Ethereum Privacy for Institutions | Mo Jalil and Oskar Thoren

David:
[0:02] Bankless Nation, I'm here with Mo Jaleel and Oscar Thorne. They are the co-founders

David:
[0:06] of ETH Systems, a new spin-out out of the Ethereum Foundation focused on three things. Ethereum, institutions, and privacy, which I think is desperately needed for all of crypto and Ethereum included, obviously, for really elevating Ethereum to the next level. Oscar, Mo, welcome to Bankless.

Mo:
[0:26] David, thanks for having us.

David:
[0:28] Thank you. Why? Do we need privacy on Ethereum? Oscar, I'll throw that to you.

Oskar:
[0:34] Sure. So I would say that Ethereum is great sort of technology and works great as a sort of credit-reneutral base layer, but obviously it doesn't have privacy baked in. And that's why you see sort of a lot of people have been trying to figure out solutions for that, whether it's on the base layer, but also a lot of application layer. So basically that's sort of the missing piece, if you will, in Ethereum land. And that's where we come in.

Mo:
[0:54] Anyone that listens to Bankless already know this. I apologize if you find me saying the same thing we've heard many times, but basically, and for us, we care about institutions. They generally have two things that they really care about. One is their business, and the second is that they're compliant. And because of those two things, they kind of tend towards places that they can control. At the same time, you have public Ethereum, which has deep liquidity, has all these new business opportunities and great ways of doing things they've already done, but much better. But you can't get both without cryptography. So for them, they need that in

Mo:
[1:29] order to basically access the benefits of Ethereum.

David:
[1:33] Can we talk about your guys' backgrounds? Because this is not day one for you guys. This is day one for ETH systems. or month one for ETH systems, but this is just the next step on, I think your guys' very long arc that started a while ago. What context do we need to know from you two and the work that you've done in Ethereum, in privacy and with institutions that you guys are bringing to ETH systems? Mo, maybe just continue taking that one away.

Mo:
[1:59] Yeah, so a bit about myself. So I actually started in traditional finance. I used to build algo trading systems like Goldman Sachs. That's what I did for like five years. So I have a really good understanding learning of the kind of things that basically these kind of investment banks need. I then spent basically a number of years kind of in the hedge fund world. And for me, that was like the interesting part of the arc where I was looking at all these different things. I remember reading the Bitcoin white paper being blown away, but like that was too early. That was way too early. And then fast forward a number of years, I joined the Ethereum Foundation, kind of leading a lot of the APAC BD initiatives. This was last year when there was, you know, Tomas was basically co-executive director and something became extremely obvious. Just in order for any of these organizations to use public Ethereum, they needed privacy. They needed cryptography. And I'd known Oscar for a while, actually. So I remember calling him up and saying, hey, look, Oscar, there's something that I think you'd be a great fit for, and we should talk about it.

Oskar:
[2:52] So I've been there in Ethereum and Cryptospace for around a decade or so. Folks like a lot on privacy very early on. So before this was kind of like a big talking point, working at Status and also creating an R&D lab. As part of that, we were sort of developing various types of peer-to-peer communication protocols that were used for sort of sensory persistence and privacy and so on. So I've been sort of into protocol design and privacy and resistance specifically on the protocol infrastructure layer for quite a while now. And then I guess the last five, six years, I've been sort of diving deeper into Synology Proofs and sort of doing various tooling for it, including work with some of the early members of PSC at the Ethereum Foundation, and also wrote like a little mini book on Synology Proofs, did some research related to following schemes and some tooling for making client-side proving easier and so on. In the last few years, I've been at the Fearne Foundation and also advising them when it comes to privacy strategy and now sort of the new access layer. And as Mo mentioned, that's where we met and we kickstarted institutional privacy taskforce. I think for me, one difference is that I used to sort of focus primarily on privacy of individuals. And while that's still something that's very close to my heart, I think one thing that I noticed is that there's a massive, massive demand for privacy of institutions.

Oskar:
[4:06] And I think that's come about sort of with the last few years, sort of where there's been more regular clarity and so on. And you see that a lot of institutions, they actually care a lot about privacy, to some extent, even more so than individuals in some circumstances. So I thought that was quite exciting and sort of been a great sort of opportunity as we've been focused on for the last year and sort of building things in public and so on and then spinning out into a separate entity a month ago or so.

Mo:
[4:29] Yeah. And just to add on that, so we basically, I think one interesting thing about us is that when we spun out, we came out with a year's worth of work, like an entire body of things that we've been doing from multiple workshops that we've gone, you know, hands-on with lots of different organizations to, you know, public goods that we had published, which is basically a market map of all these different use cases that people are looking at and how they map onto private solutions in Ethereum. And then finally, we had basically write-ups looking at whether it's like, you know, private disbursements or public, you know, public ledgers versus private rails, those kind of things. So I think for us, it was interesting. Like, yeah, like you said, the organization, like E-Systems is less than a month old, but the work we're

Mo:
[5:08] doing spans not just a year, but probably a decade worth of work that we've been looking at.

