B (3:16)

It's great to be here, Great to be on.

A (3:19)

For many years, experts always bemoaned that people did not seem to care about privacy. And I don't just mean in crypto. After things like the Cambridge Analytica scandal in which the company used users Facebook profiles to target them with political advertising, survey after survey showed that people claimed to care about privacy but didn't actually do what was necessary to keep their information private. And the same was true for privacy coins and crypto for a long while. But then in late September, all of a sudden, Zcash jumped up to what is now more than a 1000% increase in price. Monero has jumped by about 50ish percent. Suddenly people somehow seem to really care about privacy, or at least privacy coins. So why do you think privacy coins are suddenly having a renaissance? And Josh, why don't we start with you?

B (4:13)

Yeah, I think, I mean, there's probably a few things. One, there is a narrative shift and we see some of the narrative shifts happening because of overreach in governments like specifically in the UK and eu. We've seen it with Canadian truckers and some of those stories. So there has been an increasing amount of attention and living within the zcash community, like I've seen it kind of gradually grow and grow and grow over the last couple years. And so this kind of uptick just a couple months ago where it seemed like suddenly everybody was interested, I think has actually been building for some time because we've seen that interest within the community and we've seen community engagement increase over time. There's also just this kind of broader geopolitical stuff that that's going on with kind of greater divisiveness, concerns about kind of political concerns and things like that. And so like, I know people that are, that want to have mobility with, with their wealth, they want to be able to secure it without these kind of fear of future restrictions. And that's been, that's been happening. And then just quite frankly, I think, you know, with, with like zcash and some of these tools in the early days, they just, they were very difficult to use. And so we've Worked really hard to make it accessible to normies to be able to shield their wealth. And we've seen within zcash we have something called the shielded pool. And we've seen an exponential growth of the shielded pool over the last 18 to 24 months. Just people downloading easy to use wallet. We shipped a wallet called Zashi. Storing it on a wallet and on hardware, there's a keystone integrates with Zashi and allows you to shield. And then we allowed for swaps to make it easy to get in and out because in a lot of places around the world you can't get access to Zack or shielded Zec because the exchanges don't support it. So when we did the integration with near intense to allow for swaps in and out, we've the growth of the shielded pool, which is kind of a great analog for adoption. Not really necessarily price, but adoption just went absolutely parabolic. So it's been a fun season. I don't. I think we're just now kind of awakening. And some of it is very reflexive. So they see the price increase, they go down the rabbit hole, they get more interested, they discover more, and then that has a net impact on the, on the price for adoption.

A (6:45)

Harry, what about you? What's your theory?

C (6:47)

Yeah, I mean it should be obvious. Privacy was part of the original ideals that, that motivated Satoshi Nakamoto. He didn't really obviously know how privacy worked very well. Had some interesting ideas. Each kind of bitcoin transaction gives you a new key, but that's just simply not enough in a world of massive surveillance and data analysis. And we've seen that over the last few years in blockchain technology firms like Channalysis and now know national firms and I'm such as paler. And I'm sure government agencies very much have the ability to track transparent chains. And bitcoin is a transparent chain. So if I. I'm not going to give investment advice, but if I was an investor and I said, well, there's this thing called bitcoin which is completely transparent and every move I make can be tracked and therefore halted. Or I mean halted, but at least halt taxed or somehow, you know, something could happen to me. I could be someone knows how much bitcoin I have. I could kidnapped and torn up in little bits and buried in a desert as what happened in Dubai because someone knows my bitcoin address. Or. Or there's this magical alternative which looks exactly like bitcoin but which keeps your balances private. So it's not so no one knows exactly how much I have. I would obviously choose the latter. And, you know, I knew a lot of the early cypher punks such as Lynn Sassaman, who people think are not comodo. And a lot of them, they all had this critique of Bitcoin from the beginning that didn't have privacy. And now people say, okay, well, look, zcash has been around a while and it works and it gives people privacy. So it's an obvious bet. The main issue has been exchange support and lack and usability.

A (8:35)

So I find it interesting that both of you talk about how this is obvious. And I agree in some respect that is true. You know, like, I'm one of those people and I've said this on the show multiple times. I have never. Or if I have, you know, it was very early when I used the public function on Venmo, and every time I open it, I don't understand why people are still, you know, broadcasting out their trans. I find it so strange. But the truth is that we are the ones that are in the minority. Like, most people don't think about these things. Would you agree?

C (9:14)

I mean, you don't think about these things until it causes you a problem.

A (9:18)

Right, But I just want to like, to explain it is true. Most people just don't. Right. Like, like you were saying, like, it's so obvious. But to mo. To like, I would say probably 90% of people, they don't think about it.

C (9:34)

But let me respond. I think, think, you know, I. I'm on a public podcast with you, so I expect, you know, thousands of people, any random person can listen in. And that's like the kind of cognitive bias I bring to the show. I know that's going to happen, you know, so I'm not going to, for example, put my bank account on screen and give you a list of my transactions right now. But, but, but if I'm just like chatting with you in a cafe and I'm like, buying a coffee with my, I don't know, my credit card or my lightning wallet or whatnot. I, um, you know, I think my cognitive default, my. My basic intuition situation is that there's not thousands of people, including government agencies and private companies listening into my conversation with like, my friend in my cafe or my mom at home or looking at every single transaction I make. That's just not. People don't think about it because. Because that's not natural. It's actually not natural to have everything completely public. This is a freak side effect. The digital age. That's being weaponized and used against us. But I think if people thought about it, they would definitely say, oh, yeah, that's kind of weird. Like, I don't know if I want everyone to know all my financial transactions or the contents of all my conversations. I really want, like, Mark Zuckerberg between me and my mom. Do I really want, you know, do I really want chainalysis between me and my coffee purchase? Probably not. So I think most people, they just don't know. Maybe I'm wrong.

A (11:00)

Josh, do you have a theory as to why it is that most people don't seem to really care?

