for like a decentralized system to be able to bring financial freedom to the world and so they can accept payments for their work and just, you know, USDC or something or USDT or any of the other dozens of stablecoins out there.
- [34:49]
Host
Given like the challenges around exchanging, you know, sending money to your family across borders and things like that. Is it just due to sort of like the legacy of the historical players in that market or is it a technology limitation?
- [35:04]
Andrew Koller
No, I mean maybe a little bit of both. But I think that the banking system as it has evolved from like the 60s to now, so many of these banks are still like built on cobol, right? Like it's, it is old stuff. You know, as we all know that these banks only they close up on like Friday at 5pm and then there's nothing you can do with your money until Monday. When banks open, they're closed on holidays all the time. So there's things like Swift and other kind of like government style payment rails, but they all adhere to this kind of like old banking system. And that's the beauty of blockchain is like I have paid friends, I have done art contests on chain and stuff. You know, like midnight and it's like you are just with one signing of a transaction, you're sending money anywhere in the world. Like once you do that a few times or like maybe the first time you do it, it feels like magic. And I've been in the space for over 10 years. Every time I still send something or I interact on chain, it still feels like magic. It's like it just hasn't gone.
- [36:03]
Host
Yeah, I guess it's kind of like the difference, although even, even more transformational, but sort of the difference between using something like you know, Uber or Lyft, so some sort of rideshare where you've essentially cut out the historical dispatcher that was in control of the communication channels. And then because they were the facilitator or the orchestrator between essentially the consumer and the person providing the ride, they can kind of put whatever limitations in that system that they want.
- [36:30]
Andrew Koller
Yeah. And like one of my favorite examples is back when I was at Santa Cruz in 2015, I picked up a Mastering Bitcoin book. It's this awesome book written by a guy named Antonopoulos. And it kind of walks you through like what is blockchain? What is bitcoin? Why do blocks get mined? How do transactions go into a mempool and then go to miners for them to kind of order these in economical way and include them in blocks. And my favorite example from it was getting down to the private key level and showing basically like you can, I mean it's all math at the end of the day, so you can just get out a piece of pen and paper, and you could make your own private key. You could mine your own block just by, you know, manually doing the hashing stuff by hand. Of course it would take a long time, but that's what it. Where it kind of clicked with me is like, oh, my God, I can just sit here with a pen and paper with just math, and I can interact with my finances and there's no middleman. I just love it.
- [37:25]
Host
Yeah. There's certain immediacy and feeling of control with that.
- [37:30]
Andrew Koller
Yeah.
- [37:30]
Host
So in sort of the broader context of this, given that there's this trend of launching new chains and the Layer two solution, what are some of the implications for people investing in this space?
- [37:44]
Andrew Koller
So there's. Unfortunately, I think with any emerging technology, investors need to look pretty heavily on who's just kind of latching onto this because it's a hype. And I think there's a lot of that that can happen in the blockchain space. But once you find the. And there's hundreds and thousands of these. Once you find the protocols or the startups that are really evangelical about this and really believe in kind of this mission of financial freedom for the whole world, then that's where you. You kind of strike gold. And it's like, okay, these people are really serious about it and they're going to be building something that can allow people to maybe participate in financial products that are typically reserved for, like, wealthy Wall street people and that, you know, that might include perpetual future trading or some deeper kind of like options trading or like, you know, bigger borrow and lend protocols. If you are sitting on some. Some cash that, you know, isn't doing anything, you might want to go participate in something decentralized where you can actually lend that out and make some yield on it. It's. It's hard to do from like, just an average kind of person, like living in the US to say, you know what, I have this big savings, I want to go lend it out. That is really hard to do. And you can do that very easily with just at your desk by participating in one of these protocols. So, like, yeah, investors, I think, need to always be looking at those people that are just evangelical about it. And that's like, that's where you're going to hopefully have a good return and really see the space evolve. Yeah, fortunately, a lot of grifters too.
- [39:16]
Host
So what's next for you and the team at Kirkhan?
- [39:20]
Andrew Koller
Yeah, so we launched this blockchain yesterday. We originally stated that it was gonna be out in Q1 sometime but we feel that there's this perception sometimes on crypto that it can move a little slow. And so we've been working night and day to accelerate this timeline. And so we got it out yesterday. You can go to inconchain.com and see kind of the applications that are deployed there. And then you can see the bridges and the ways to connect your wallet and be able to interact. I think hopefully we'll have some tutorials coming out very soon and some campaigns that make it really easy to onboard to this. And so our focus for like probably the next six months of these three pillars that we have called, you know, UX security and Privacy. UX is a core focus of this because of all the stuff we've been talking about. It all sounds great, but to the new user onboarding, to some of this, it's wildly complex and you know, you have your funds on Ethereum and you're like, okay, now I have to bridge this and then now I have to go look at a different application to be able to interact. And I have all these pop ups of like, I need to sign to authorize my wallet and then I have to sign to do the transaction. The UX is not there yet. So our core focus for at least six months is like, can you just open a wallet, scan your face within five seconds you have addresses and then you have like really easy to use curated experiences to be able to interact with these financial products.
- [40:43]
Host
Awesome. Well, maybe we'll have to have you back to talk about that once that launches.
- [40:47]
Andrew Koller
Absolutely, yeah. Q1, I think we'll have a lot of improvements to our wallet infrastructure and yeah, we're going to be very loud about it.
- [40:54]
Host
Andrew, thanks so much for being here.
- [40:56]
Andrew Koller
Awesome. Yeah, thank you for having me, Sean, it's been a pleasure.
- [40:58]
Host
Cheers.