David:
[5:12] There are a couple of things you said, Oscar, that I'd like to learn a little bit more about. You said privacy strategy for the EFs. And then you also said privacy for institutions is different than privacy for individuals. I want to learn more about both of these things. But let's start with privacy strategy. What is a privacy strategy? Can you just illuminate what the strategy is?

Oskar:
[5:34] Yeah, so I think a lot of that had to do with the context that PSC found itself at the time at the Ethereum Foundation. And I think one thing that we did is try to move that into the Ethereum Foundation and see what type of privacy things Ethereum Foundation should focus on. That is now most, and it's like a lot of other people, so I don't want to talk too much about sort of for Ethereum Foundation and what they are working on. But what I would not want to add to is also what Mo just said, is that as sort of part of the institutional privacy task force at the Ethereum Foundation, what we were trying to do is basically connect to these two worlds, where you have sort of institutions on one end and an ecosystem on the other. And in talking to them, oftentimes they didn't necessarily understand the Ethereum world because they just see sort of, oh, it's a blockchain, there's no privacy. But the fact is that the Ethereum ecosystem is extremely rich in terms of different protocols or vendors or various solutions that exist. So what we're trying to do is sort of explain to them what the space looks like, and in turn also talk into various companies in the space and protocol engineers and so on, and explain to them, here's what these users actually are looking for. And that's why we sort of developed a privacy market map, where we sort of talk about these specific requirements these users have, and they can be quite sophisticated if it's like specific business requirements or legal constraints and specific use cases, and then basically map that into sort of a set of solutions whether it's like vendors or protocols and so on and then basically doing pocs and write-ups sort of show things that are missing like how you can combine these building blocks sort of create protocols and solutions that sort of fit what these users are looking for yeah i

Mo:
[7:01] Just want to add one more thing on there it's really quickly because i think, oscar i know you mentioned psc and folks that are listening might not know what that is, Actually, the Ethereum ecosystem has been deep in privacy for many, many years. So I know privacy is like a really hot topic now, especially last year with Zcash and, you know, all these privacy protocols. But the EF has had a cryptographic research lab for seven years or so, right? And that was known as PSE.

David:
[7:26] The privacy stewards of Ethereum, just like the group of people talking and building about privacy solutions.

David:
[7:33] Does everything that you guys are saying, does this mean that we have the privacy solutions that we need in terms of just like code on the shelf, ready to pull off the shelf and apply it if institutions just know it's there and know how to do it? Or in the terms of just like building privacy on Ethereum, building private systems on Ethereum, we still have some building to do. Like where are we in that arc of we still need to build more solutions or we already have the solutions and we just kind of need to come up with some standards or institutions just need to be made more aware of them and somebody kind of needs to just hold their hand and put the building blocks together to get what they need? Like, where are we with the evolution of privacy around Ethereum for institutions?

Oskar:
[8:20] It's a good question. I would say it's very much a mix. And I think one thing you see and I've seen over the last decade, and this is partly due to a financial foundation, but other people in this space like Ccash and independent resources, We've been sort of pushing up and making a lot of the cryptography actually usable. And then there's sort of companies that have come up around that and sort of made it even more usable. I would say that some solutions we sort of know how to do, but then when it comes to specific constraints, I would say we are still, there's still a bit to go. Because a lot of these institutional use cases, they are not necessarily obvious in terms of the specific constraints. So you do need to customize things a little bit. And you could say, oh, just use like a privacy of two. But if you look into the specifics, oftentimes there's a common trade-offs that not every institution is willing to make. And it's very interesting when you talk to these various companies is that some of them, they're extremely sophisticated. Like they have their own R&D department with 20 people and cryptography PhDs. And we were looking at the space for like years. And then on the other end of the spectrum, you have people who just like, maybe they don't have like a very strong technical team, but they sort of want like a white label solution. So you see this wide sort of spectrum in terms of what these users are looking for. And then also different timelines and different sort of targets. If it's like retail, like massive scalability in terms of TPS, or if it's more of a higher assurance kind of security use cases. So it very much depends on the specifics we're talking about.

Mo:
[9:38] And just to add on that, I think maybe, Oscar, I don't know if you're going to push back on me on this, but I think at least for the kind of use case that we look at, I think largely more of an engineering problem as opposed to like a research problem.

David:
[9:50] Okay, so the research is done and the engineering, it seems to be like that is just like where Ethereum is these days. It's like the research is mostly done, it's about just about engineering.

David:
[10:00] Can we go through like just a typical case study that you guys have with like your most average institution conversation that you have? Like what's the number one form of privacy that they are looking for? Is it their account balances with stable coins or if they are interested in creating real world assets or using real world assets, it's like revealing their how much of an asset that they have. Is it sending these assets? So like private business to business stable coin transfers for payments, like businesses probably don't want to reveal that activity on chain. What kind of privacy is the most commonly needed privacy in the conversations that you guys have?