B (11:05)

I do think they care. I. I think they just have different expectations. I think it's what Harry's kind of talking about. So again, like, if I use my credit card to make purchases, I have an expectation, a certain amount of privacy, that the person at the cash register can't see my balance, that the people behind me in line can't see my balance or my transaction history. I know that I've given it up to a credit card company. What people don't realize is they sell that data all over. So it's actually not very private. And so lots of people get kind of information, but it's kind of hidden from the user. I think if they could see if, I think if the, the credit card companies and the, you know, the banks were very transparent about who can see what, I think it would actually freak people out, and I think they would care. With something like Bitcoin, if you're on a public, you're on a public database, so you have no expectation, there's no intermediary in between that says protecting your privacy, it's just out there for everybody to see. So if you're going to transact online and hold a balance, if it's on a public database for everybody to see for all time, it can never be erased. Like, how does that change your behavior and what you do with, with your money? Ultimately, if you're being watched, your behavior changes you. You just act differently, right? If your curtains are open, you act differently than if your curtains are closed. So some of it is just a realization, but I think there is an expectation of privacy. It's just for, for a lot of people, they've trusted intermediaries to provide some, some blanket or some layer of privacy.

A (12:48)

And I mean, Harry went, went into this a little bit earlier, but I was curious for you to also explain, like, you know, what do you think can happen to people? Or like, why do you think they should care about Privacy. I mean, he got a little violent with his. And you might, you might also have reasons that, you know, trend that direction. But I was just curious for your thoughts on why people should, you know, prioritize privacy.

B (13:16)

Yeah. So actually, my genesis story with zcash goes back to when I was building tools and realized for. For ad tech and realized how little privacy people actually had. So what we were doing was building aggregating data. This was pre Cambridge Analytica, aggregating data across over two dozen different social media sites. We could scrape things like images that people posted online, and those images are geotagged and they're date tagged. So we know who you are, where you, you know, where you live, where you like to travel, what style of traveler you are, whether you have discretionary income, and got to a place where we could even infer, like, whether or not you're good at your job. And it became very, very creepy for us with the tools and that. When, when I went down the crypto rabbit hole a couple years later, it was like, this is a disaster. So not only can I aggregate all of this social media data that people are willingly posting online, but I can map it to their. To their. Effectively their crypto bank account. Right. Their Bitcoin address, and I can map their whole transaction history. And then what can I tell? And then what can I do? Like we saw, there was. There was Harry mentioned somebody that had just recently gotten murdered or a couple that had recently gotten murdered outside of Dubai. There was another one in the UK where fortunately it ended well. But they had hacked into his phone. So they got my. His map, my run data. They were able to see each day where they were starting and where he was starting and stopping. And they knew he had. They knew had crypto. So they showed up at his front door. Those kinds of situations where you're marrying not just the, not just your transaction graph with a cryptocurrency, but that with all of your. All of your other data that's. That's posted online is a very real risk and it's being used to exploit the. That. That was. That was kind of the big realization for me. Again, it's like my. My history and realizing, like, we need actually a better option. And that's when I went looking for a better option. And somebody told me about this project that was starting called, called Zcash back in 2016.

A (15:34)

Okay. And Harry, what about you? How did you get into privacy technology?

C (15:39)

Yeah, so I used to work for the inventor of the web over at mit, called Tim Berners. Lee. And we were trying to just make the Web a better place. Hanging out, adding cryptography to brow. Because essentially back then, everything was unencrypted on the Web. And during that period, we had this essentially revolution and Tunisia and then Egypt and then a failed revolution in Syria. And people got in touch with me because I was an expert in security and privacy. And they said, how can we kind of access the Internet? How can we access that privately and securely? And at that point, there weren't that many good options. You know, there was Tor and, and messaging. There's really nothing. Signal didn't exist back then. People use skype, people use VPNs. And then what happened to me is that, you know, friends of mine, people that used to work at Mozilla, you know, the Syrian government tracked them down because their communication patterns and put them in jail and murdered them, actually visited jail in January. It's pretty terrible stuff. So I think it's not just the fact that, that you can be a rich crypto trader and you don't want to get kidnapped, which I think is completely reasonable, but also you never know when your government's going to go against you or when a powerful adversary is going to come up. I was friends with Julian Assange. I remember I was at the WikiLeaks launch in 2009. And Julian, I told everyone, I said, you're all going to go to jail. And they said, no way. No. We're just doing good public things for the public good. And look what happened. You know, got put in prison, only recently released. So you don't know even of what you think you're doing is perfectly legal and perfectly civil and for human rights and for a better world. You never know when someone's going to disagree with you. And that person might be very powerful, and they will then weaponize your patterns of communication, your financial transactions against you. I'd bet money there's going to be a series of banking, of bank. Bank closures and bank accounts being frozen and more mass surveillance ramping up as things become more geopolitically unstable in the next few years.

A (17:46)

Okay, so let's, let's now go into the different privacy technologies in crypto, and then after that, we can talk about your specific projects. I just want to make sure the listeners have a basic understanding so that way they can follow the rest of the conversation. So why don't we just start with probably the one that maybe most people have heard of by now, which is zero knowledge proofs. And that obviously is core to zcash. So Josh, can you just explain how that, how that works?

B (18:16)

Yeah, journals, proofs, it's, they're basically math and they allow you to prove that something, some fact is true without disclosing any information about that fact. So one that's used often, like we talk about, somebody can go into, let's say they go into a liquor store and today somebody's got to hand over an ID and the cashier can see the person's name. Yes. They can see the birth date, which is the thing that they need, but they can also see all this other data. Right. They can see the person's address. That's information they don't need. And they don't even need to know the birth date. Right. They just really need to know. Can this person legally buy a beer? What a zero knowledge proof allows you to do is to keep all of that data encrypted essentially and create a proof and say I can prove that I'm 21 years old and can buy this beer, or I'm at least 21 years old and can buy this beer without giving you any other kind of information. And so that's what we do. That's. That same kind of mathematics is used for protecting privacy online.