Mo:
[10:45] Yeah, so I can add a bit of color here. So first of all, I think when it comes to the work that we do, we span a broad range of use cases and our time is usually spent on the work that hasn't already been solved, to be perfectly honest. So for example, when you talk about the situations that you just talked about, all of them, I think a lot of people know about them, like for example, private payments, tokenized deposits, those are great but they're already kind of solved in many ways, at least for some organizations in some countries, the type of work that we look at is kind of like the work that really hasn't been taken a look at yet. I can give you some examples, right? So one is that, you know, we were definitely talking to a particular organization, let's just say, Tier 1 Investment Bank, where they do this thing known as inter-dealer compressions, right? So what ends up happening at the end of the day, they send all of their trades to a trusted third party, which they pay millions of dollars a year, by the way, tens of millions, if not hundreds of millions of dollars a year. And what happens is that this trusted third party, they look at.

Mo:
[11:43] Banks' trades and all of their positions. They look at another bank's trade, all of their positions, and then they net it out. And no one likes doing this, but they do it because the value it brings in terms of compressing these trades down. And they first have less capital requirements because they don't have to get that ready. They have less transactions they have to do. And we basically had someone that come to us and they were like, well, hold on a second. Is there any way that we could do this? And this is the perfect example where a kind of like, I would say foundational new technologies like Ethereum, a shared state, could give them this without this particular third party. But the problem is then the entire world can see everything. So that's an example of a very specific use case that, you know, I've talked to other teams about this and most people haven't really seen this business or this opportunity that needs to be addressed. But this in itself is a several billion dollar basically business that could be taken a look at. That's one. To your point around basically private payments, we've talked to a number of different organizations across different jurisdictions that are looking at this and they all have different requirements and i think oscar made a great point where like sometimes a use case is well known like private payments but the jurisdiction it's in gives you a very various permutation of it that makes it non-trivial to do.

Oskar:
[12:52] Yeah also to add on that like i would say we talk about privacy a lot and i think that's great it's very important but i i don't want us to focus only on that because oftentimes if you think if you think about building confidential and secure systems that's one of the things you care about like you also care about sort of the security properties and and sort of if it's sensor persistent and and of scalability and so on. A lot of it is also about sort of elevating the space a little bit in terms of rigor, because if you look at all these institutions, they already have product market fit. So they already have like a system with like billions of dollars flowing through it. And they want to be able to move on to Ethereum with confidence. And in order to do so, they need to actually be sure that the system works the way it's supposed to. So that's like a little bit different from like, you know, like live coding an app or whatever. Like it requires you to actually think carefully about what are security properties that you have. And privacy is definitely one of them and one of the more tricky ones, but also just one out of several so you need to think about all of them as a whole in terms of a system and like having kind of technical specifications around this and so on so i think that's like another thing to think like a bit more holistically about it that just like multiple properties and they all have to be satisfied in order for institutions actually want to move over onto ethereum

Mo:
[13:57] I know but that might not be like a satisfactory answer in terms of what's the most kind of popular use case it's probably because we go for the really kind

Mo:
[14:03] of edge case kind of problems that are out there.

David:
[14:05] Is there an example is there like a case study that you guys have worked with in the past that we can talk about where you could you could have the end-to-end conversation of you had you started talking to this institution they had a privacy need you guys worked with them did whatever you guys do and now they are using ethereum in a confidential private way is there is there a story you could tell us about like an example that's like worked so far yeah

Mo:
[14:29] I can tell you a story i don't know if i can mention names because.

David:
[14:33] Yeah i would figure I mean, if we're talking about privacy Yeah,

Mo:
[14:38] Yeah, yeah People don't like to share it Especially the bigger you are The more that you have But we can talk about a couple So, for example Everyone understands that, right? I do a payment to you And doing that on chain, everyone sees it It's a use case that, you know, bog standard, For a particular jurisdiction, it's a bit non-standard because first of all, they want it to be confidential and they would like to roll out for almost the entire country. So what's happened to them is they're like, we think blockchains are amazing. We think, you know, payments are great, but we need to be able to do it at scale for an entire nation.

Mo:
[15:16] And the thing about a payment is that normally it only has like really two actors, which is a sender and a receiver. It's known as like a DDP, like they usually have two actors. But because of this particular country, they have a relative requirement to have four actors for payments. This is the sender, the receiver, the auditor, and then the government, essentially. And to do that in a privacy-preserving way, they tried for, I think, two to three years. I'm anonymizing the years bit.

Mo:
[15:45] And they tried to basically, you name it, protocols are out there. And they were not able to do one in a way that was acceptable. Basically, was it performing enough? Could they basically hit the TBS? Could they do it in a way that basically is not like ridiculous computational costs? What's interesting is that for the last year or so, we've basically been publishing our market map and we've been doing write-ups. And they basically saw one of the basically proof of concepts and works that we've done because we often do exploratory work around what you could potentially do on Ethereum. And they're like, oh, hold on a second. We've tried, I don't want to name the protocols or the teams, but we tried X, Y, and Z for three, four years. We published a natural report about this, a 16-page report and why we can't do it. But it seems like actually this piece of work that's coming out of the EF could work for us. So they basically reached out to us and they're like, hey, hold on a second. We'd love to have you guys reference your work and build something that actually looks like it could kind of solve our needs. And that's an example of one where I think no one is the work kind of interesting and it might solve a few people's problems but you can do it at scale. You can do it where you can affect tens of millions of people and I think that's an example of like some of the things that we've done that, you know, had we not done this open source work, had we not published it, had people not seen it, they probably would have just put that on the backbone for a very long time or worse yet, gone to, I say worse yet, gone to some kind of private network.

Oskar:
[17:03] I would also add a little bit to that like, if you think about the institutional sort of sales cycle, they are quite long so oftentimes like it requires quite a lot of work to sort of So get something going and there's like, you know, some confidential around that. And then it takes a while until you actually see sort of the complete fruits of your labor. So that's generally like a thing. And I think one thing we noted at EF, and this is also one thing that gave us, I guess, the idea that it makes sense as a separate for-profit entity is that we had a lot of engagements and collaborations with various institutions. And there were many cases where people were like, okay, so we would love to continue working with you guys. How can we pay you? And we're basically going to say, no, no, no, we're a nonprofit. We have to be neutral and so on. So we have to say no. And sometimes where some conversations stopped because it's extremely important that Ethereum Foundation stays incredibly neutral and so on. So we kind of have to back off there and let other people sort of take the ball there. But I think that also shows a lot about how much demand there is and so on. So as we've been sort of spinning out now and into a separate for-profit entity, it's a lot easier to have sort of these commercial agreements in place because it's a lot easier for an institution to understand. It's very straightforward in terms of contracts as well.

David:
[18:11] What I'm hearing from you guys is it feels like there is a lot of very bespoke solutions that need to be built, as you said, for the specific permutation of privacy in a particular compliance jurisdiction for the specific needs of a specific institution.

David:
[18:27] My concern about that is that if we keep doing bespoke stuff, it doesn't really scale. Because if you make a perfectly fitting glove, it's only going to fit one hand, right? And the alternative that I see for that is like, well, we have the core of Ethereum, things like Uniswap, things like Aave, things like EOAs, like my address, my ledger. And if we can get privacy in these core things, the level of scalability that we get on Ethereum on net is going to become much larger and maybe institutions can, like once we get pretty high fidelity privacy scaled and easily accessible and closer to a default on Ethereum, then institutions could like bend a little bit and they're like, this doesn't perfectly fit, but I can maybe change my systems a little bit in order to fit this form factor of privacy. And if we get everyone onto the same standard, then the total amount of privacy, both on Ethereum and on the world, can grow massively. And so I guess the question is a concern about the scalability of what you guys are doing. And don't we just need privacy a little bit more baked into Ethereum core rather than doing bespoke stuff on the margins? How would you guys respond to that?

Mo:
[19:48] Yeah, I've actually got a really good answer for this. So a couple of things. I think one is that, We could do both. That's one. There are many teams that do that, and that's why I think Ethereum is amazing. The second thing is that, you know, we talk about these bespoke bills, but actually each one of these markets, each one of these industries is freaking huge. We're talking about potentially hundreds of millions, if not billions of dollars. So the way we think about it is that we actually like, we don't like doing purely bespoke bills. We think that's a really bad idea. What we think is that you go in and understand these highly specific use cases because if you don't really understand it, you can't really solve it. And what you end up doing is that you can create generalized solutions that can be reusable for other people. So, for example, I told you about the interdata compressions. That can be useful for every investment bank. We talked about, for example, the kind of like, you know, multi-party DDPs. That can also be spread out. So our plan really is, and the way that we think about it, is that we want to generalize and we want to do two things. One is that where we can open source and share with the rest of the world because that basically hardens the way that people look at privacy on Ethereum. The second is that take these reusable components and put them into a place where it essentially becomes a stack that people can easily switch on. So the way I think about it is that this bespoke work is almost like, you know, when you do a startup, you have this idea maze. Balaji talks about the idea maze. You go and you try to find out what works. And, you know, Paul Graham also talks about things like, you know, do things that don't scale. And that really is important when you work with institutions because they have these systems already. They have billions of dollars.

Mo:
[21:16] Of business. And to get them on chain, you have to start from that side as opposed to the DeFi native side. And I think, like you said, there's different people working on both, but I don't think actually enough people are working on the TradFi side that then converts them to Ethereum as opposed to there are many teams already on the crypto native side that are kind of going the other way. So having both is the way to do this.

Oskar:
[21:37] Yeah, I would agree with that. And also, I would say, in general, the space has invested a lot in generic infrastructure, if you will. And if you build, they will come. But that's not always the case, especially when you're talking about these laws, you know, institutions with very specific requirements. So I think there's value in actually going after the specifics and then generalizing after. And there's a few ways we're doing that. So one is in terms of open source libraries that we're pushing out, so like building blocks, and also in terms of like technical specifications that are written in such a way that they can sort of be generalized or you sort of, to the extent that is special case, you sort of make it very clear. So it's like swap ball or pluggable or sort of modeler and so on. And then I think in general, like base layer privacy is amazing. We would love to see that and that would just enable some even more use cases. So we definitely support that. I think it's great. It's just not the main thing we're focusing on. And then there's like a lot of other things. So for example, when we talk about liquidity, there's like solutions when it comes to interability, like Ethereum economic zone and these sorts of things. So I do think you can get the best of both worlds and there's like many different ways to approach this. We are focusing more on like how do we actually move institutions onto Ethereum and that's our number one priority.