A (19:26)

And so there are some other technologies that are used for these privacy coins. One is ring signatures. Obviously there's like other technologies. Harry, do you want to describe more than happy to.

C (19:42)

I mean I can go into a few of the more popular ones. There's a sort of infinite amount of possible things that can use for privacy. So ring signatures are mostly known for being, I think hopefully until recently use the Monero. And so they allow you to be private but among a group. And those are the kind of people in the ring, so to speak. It's a finite number. So the problem is like up until very recently that number was pretty small with Monero and it's still like a pretty relatively small number. And the nice thing with your knowledge proofs, which I think even Monero is upgrading to effectively using, I think fcmp, is that the amount of people that you're anonymous with is everyone that's like ever used the quote unquote shielded private pool. Zcash. And that's not the case with ring searchers. Ring searchers are only private among the size of the ring, which is a parameter kind of set by the people that made the software. And so that was used I think in Monero and mobilecoin and that's known as a not as good design. Now there's Other interesting technology out there, but I would say none of them are silver bullets. There is homomorphic encryption, quote unquote, fully homomorphic encryption and that allows you to compute non encrypted data, for example, add, subtract, this sort of thing. It's known to be a little bit slow, hopefully it's sped up a bit. And then you also have question you have issues of things like trusted enclaves. So this is hardware that you kind of trust is keeping your data encrypted. And this has been very popular technologies such as I think Secret, maybe the first one to market with it. Nilian, there's a few others out there FH Phoenix however, I mean that technology, the problem with a lot of trusted enclave work is I think they're pretty good but you still kind of have to trust the hardware manufacturer. And I don't know, I don't like particularly trust Intel. Over time we've seen more and more breaks against that core technology. So people, I think like we use trusted enclaves as part of like defense and death, but I wouldn't recommend it as the only technology. And there's other newer technologies like secure multiparty computation and a few others. But effectively I think if you just want to rely on pure math and you want effectively privacy on chain, zero knowledge proofs are the way to go. And I have to admit zero knowledge proofs are high tech technology. I was working at MIT and my across the hall from me was Madaras Versik who was working on the original at that point it was called zerocoin zcash paper. And I was like there's no way this works. I asked Madaris, he's like are you sure it works? He's like well I'm not really sure but it looks like it works. And I was like oh, let's try to do a transaction. And I don't know, like a year later we tried to do a transaction. I did a transaction, this guy called Amir Taki where I was watching him try to make a zcash transaction. He like had to like handcraft some JSON and we were just like terrified it wasn't going to work. It did work, it was very slow back then but now it's like much easier. So I would say in terms of technology maturity, zero knowledge proofs are the way to go. And then there's like a million types of zero knowledge proofs but they all do the same thing with various trade offs on prover and verification time. Basically like how fast is your transaction?

A (22:51)

Okay, yeah, I know Amir. And yeah, he's. He's great. He makes an appearance, I think, in my book. Okay, so let's go into your specific projects. We'll start with zcash. That one obviously has been the biggest recipient of the new interest in privacy. And even earlier today it was announced that there's now going to be a zcash dat called cypherpunk, which is maybe the least cypherpunk thing I've ever heard. Anyway, let's just talk about zcash. So, Josh, why do you think it is that zcash has benefited the most from this sudden interest in privacy coins? And maybe just you kind of left us hanging in your personal journey where you heard about zcash and got interested. So maybe fill in also what you've been doing since then.

B (23:45)

Okay. Yeah, so just el taya bow on that personal story. I. I found the zcash project because I was looking for privacy. I was a little, I had been kind of around the Monero community. I was a little bit frustrated and so I wanted to find something better. Somebody in the Dash community actually pointed me to, to what the, the team was doing at zcash prior to, prior to launch. And then I came knocking at the door and I said like, I, I was a CEO of another software company, decided that this is what I wanted to do for the rest of, is to solve, work on solving this problem. And so I, I actually stepped away and I started knocking on Zuko's door and maybe eight months later or something like that, he finally agreed to let me come work on it. And then I took over as the, actually the. Zuko stepped down in December 2023 as a CEO. And then I stepped in during that time.

C (24:47)

So.

B (24:50)

So it's been the honor of my life and I had to really grovel to get to work with this amazing team that's here at Electric Coin company. Part of what's beautiful about zcash is its simplicity. And it's complicated. Yes, the zero knowledge proofs, but it is effectively encrypted Bitcoin. So zcash was a fork of the Bitcoin code base at the time, you know, the, the scientists like Medars and others had approached the bitcoin core team about adding zero knowledge cryptography to Bitcoin. But the cryptography was too novel and rightly so. The core team said like this, it's not performant. The cryptography is new. We need to be able to trust the bitcoin chain, like try it out, experiment with it somewhere. Else. And so they did, they just took the Bitcoin code base and then they added zero knowledge and then it wasn't performant as Harry was talking about. It took a beefy machine maybe four minutes to create a zero knowledge proof. And that's just not going to work. Right. So we've had to go through years and years of refinement and scale and kind of working through these issues to get it to the place where it is today. And it just took time. But underneath it all, it's encrypted bitcoin. Like it's 21 million cap. It's got the same properties as Bitcoin, but you have this added privacy layer and people can really understand that. It's really like it doesn't have programmability. The attack surface is very low. And so when people start thinking about what they want with Bitcoin, if they want any kind of privacy, it's an easy thing to understand.

A (26:37)

And at this point, how widely adopted is zcash at like say merchants or you know, what do you think people are using the shielded transactions for? And you know, are there. Do you have an idea of the demographics of who's using it? You know, whether it's certain geographies or certain types of people or we have.

B (26:58)

We don't have anything like we can't could because we can't see the balances and we can't see who's transacting. Like nobody can. We can see information about like who downloads the wallet, like the Zashi wallet that we released in terms of its use. You can see like within the last couple of months that the amount of transactions specifically shielding and unshielding has grown massively. And so part of that is related to the ability to swap in and out. So it's one click swaps through Zashi through Near Intents, which we've, you know, that team we've been working with for, for some time to make it very, very easy to move in and out of shielded Zec. And then we implemented something else called Cross Pay, which was kind of based upon again, something that the NEAR team built, which I think was very clever, but it allows me to send shielded ZEC to anyone that accepts crypto effectively, whatever crypto they accept. So if somebody is accepting Bitcoin and you're going to buy a T shirt or something from them, and I can't do the math right now, but let's say it's 0.001 bitcoin or something, I can send them 0.001 bitcoin out of my shielded Zec. They get Bitcoin, so they don't have the privacy guarantees, but they can't see the source of funds. They can't see my transaction history. I get to stay private with Zec, but they get the Bitcoin that they want and that we've seen a nice uptake with people using that capability. It's this kind of combination of shielded deck, the Zashi Wallet near intents. It's kind of this promise of Web3, where we're actually now stitching this fabric together in a way that's preserving privacy.

A (28:50)

That's so interesting. I love it. Yeah. And I am seeing that the shielded pool is about 23% of the network. So, you know, that I can't remember. I think, like, a really long time ago when I looked into this, it was only like 10%. But one question.

B (29:07)

Yeah, it's like 30%. Like, it's. It's close to 5 million. In terms of the shielded pool, where is just a year and a half ago is where you started to see that growth again. It didn't just happen over the last two months. It's been happening. You just saw kind of this upward thrust just recently, but it. It went from like 1.5 mil, I think, a year and a half ago to 5mil today. The total number of Zach that are stored in shielded addresses. Yeah.

A (29:32)

And last question on this. When I asked about the demographics and you said you could only see who had downloaded the wallet, I was just wondering, because the, you know, percentage of the unshielded pool is much greater. Can you figure out who the users are from that? Like. Like either geographies or, you know, what they're using it for.

B (29:52)

Anything, I'm sure. Like, maybe the tracing companies, like, it's just antithetical to who we are to look at that.

C (30:01)

Try to look at that data.

B (30:03)

So I'm sure that they can probably, if people are using it just like they're using Bitcoin, they have the same power to whatever they can see about Bitcoin. They can see about completely unshielded zcash transactions.

A (30:17)

Okay. And one last question. Earlier in the episode, you talked about how a lot of exchanges don't support zec. Why is that, and do you feel like that is going to change?

B (30:31)

Yeah, it is changing, especially based upon this recent push. Inbound has been through the roof. So one, the exchange that supports zcash to the greatest level is Gemini. And it's that, you know, it's the Same the Cameron and Tyler, the Wiggle.

A (30:51)

Boss, they're involved in the dad, they're.

B (30:54)

Involved in the dat. Yeah.

A (30:55)

Cipher Pink.

B (30:57)

One of the things, One of the things to note about it is that they, they talked this morning about it. It is a dat, but they're looking at investing in various privacy projects broadly. So the DAT is one component to what they're a building, but they're looking at like, who is really developing interesting kind of software and solutions that protect privacy and intend to invest in those. Those companies. So it's like a DAP plus, but anyway, so that's cool.

A (31:28)

So it's like. It's like both a dad and an investment company. Kind of like a VC firm or.

B (31:37)

I don't want. Yeah, I don't want to speak for them or, you know, and I don't know the details of how they're carving up, you know, how much is. You know, I think they said they, they purchased 50 million in Zach and I don't know what's allocated for additional investments, but they may have been talking about, you know, earlier on the, on the spaces they held this morning. I'll have to listen. So what Gemini did, which I think is amazing because they're also, they're regulated by the US government, they're also regulated by NYDFs. And it really demonstrates that Zcash can be done compliantly and still protect privacy. So if you. Most exchanges in the world, with the exception of Binance, that support zcash, you can deposit from a shielded address to the exchange. So nobody can see where the money came from, except the exchange has it on their, you know, their account that it came to your account. And then they can ask you questions. Right? They do due diligence and say, okay, what's the source of funds if they want to exchange, exchange. What Gemini does is they actually allow you to send to a shielded address. So they're actually protecting their users in a way that nobody else in the world does. No other exchange. Because if I'm sending front to a transparent address, then everybody can see that I've withdrawn funds to my address. I've moved out of an exchange into some other. Either another exchange, but maybe into self custody. It puts users at risk. Right. You can see that that event occurred and how much of that. So what Gemini did is they enabled shielded withdrawals. So you can see that a withdrawal occurs from Gemini, but you can't see it where it went. They know where it went. You've KYC'd into the exchange. They can comply. Regulators Agree they can comply, but it protects their users. We're hoping that more exchanges will do that. It's kind of a mix of compliance teams ticking boxes, like not wanting to, like not being motivated to do due diligence or do the work to support. Shielded completely on the exchange. And some of it has to do with technology. So they use hardware security modules. The hardware security modules have to be updated to be able to support the cryptography effectively. And so unless there's like a commercial demand and customers saying like, do this, they're just, they're not going to do it. Right. They're just not incented to do it.

A (34:05)

That's so interesting because basically, yeah, the customer themselves is KYC'd at the exchange. And so the, the government could send, what's it called, a SARS or whatever it is, a request for information. Sorry, it's this exchange that sends the sar, but, but the, the government can still request information on that account, but if that person has withdrawn to a shielded ZCASH address, then basically at that point the trail goes cold. Like in the, in the exchange itself.

B (34:38)

Yeah. So basically the exchange has an obligation to like report suspicious behavior, create SARS or something like that. If there's a specific. And if the government comes with a warrant and they've gone through proper channels, then they can get the information about the user and then that user might be, you know, law enforcement or whoever could go after that user and say, okay, what happened to the where do the funds go from here? So they've got the tools to do it. And that's really how the US law is set up. What we've done with transparent chains is we've kind of like they've circumvent the fourth Amendment. And what it is, is users just saying, well, I don't care about this notion of unreasonable search and seizure. I'm just going to make this available to you all the time. And so law enforcement doesn't have to go through the legal process of getting a warrant to justify surveillance. They just get a surveillance. So what this does is yes, you have to KYC into Gemini, but you've got this added security where law enforcement really needs to follow the law in order to be able to get your information.