Mo:
[22:41] Yeah, and just to add on that, I know we've got like a million points here, but I think for organizations that may have been running for hundreds, like over a hundred years, some of them are like that old. You need to, kind of build that bridge and come from where they're building. It's like, hey, look, this is how your business is. Okay, let's translate that. I think trying to force them into doing it the other way might not work.

Mo:
[23:02] We've seen a lot of teams that have tried that and it hasn't worked for them.

David:
[23:04] Is ETH Systems a startup or a nonprofit? What's the legal entity behind ETH Systems?

Mo:
[23:11] So ETH Systems is a for-profit entity.

David:
[23:14] Profit, okay. Yeah. Okay, because my question was going to be like, isn't this best done as a startup trying to build a very scalable venture-sized outcome you guys are you guys are for profit is that where you guys are yes yeah yeah okay i was like i was like okay wait a second if you guys are having all these conversations you're seeing you're seeing that you can build solutions like isn't this best done with something like with kpis like tvl and volume and you guys take like a cut but this that is what you guys do Yeah,

Mo:
[23:49] Yeah. So for us, it's a for-profit organization for a couple of reasons, actually. And this is something that we debate. Actually, Oscar, we talk about this quite a lot, right? It was like, I think there are a lot of non-profit organizations in our space, and I think they're amazing. But for the work that we're doing, it's going to be a multi-year journey. And the most, I think, cleanest way to sustainably fund it is to do it as a for-profit entity. That's one. Because public goods funding is extremely, extremely hard. And in my opinion, grants should be given to people that really need it. The second thing is that, The types of organizations that we work with, in order for us to do the last mile, they actually require you to be a for-profit organization to go through procurement. Like being a nonprofit is actually a red flag sometimes and they just can't work with you. So for those two reasons, we basically went with the basically for-profit route. Knowing, by the way, that we have so many sister organizations and friends in the ecosystem that are nonprofit and they can kind of pick up the mantle there.

Oskar:
[24:42] And also like just personally, like at least for the last seven years or so, like I mostly worked at sort of nonprofits. So I definitely value that. And I think there's amazing value in terms of this like R&D and going really deep and public goods and so on. So that's amazing. I think in this case, it's kind of obvious, as you kind of alluded to, that it's a very straightforward business model. You know, there's a customer and they're willing to pay for something and we can help them. So I think that's, it makes a lot of sense in this instance, especially for the reasons Mo mentioned in terms of commercial counterparty and so on. I would add that like, we're not only doing that. So the way we approach this, we kind of have these two work streams. So one is business-driven and the other is open source. In ideal world, they are like 100% sort of aligned and so on. But the business-driven work, a lot of it is talking to institutions and understanding their specific requirements, if it's business or legal, and then basically mapping that to technical constraints and the science and sort of helping them in that, in terms of like, if it's like educating them or do architecture reviews or POCs or production environments and so on.

Oskar:
[25:39] Then based on that, we get like a lot of business intelligence or details, like particular details that are hard to talk about. We take those and generalize that. And they use that to sort of push out open source building blocks that can sort of elevate the space and also inform people. So it's kind of continuity in terms of the work we did at Ethereum Foundation. So that can take the form of like POCs, like explaining, here are some examples of constraints and how you can think about it. Like write-ups, the service of the space, like how you can get these properties, open source libraries, take on specifications and so on. So we think that's extremely valuable, both for the ecosystem as a whole, but also in terms of like,

Oskar:
[26:13] You know, just general communication and also attracting world-class talent because open source is like something, it's hard to do too much open source. And fundamentally, a lot of the security properties and private properties, they need open source solutions. Like you can't just sort of hide things and do sort of security by security. So, some of these institutions, they actually ask for open specifications and open source in order to be able to trust the system. So that's something extremely important to us. We try to sort of keep a balance between the two, both sort of being very pragmatic in terms of business demand, but also very principled in terms of open source work and pushing it out for permissive licensing and so on so other people can build on it.

Mo:
[26:47] Yeah. And just one last thing on that is that oftentimes there's these like unintended side effects. And one of the great things about kind of the work that we're doing is actually you end up having for-profit institutions funding some of these public goods

Mo:
[26:59] and become great for the rest of the ecosystem.

David:
[27:01] So are you guys a like a consultant dev shop where you guys are hired and paid to build technical solutions for institutions? Or is it something a little bit closer to something like, I don't know, Uniswap or Aave, where you are trying to build systems in code on chain that imbues institutions like workflows with privacy, but you're trying to build like a large scalable structure that, I don't know, like governs over a system or something like that. And so like there's a spectrum there where it's just like you guys are just like, you know, privately paid consultants and that has like one size like outcome in terms of investment. Or there's like the massively scalable system where, well, you guys are talking to all these institutions. You're getting a view of the landscape. You are starting to get a picture of what's needed. And then when you guys are ready, you guys are ready to build the massively scalable like venture sized outcome. And you're then that is like a product that you guys build. Like, where are you guys in that spectrum?