A (35:51)

Okay, so in a moment we're going to talk about nim, but first we're going to take a quick word from the sponsors who make this show possible. Mantle leads the establishment of Blockchain for banking as the next frontier. UR is the access layer that transforms Mantle network into a purpose built vertical platform, the blockchain for banking that enables financial services on chain UR unifies and vertically aligns Mantle's focus on payments, trading and assets MI4 Meth Protocol functions FBTC supported by developer grants, ecosystem incentives and the industry leading distribution platform through the UR App Rewardstation and BYBIT launch pool. All economic activity will within you are will be captured by Mantle Network to further drive value to token holders and establish its significance in blockchain for banking. Follow MantleOfficial to learn more. Hey founders and developers, if you're looking to bring on chain trading to your product, wallet or platform, check out the new Uniswap Trading API from Uniswap Labs. It's your plug and play gateway to global on chain liquidity. No deep crypto experts expertise required and no need to manage complex integrations or ongoing maintenance. With the Uniswap Trading API you'll get enterprise grade on chain execution combining both on chain and off chain sources for the most competitive prices. Simply put, more liquidity, less complexity. And this isn't just any API. It connects directly to the Uniswap protocol which has securely processed over $3.32 trillion in total volume with zero hacks. So stop worrying about liquidity infrastructure and focus on building your product. Get access to the same liquidity that powers billions in swaps through one powerful API. Visit hub.uniswap.org to learn more. Back to my conversation with Josh and Harry before we move on to Nim. Actually I did want to ask Josh one more question because we often hear that it's not just people who are kind of like trying to evade government authority or whatever who can benefit from this. But oftentimes we hear, you know, for instance, financial institutions could benefit or, or whoever. So can you just talk a little bit about some other demographics than the ones that people traditionally think of that can benefit from privacy Coins?

B (38:15)

Yes sir. So we yeah we often talk about we think in terms of our ourselves and us as individuals and having sovereignty and being able to transact securely without and safely without somebody spying. But to your point it's also it is financial institutions like it's a non starter to be able to and just businesses in general. Right. If I have my, if I have my balance sheet effectively on a public ledger or I'm transacting with customers and things like that. I don't want to expose that. Like I don't want to expose it to my competitors. I don't want to expose my customers to you know, unreasonable like security issues because they happen to buy a cup of coffee or T shirt or something like that. And so it's, it's really kind of incumbent on businesses that are accepting crypto really to kind of think about the information they're exposing, about their customers and about themselves. And in fact, finally, like, it's a national security problem having transparent ledgers. And I've had numerous conversations with regulators about this. It was interesting one that I had with someone at Treasury a couple years ago. They said, we recognize that having everybody, all US Citizens, balances and transactions on a public ledger is a national security problem. But it's only a national security problem if crypto goes mainstream. And we don't intend, we don't intend for crypto to go mainstream.

A (39:37)

Not that they can control that so well, that didn't.

C (39:42)

They, they, they, they, they battled and.

B (39:44)

They lost, and it is now mainstream. So now it's a national security problem. So if you think about it, right? So if the US in the context of the US if the US Government has access to everybody's transaction histories on a public ledger and their balances, and they can see them, yes, they can go after bad guys and they can, you know, they can see all that information, but so can hackers and thieves, so can North Korea, so can other foreign governments who they may not want to be able to see U.S. citizens data. That's why it's a national security problem. Right? It's. Every country wants to be able to kind of protect its own privacy or the privacy of its, its citizens. And by allowing these kind of transparent transactions, or at least not supporting the option to encrypt them, they're creating risks, actually, to themselves.

A (40:32)

Okay, so now, Harry, let's talk about Nim. Nim is focused on a very particular use case for privacy, which is VPNs, as you kind of talked about earlier. So explain how you feel like this kind of fits into this wider focus that we're seeing in the crypto community on privacy and how you've been trying to grow Nim.

C (40:56)

Yeah, I mean, I think it's important to. When you talk about privacy, what you really want to talk about is your threats and the kinds of data those, those adversaries can get. And, you know, blockchains are pretty amazing because when I was like, kind of working back for Tim Berners Lean, we had the Snowden revelations, we said, oh, wow, that's so crazy. Like, every single transaction I'm seeing over the Internet that's not encrypted is basically, like, recorded on a giant hard Drive probably by the NSA in Utah. That's wild, right? I mean, even cryptographers thought that was sort of paranoid and that ends up being kind of true. And that isn't even involving blockchain technology. That's just involving I'm accessing the Internet, I'm using WhatsApp, I'm using email, I'm going, I'm web surfing. And all that information is also recorded. Blockchains are just sort of special because it's transparent. Blockchains are kind of form of self surveillance where you, you record that data, you distribute it to other people. And that's useful for financial transparency, but maybe not useful for everything. And so what occurred to me when I was kind of working with the kind of the inventors of the web and the Internet is that, you know, they didn't really have privacy in mind when they built this entire edifice. And the reason is because they're a bunch of academics, they were building it in a pretty trusted academic environment. They didn't even think like financial transactions were going to go through this thing. This was barely imagined. There was this 402 code HTTP, which everyone actually just like forgot about until very recently. Right now you're seeing Coinbase and friends reviving. It's pretty cool. But nonetheless, so when I was looking, I said, well Look, I mean, Zcash has solved, using $0 proofs, a pretty hard problem. They've made Bitcoin encrypted, they've made blockchain transactions private. And there's other hard problems, right? So you know, for example, if zcash is the encrypted Bitcoin, who's the encrypted Ethereum, right? Maybe it's Aleo's pretty interesting tech. They're building off some tech from the zcash researchers. Charles Hoskinson has this other project called Midnight that looks super interesting, which is also building private smart contracts. There's clearly all this other amazing stuff you can do. However, as an Internet standards expert, I said, well, let's try to fix the problem at the basic level. And that's the most basic level of when I send packets over the Internet and doesn't matter if it's for like a video call or if it's for zcash or whatever, can we encrypt those packets and can we make them private even against an adversary which like the NSA or Palantir or Chinese government choose, your adversary of choice is watching the entire Internet and can actually see and record every packet. And a long time ago this Guy called David Chaum, who's an absolute genius, invented this technology called mixing. And it solves the problem. That solves the problem by taking packets and kind of mixing them up like a deck of cards after they're encrypted. So you can't see who's sending packets to who, but you can still deliver them. And the problem is that technology was kind of slow when Dr. Chom invented it. So we said, well, maybe the Internet's faster now and we could actually implement this technology using some newer techniques. And this technology can be used for general purpose Internet traffic. And I think that is what we built. We built nim. It's a mixnet. And it makes your technology, it's decentralized and it makes your packets kind of private and anonymous, unlinkable to who sent who, sender and receiver by default. And we think that's pretty cool. And it's very useful even for things like zcash. So, you know, zcash, it's encrypted on the blockchain. But when I'm actually using, say, Zashi, I'm gonna, I'm not gonna have a. I mean, I could. That'd be pretty crazy. I'm probably not gonna have like a zcash, like full node on my machine, right? I'm going to be talking via a light client, my phone to like someone else's machine, and that machine is going to do the cool Zcash broadcast. But the problem we have there is your IP address, this little number, you know, 255013322. Whatever it is, you always have one when you're on the Internet. That number, which can be traced to more or less my neighborhood, if not my Internet router itself, is then revealed to the full node. So it doesn't really matter that my data is encrypted. My IP addresses is revealed and my timing when I sent the transactions revealed how many bits I sent is revealed. And we also think that stuff, that all that data should be hidden. And to my knowledge, NIM is the only kind of deployed, mature technology that can do that against an adversary that's watching the entire Internet. There's other stuff that can help. VPNs help. Tor is definitely better than VPNs. And the way you think about Nim, it's like an ultra secure and private version of TOR in a standard vpn.

A (46:03)

You know what you're talking about reminds me, I don't remember what year this was, but there was this kind of like scandal on crypto, Twitter when it was revealed that Chainalysis had some kind of presentation in Italy about how they were using things like your IP address to, you know, add more information to figure out stuff about your transactions or whatever. So what you're talking about. Yeah, it definitely did cause a stir when, when people figured out that that was something that, you know, these different analytics companies were using. I did want to also ask. So. So NIM also has a coin, but the coin itself doesn't have private transactions. So. But earlier you referenced, like using it with zcash. So can you just explain. Yeah, the. The transaction piece.

C (46:52)

Yeah, yeah.

A (46:53)

So.

C (46:53)

So NEM has a token because we want. When you're mixing these Internet packets, you have these computers, servers, nodes in a network which are mixing them. That's kind of the work they're doing. So rather than like mining bitcoin, they're. Rather than mining, they're mixing packets. And, and those, and that token exists to reward those servers for, For. For how much they're mixing. So similar to bitcoin mining, if I'm, you know, if I put more hash power in, I get more bitcoin or get more Z. And I've seen, I've seen in China those wonderful zcash miners that are quite popular for a bit similar. I have a big server, I'm mixing a lot of packets. I should make more NIM if I mix those packets correctly, and then I should be able to cache that NIM out to pay for my computer and get even a bigger and bigger one. And that, I think, is, that is a transparent use of a token, because we believe, similar to the original cypherpunk logo, which is obviously inspired folks like WikiLeaks, transparency for the powerful and privacy for the weak, or at least everyone else. Right? So powerful people, I believe, like governments or nodes that actually run large amounts of network servers who are doing things which protect people should be transparent. And so our token is transparent by default because we want to be able to accurately judge who's rewarding and who's doing the mixing properly. And the token essentially is also used to access the network. So what's interesting with NIM is when we build it, we're like, oh, we have this cool mixnet, maybe zcash will use it or someone else, Monero, so forth and so on. And what we discovered is that was very hard to explain what a mix that was. We said, look, imagine it's like a super vpn. And people kind of understood that better. And we said, well, let's just make it look like a vpn, let's make a VPN interface for it and then we want people to buy it. And we were, I think the first merchant to support shielded zcash. You can send that shielded zcash over. But what happens is when you purchase access the NIM network, you're actually using NIM tokens. We just hide it from, from you. So your, your purchase comes to us either shielded zcash or Bitcoin or even credit card transaction over stripe. We don't really care that transaction, it gets converted to a buy order for NIM tokens I think currently on Bitfinex. And then those NIM tokens are given to the network and that rewards them for participating and sending this user's traffic over. Now we want to disconnect very similarly to how zcash wants to disconnect transactions from their senders and receivers. We want to disconnect the user of the VPN from their payment. So we don't want your usage of NIM to be tracked to the fact they're using it. And if you think about it like the way that centralized VPNs work are totally crazy, you're like, I'm going to trust you to keep my traffic private and secure. And by the way, here's my credit card address which gives you my address and my name and you can see all my traffic. That's crazy. So what centralized VPNs do is actually I think pretty dangerous what a decentralized vpn. And mix that like NIM does, we say we will split that traffic up into multiple groups and then in order so we can't connect your payment, when you pay us, we give you a zero knowledge proof back. And that zero knowledge proof back is like proof that you've paid. And then you're like little VPN client can display that zero knowledge proof. And the zero knowledge proof says hey, I pay, I bought, you know, $10 worth of NIM tokens, please give me access. And we tried really hard to make all this invisible to the user because I think, you know, usability is really what, what's going to make or break privacy attack.

A (50:39)

But wait, so I have a question. So if I am buying NIM tokens on Bitfinex, then aren't then like somebody can figure out that I'm probably using the NIM vpn, right?

C (50:50)

Or yes, but you're not buying them. Yeah, you talk to our credit card or payment processor, currently BTC pay server. Then we say, oh, thanks for the money, here's a zero Knowledge proof that you pay.

A (51:02)

Got it, got it, got it.