Mo:
[28:04] Yeah, I think this is really clear for us. It's definitely the latter, which is basically we love products. Like I was a CTO of my last company building products. Austin's been building products his entire life. Products are the way to go for like scalable kind of solutions. But like you said, it's a spectrum. Like you need to do a lot of that kind of hands-on understanding of all the various use cases, taking a bit more of like a forward deployed engineer model, sitting down with them on the trading desk and understanding what they're doing. But the goal definitely is to take some of these learnings and turn this into

Mo:
[28:31] like scalable products that you can roll out in basically mass.

David:
[28:34] How far along are you on the research and proving the landscape and gaining information side of things? Like how complete do you feel in terms of informing a product that you will eventually build later? Or is there still more like research and development to do?

Oskar:
[28:52] As I mentioned before, like the institutional sales are quite long. So it's the kind of thing where it is actually quite useful to take your time a little bit in terms of actually doing multiple collaborations with POCs and architecture reviews before sort of going deeper into one or a few product bets. So we have a lot of active collaborations but it also takes a little bit of time to actually see those through and sort of see okay so what is the exact thing where we have a sort of competitive advantage and so on that makes sense sort of go double down on

Mo:
[29:22] Yeah and yeah to Oscar's point basically we do have a couple of ideas already like, some that I think could be absolutely quite game-changing, but it requires more testing of the thesis, going in there and really understanding whether or not those fundamental questions that we have have been answered and we're not quite there yet. And I will say, by the way, there's already examples of like venture-scale type businesses, for example, private RFQs, right? I think Zama did something recently where I personally think that's a huge business. And actually up until they did it, I don't think there were many people that are doing it at that level of scale. And there's other opportunities I like that will stop. I'll make prediction over the next 24 months you can see a whole number of businesses pop up that are like that and the reason why i say 24 months is because a typical institutional engagement will take, kind of at least 18 months you like it takes you a number of months to get to talk to them and educate them another month to go through procurement and then

Mo:
[30:12] like almost a year to kind of get the initial version out.

David:
[30:14] What's the appetite these days for institutions to actually come on chain and do things do things in like the the decentralized public blockchain context and then like clearly the answer is some but when you guys have conversations is it a little bit more of like you guys are going to them and be and trying to like convince them to come on chain or are they coming to you and being like we really want to come on chain but we can't because of these constraints how much selling do you guys have to do to get people to come on ethereum oh so

Mo:
[30:45] This sounds terrible but actually i'm a really bad salesman so most of them come inbound i'm not the worst. I'm not sure you're saying this, but I'm not the greatest. And most of the demand has been inbound. So I think for first of all, it's one thing that's amazing about that is that they understand the value of blockchains. Secondly, I think I've got to give credit to DeFi here. They can see what's happening in DeFi and that really, really interests them. So the things like Aave and Uniswap and Lido, they want those things, but they want to do it in a way that they're compliant. So to your point, like the demand is absolutely massive. Like it's huge. And the thing that they're looking for is in some ways that even kind of classified as institutional DeFi, And you'll see, for example, various organizations and DeFi protocols are basically making forks of their products to do this. But it's huge and it's coming. And what you'll find is that the ones that have been looking at blockchains for the longest time, so up until recently, we've been through Clarity, hopefully coming, and like Genius Act, they were looking at it with almost like, oh my God, this would be amazing if we could do it. And then the floodgates started opening up. So we don't do much selling, to be completely honest with you. We do think a lot of the demand is, it's basically intrinsic to basically these businesses. They used to do proof of concepts. They used to have basically like innovation teams that would try things out. But last year, something really changed where sometimes a CEO would basically pick up their phone and talk to the innovation team. We're like, hey, look, you guys have been working this for five years. We actually want to do business now.

David:
[32:09] Maybe one way that this unfolds is we have the DeFi ecosystem, the main core like campfire of Ethereum, the Uniswaps, the Aave's, the stable coins. you know, the pendals, morphos, like all that kind of stuff. Like I'll call it the center of Ethereum. It really feels where all the heat is. And institutions are looking at that and be like, well, that makes sense. I want to go play there. First, there's going to be a very distinct parallel, dare I say, even siloed ecosystem that gets built out for institutions that is private and fits their form factor of needs. Because directly integrating into those things is probably like too soon, too ambitious. And we need to do just so we just have things going out in the wild first. And so before there's like deep privacy institutional integration to kind of like the core DeFi apparatus of Ethereum, there's first going to be distinct siloed separate arena, separate playground, separate sandbox for institutions to come in and do their business logic on chain in a private manner. And then they're going to see like, okay, this is working out for us. I like what we're doing here. And then maybe somebody can build us a system that integrates what we're doing into Morpho in a compliant way.

David:
[33:29] And then later these systems start to intertwine and grow a little bit more together rather than being two separate versions of Ethereum. But that's kind of how I see the path playing out. You guys are slightly nodding your heads. And so like first it starts off completely separate and then we figure out how to intertwine. the market will figure out how to intertwine these things. Do you guys agree with that sort of like logical evolution?