C (51:03)

And then we do the order for you. So that kind of disconnects you from that buy order. And I think that's quite nice. That buy order does a perpetual buyback or burn mechanism which hopefully will have some effect at some point. And then you have this cool. Zero knowledge proof. So we're using zero knowledge tech similar to zcash, but we're not using it for financial transactions. We're using as proof of payment for a VPN provider.

A (51:28)

Got it.

C (51:29)

And then you can imagine zero knowledge proofs for all sorts of things like, you know, identity or, I don't know, voting. I've seen some of that. That's worked pretty well in some places. And so that's kind of our tech in a nutshell.

A (51:41)

Okay, so I wanted to ask quickly about just a number of kind of new developments that I think are happening on zcash and Josh and Harry, if I'm missing any, feel free to add additional ones. But as far as I can tell. So there's one zsa, which is enabling companies, daos and individuals to create shielded by default assets on Zcash's L1. So it's sort of like an ERC20 on Zcash or something that's shielded by default. That sounds interesting. And then there's Tachyon, if I'm pronouncing that correctly, which will make zcash less computationally onerous, which is why I think it probably took a while for private transactions to take off just because it just required kind of more gas, et cetera. As you talked about, there's now this integration with the near intents, which is, you know, what I think is causing a lot of this activity. So it sort of feels like we're on this precipice of just. Yeah, like real transactions happening privately and the technology making it easier.

B (52:57)

Yeah.

A (52:57)

To do it by default. Is that how you're thinking about, like, where kind of the next wave of privacy tech is going?

B (53:06)

Well, I mean, we have an expectation of privacy when we're online. Right. So we have. I mean, Harry, with. With NIM is like solving a massive problem with people being able to track packets and be able to track what's happening behind the scenes. But we have some level of encryption with HTTPs where, like if we're buying something from Amazon.com put our credit card, there's an expectation that that information can't be kind of sniffed out. Somebody can't steal our credit card. Right. And it works. And people use it because it's just part of. It just feels part of like your normal everyday kind of activity. It hasn't been that way with, with privacy coins. Right. It's too complicated. The user experience just isn't there. But that's changing. So we now have these wallets where we can hide all the complexity kind of behind the scenes. The user knows that it's private, but they don't have to go through any additional hoops. So if it's just as easy to have a privacy option or not privacy option. It's not even a privacy option. It's just the option for being able to spend and I know I'm safe and secure. It's. It's just got to feel like that. So in order to get to billions of people in addition to the ux, like we need it to be able to scale. So it's really, you know, it's really hard to scale blockchains. So Tachyon is actually a project that was started by a former ECC engineer, Shambo. And his mission was to figure out how to get zcash to scale to billions of people to where sending small, big, doesn't matter. We could handle that transaction load in a kind of decentralized way. And he figured it out like one of. There's a. Without kind of going too deep down it. That rabbit hole or that with. With too much technical information. There's this huge problem with zcash. It relates to this kind of accumulation of nullifiers. It's to this. These things that when you spend your zcash it has to create this nullifier to prove that your coins think of.

C (55:06)

It like a serial number, maybe with the easiest one.

B (55:11)

And it just kind of builds up over time. And so if we're going to scale a bitcoin like blockchain and kind of get rid of this nullifier problem. How do you do it? So that's what they've solved, which Sean solved and now has built a team around to go and deliver that over the next, you know, 12, I think they're saying 12 months is probably 12, 18 months, I don't know will be completely scalable that way. We need to improve the user experience so that we don't have to deal with seed phrases and addresses and things like that that normies have a tough time kind of grokking or understanding out of the gate when they're first getting onboarded. And then there's these other efforts. One of the beautiful things that's happened with zcash over the last couple years is this proliferation of different people and organizations that are building stuff. So there's a group called Kedit who's building this notion of ZSAs. So that, yeah, that allows an issuer to issue an asset on top of the zcash chain and have it completely shielded. So if somebody wanted to do a stable coin or they want to do Bitcoin, they could using zcashtech. But it requires an issuer to be able to do that to manage issuance and redemption. And then there's other kind of fee market things and things like that that are going on actively. Somebody's looking at a kind of hybrid proof of work, proof of stake. That's where Zuko currently is with another team called Shielded Labs and then the zcash Foundation. It's just like this ecosystem is growing and it's growing really, really quickly.

A (56:45)

All right, so last question. I'm sure you guys know that there are other bigger blockchains that are already looking at adopting privacy. So, you know, we did see the price increase suddenly in late September with zcash and other privacy coins. And then in early October, the Ethereum foundation announced that it was establishing what it was calling the Privacy Cluster, a team of 47 researchers, engineers and cryptographers to establish privacy as a first class property of Ethereum. We've long heard bitcoiners talk about adopting privacy, and I have seen a few sentiments online that just make it seem like there are users in these ecosystems that feel like privacy should just come to their chain and they shouldn't have to go elsewhere for it. So here's one clouded mind said on Twitter and saying that the entire timeline thinks privacy coins like Monero and zcash are better than Ethereum. After the Ethereum ecosystem went to war with the US government, you can literally use your anonymized eth in a plethora of on chain permissionless protocols. In defi what the fuck you got to do with your zcash, bro? Shield it and buy drugs? Let me tell you, drug dealers don't even want zcash, dude. And then another one Asger MSB wrote, are privacy coins actually useful? What niche do they feel that something easier to use, like Tornado Cash doesn't fill? So, and then they wrote, I've been investing in crypto since 2017 and I don't want to use a new blockchain unless there's a really good reason. So how do you guys address that sentiment?