Oskar:
[33:49] I wonder if you've been in been in our meetings or something because that's exactly how I think it's going on. Because if you when you talk to them you notice that they are they're like there's like a path right and they are Some are further along and some are extremely sophisticated and they're already thinking about this. Like they have, they're thinking deeply about like how do we integrate with these issues of DeFi? How does this compose with all of everything else? So that's naturally happening. And that's something that we see the more sophisticated actors are already starting to plan for. But they sort of need to learn, right? Because it's a new system, it's a new world. They need to sort of level up in terms of their thinking. And like a lot of it is also like translation work because a lot of these companies have been around for like 100 years or something like that. And they have a compliance officer and the legal framework they're operating under was written for the old world. So all of that needs to update and that goes into like, has everything to do with like policy work and like how do you even map this to technical capabilities? And that's like a decades long transition that's happening all across the space and it'll continue to happen. It will take a while, right? But obviously there's sort of smarter money or most sophisticated money will sort of try to front run that a little bit and sort of get ahead of things. But that's definitely how we, I think at least that things will develop.

Mo:
[34:58] I mean, I've talked to asset managers, I'm talking about like traditional asset managers that will come to us and say, look, we want to put these products on chain. We can see what you guys are doing. We just need to figure out a way to do it. Like there is a lot of, I think, especially the more forward thinking asset managers, and they are definitely, definitely interested in doing this. And I have this conversation almost every single, I would say, week or two.

Mo:
[35:20] Like people are saying, hey, how do I do this?

David:
[35:22] What gets unlocked? Like paint a picture for me. I know privacy is hard and crypto moves, I think, slower than it did in the past when we were trading meme coins. But paint a picture for me in like 2033. So seven years. And you guys have done the job that you have needed to do. Institutions appetite continues to increase. Paint a picture for me of what that world looks like with institutions and privacy. Like what's the ambitious, optimistic case in like a seven year timeframe?

Mo:
[35:53] I think what you'd want it to be is that for the vast majority of people that are not crypto native, it should be invisible. Like the best technologies, you don't see them, but you get the affordances of it. For example, imagine I could trade U.S. stocks without being in the U.S., without giving away my identity because I have digital, you know, I have like a DID system. Like that'd be amazing, right? So I think the way that we like to think about it is that not only is like basically trillions of dollars of assets on chain, but beyond that, like all of this stuff is visible, but I get all the amazing benefits that we currently have with DeFi. I think that's the way I like to think about it. You know, you could access any stocks in the world, you can access any kind of these assets and you get all the benefits of a blockchain. Essentially, you can do transferability, you have that ownership of the things that you want. So, yeah, I think that's basically how we see it. Like in seven years, it's very realistic that the vast majority of financial infrastructure is going to be on a blockchain. It's happening right now. All the biggest players are already doing it. Hopefully that happens on Ethereum.

David:
[36:49] Some of the core properties that we really, really like in crypto and on Ethereum is transparency, auditability, and verifiability. Going back into some older days I remember I would debate with Bitcoiners about the adoption of Lightning Network and they would say Lightning channels are private you can't see the volume there's actually insane amounts of volume going on on Lightning but it's private so you can't see it and all the Ethereum people are like you guys are bullshitting us Lightning is a joke of a product and just because it's hidden behind you know, private state channels doesn't mean we can't, sure, we can't verify it, but like there's nothing going on back there. And so like I just use that as an anecdote of just saying like, okay, well, if we make things like asset transfers private and we hide TVL and AUM, like that's also private and we remove some of these core properties that make DeFi interesting and like trusted in the sense that we can inspect, source some of our DeFi systems. If we hide everything, How do we know anything's actually going on?

David:
[38:00] How would you respond to that?

Mo:
[38:01] Yeah, so I think a question I'd have is like, I think some people often mistake privacy to be meaning hidden. I think privacy really is who can see what, when, and how. And, you know, for example, when I do a transfer of my bank account right now, I can see it. The person that's receiving can see it, but, you know, the public can't see it. That's great. That's great for me, and that's what I'd like. So the question I would have is like, I think transparency, people want that so they can have a level of trust. But if you could get trust without having to see, people's details, I think actually that's a better product where it's almost optional. Like you can get all the same affordances that you have, but it's kind of selectively disclosed. So my question actually to you, David, would be like, imagine you could verify anything that you wanted to, like whether someone's doing the right transactions, it's like the right thing that they said, the TBL is above a certain amount, like it's like good, but it's still somewhat selective where you can't see everything. Wouldn't that be great?

David:
[38:53] Yeah. The things I would want to retain in verifiability and auditability is things like trading volume and market cap of an asset like TVL. And so when these private assets get deposited into Morpho, Morpho gets to like report the AUM of those assets in question. And or when like, you know, assets are traded privately across Uniswap or some sort of prop AMM, the actual metrics of the activity is still like reportable. And beyond like who's trading the assets, I don't really care. And in fact, like, just as an anecdote, like today's Friday, August 7th, there's like this Ethereum whale with $55 million T-wopping into like lit on the main Uniswap layer one. And everyone is like, oh, look at this guy. It's like, then the price is front running this individual because we see $55 million of stable coins T-wopping into this token on Uniswap and everyone's also buying to get ahead of this whale. Doesn't feel right in terms of just like, that's not how finance should work. And like the other example that's happening is like people are like looking at all of these traders on Hyperliquid with regards to like Robinhood meme coins. And they're seeing this one account with a trading history who traded all the correct meme coins ahead of Robinhood listing. In this case, it's actually really nice that we have the auditability.