C (58:24)

I'll mention this really quickly and I'll let Josh go into the details of zcash. We're a merchant, right? We essentially sell a mix now which is a super vpn. And we want. And obviously people that are really into privacy, like Chelsea Manning and so forth, are our super users. And we want to take payments from as many different kinds of people as possible. In fact, I think most of our users currently pay. I think most people pay in credit card match for that's Monero. But you know, we want people to be able to pay for our service privately. And we know that shielded zcash is the best tech out there. So that's why we encouraged as a merchant, we said, hey, why don't we just make. So we can plug in shielded zcash into a BTC pay server. And someone did that, it wasn't us. And we got working first I think. And now we're seeing a large increase in number of shielded zcash transactions also basically going up exponentially from our user base. And so you can't, you can, not only you, I mean I'm not going to comment on buying drugs, but you can also buy a VPN with shielded zcash. And I think the amount of shielded zcash users will proliferate and more and more merchants will take it. I do think there's some questions of other chains trying to catch up to zcash. Why? We only supported zcash because I can say as an outsider, but who does have a PhD and did you know, teach cryptography. Both worked with Ron Rvest, MIT and crazy places like American University of Beirut. There's not so many people that can actually code this technology without bugs. In the beginning of the Internet we were just trying to get tls, we're just trying to get HTTPs working. It took like five to six years after Stone and Revelations to take the Internet from like 10% TLS, like 99% TLS. And at the time there weren't even that many people that could code that properly. There were still bugs being found. 2018, 2019, there's still occasional bugs. And so the amount of people that can actually like code zero knowledge proofs in a way that's not just like oh, I forked your repo and just jumped through it on another chain is close to like, I don't know, I would say probably like maybe 50 max on planet. And I would say like half of those work at zcash. So I think zcash has this like inbuilt advantage because we know their code is solid and their team is solid and they're the first people get it working. Even like the co founder of Google. I don't believe you guys even have this working. I mean I think, I think it was Sergey Brin who said that after zcash presentation and so that's you know, and you know it kind of makes sense that, that they have an advantage. That being said, I do think the property should eventually come to all chains. It's just, I think it's, I suspect it's quite, it's going to be quite harder to get there. So we do know Ethereum is going to move in more and more privacy enhanced direction. I really support that. We'll, you know, obviously it's crazy that defi, that guy thinks his defi is anonymous. Good luck buddy. Like it's completely not anonymous. Ethereum is even worse than Bitcoin. Right on this fact. You know Bitcoin has had thoughts about adding zero knowledge proof proofs at various points. Adam Back, who is a who, who is a enemy of mass surveillance and a good friend, although no fan of zcash, he's had this great idea for years to say why don't we just like Bitcoin is like gold. It's the store of value, you know its price is going to go up. It's kind of, there's a finite amount. Why don't we just put privacy on a side chain, right? So use maybe zero knowledge proofs or homorph encryption which they do have on liquid on sidechain. That's a great idea. But the fact of the matter is, you know, these ideas have to be delivered and it's easy to say yeah we have a privacy coin but 90%, maybe like 95% of the privacy coins I've looked at are just like outright scams. It's just some random guy forking a code base and using the word zero knowledge and PR and they're just not like, you know, I can look at the code, I can tell you like I don't trust any of this, that it took me years even to trust zcash and now I do trust the zcash code base. So I think that's like the inbuilt advantage. And I do think other chains will catch up, but it will take a long time and there's all these hard problems that even zcash hasn't solved. Right? Private smart contracts. Who's going to solve that? You know, Charles Hoskinson's talking about it, Midnight Aleo is talking about it. Who's going to solve, you know, what's going to happen to Polkadot. Gav Wood has been talking about privacy. That's amazing. We can't, we don't have privacy enhanced dexes. CZ was the first investor basically and you know, he's been talking about this on X saying hey, why can't we have a privacy enhanced dex?

B (62:58)

It's crazy.

C (62:58)

They're not privacy enhanced yet. No one's really built it, at least I know of. So this is a huge opportunity out there I think for hardcore committed teams to make a progress. But they should learn from the masters and the masters on, you know, privacy is really, I think the zcash team.

A (63:15)

Josh.

B (63:17)

Yeah, so I'll add by the way on the Dexes near this morning, I don't know if they've announced it actually, but you can use it. There's shielded withdrawals from near, so you can now deposit it in there and withdraw shielded from near. Maya, which is a sister chain of Thor chain will soon have that capability as well. So they're coming and people realize the necessity of them and they're investing in them, which is amazing. So yeah, so with, with some of these things, so building I was talking to somebody who's engaged in, in a privacy project that's not, not in the crypto space but very well known. And we were, we were having lunch and he was telling me like for our development to add privacy capabilities it's like at least takes at least twice as much effort and work with a skill level that's beyond what most engineers kind of understand. So one thing like Harry alluded to, like one of the things that Nim protects against is something like kind of timing attacks. So when you send a transaction or you do something online, when you do it can be correlated with other information. Engineers aren't necessarily equipped to think about threat models these ways. And so the people that are really good think about these kind of adversarial attack vectors. When you think about privacy, like what is really being exposed, not just like the core of the thing but on the edges of these things is cops like side channel attacks that are possible. Additionally you have like, you have world class engineers that are, that are available out there that are working on some of these. And then you have world class cryptographers, but you have very few people that are world class cryptographers and world class engineers. So that's that part of that talent scarcity that Harry's talking about. A lot of the privacy stuff that's being used across these different projects like a LEO are built on the work that we're doing at zcash that we've done and that we continue to do. So we'll continue to innovate and drive this stuff. Tachyon is going to be a big one. And the other thing that's, like, really important, when you add, like, smart contracts and that kind of thing, you increase the surface area of attck, Right? You're adding more complexity to the protocol. And, yes, there's additional things that you can do, but it comes at a great cost. And the hardening of that kind of technology and being able to do that is going to happen over many years. You have today strong privacy guarantees with zcash that you just don't have anywhere else.

A (66:10)

All right, you guys. Well, we're at time, but it's been such a pleasure talking to you both. Thank you so much for coming on unchanged.

C (66:17)

Thank you. And I look forward to integrating with Nim with zcash at some point.

B (66:22)

So do I. So do I. Yeah.

C (66:24)

Rock and roll.

A (66:26)

Unchained is produced by Laura Shin, with help from Matt Pilchard, Juan Aranovich, Margaret Curia, and Pam Majumdar. Thanks for listening.