David:
[40:16] But still, like you shouldn't be able to see people's trades and like accounts and all of their trading history.

David:
[40:24] The fact that that's fully transparent is like an interesting property and it makes for a lot of drama on crypto Twitter. But like that's fundamentally a constraint for institutions. But I still want to see the volumes and I still want to see the assets being traded. There's like a bunch of other stuff from removing of like, you know, the individual accounts. There's a bunch of, basically everything else I still want to see and retain. And so like, so long as I can verify all of that stuff, then we can get the best of both worlds.

Oskar:
[40:50] Yeah, and I would say you definitely can. Like they're not contradictory because especially with like cartography and synodic proof and so on, you can get that. You can sort of prove sort of these aggregate metrics that you care about. So there's no contradiction there. Like you can definitely have a system where you sort of get transparency on the things that you want to be transparent and then privacy of the things you want to be private. So I think a lot of also benefits of something like Ethereum, a public blockchain and programmability and so on, that you can actually get

Oskar:
[41:15] these properties. They can design the system in such a way that you get the best of both worlds.

David:
[41:19] I love smart contracts. What can, who can help you unblock you the most about certain things? I feel like maybe there's two directions here. There's the broader DeFi ecosystem. So like, I don't know what this looks like, but like, you know, Morpho off a Uniswap, maybe they can help you guys make privacy with those systems easier and more accessible. Is there something that you guys need from like the Ethereum community or the Ethereum DeFi ecosystem to make your jobs easier? And then also the other side of the spectrum, the Ethereum foundation and the actual Ethereum protocol. Are there like EIPs or upgrades to the actual Ethereum protocol that would also make your guys' life easier? Basically, how can Ethereum help you?

Mo:
[42:01] I can start with maybe the ecosystem, the Deco ecosystem. So we already know a lot of the folks in this ecosystem. But like, for example, if you're Morpho, if you're Aave, we're already talking to some of them already. Like definitely talk to us because we'd love to be able to like look at your products and see how we can kind of like basically modify them in ways that would be suitable for very specific types of use cases that could be incredibly large. So I think for me, it's like, come to us, talk to us, you know, let's look at the products. Let's see what we can do to work together. And yeah, just like that's the one ask. I would have, like, definitely come to us. And we'd love to talk to you as well. We're very open doors here. Like, come, come, come. And then, actually, another thing I would like to say is that because we do have public goods, like we basically release a write-up every three or four weeks. If you've done amazing work, and honestly, this is good for you as well, contribute to our open source repo. I will tell you right now, the number of banks that look at it is pretty large. So if you have a product, you've made something that's really kind of intuitive or cool, or you've got DeFi protocol, come to our repo, contribute open source, fork it if you want, change it however you want, but basically contribute. It's going to be great for you.

Oskar:
[43:04] I would add to that. So we talked to a lot of people in ecosystem and so on. I think one thing that we've started seeing the last year or two or so is that people are starting to being a little bit more open-minded about what the users might be like. And maybe it is partially because of retail movements and the cycles and whatnot. But I think that's another thing where Try to sort of be open-minded about like who might best benefit from using your product and protocols and so on. And think about what kind of requirements and constraints there are, but there are. So that's something we're trying to sort of make a bit more public in terms of our privacy market map. But one thing we noticed a lot, and it's something we noticed at the Ethereum Foundation is There's a massive, massive disconnect in terms of what the institutions are asking for and sort of what the ecosystem provides. And we try to sort of help bridge those and sort of create a feedback loop between the two, but there's definitely a lot more work that can be done. And this is like a

Oskar:
[43:52] ecosystem-wide effort.

Mo:
[43:54] And one last thing I want to add, and by the way, this is something that Oscar brought to the table. And I think the position that we often have is like cypherpunks in the boardroom. Like that's super counterintuitive because these are the two types of groups that normally don't talk to each other. But what we'd like to be is like that bridge where those defaults that could be generally good for humanity, have them built in. But the only way to do that is to get into the rooms that these decisions are made.

David:
[44:16] Yeah, one thing that made me very optimistic was hearing a lot of Danny Ryan's reporting from like inside the room. And like, Danny Ryan's a cyberpunk. And he's talking to the banks. And they're talking the same thing, but with different words. It's kind of like the horseshoe theory, where like Danny's like, decentralization is really important. And the inside the bank is like, I want to remove all my counterparties and people are like these are the same things and I feel like there's a lot of synergies with you know the powers that the needs of the powers that be of the world and like cypherpunks and like these things are like coming together and like touching as like completely opposite ends of the like the political spectrum or some sort of spectrum but like the wants and desires and needs and products that they're building are actually synonymous is that your guys' experience as well?

Oskar:
[45:07] I would say so and I would say it's like you have a lot of the tools that you saw the same, a lot of the affordances that people care about as individuals, they're often very much the same in terms of sensory presence and privacy and open source security and so on. And I think one of the great things about Ethereum is you can both have people go like, because some people who listen to this, they might be extremely skeptical and like, oh, you know, Tradfuck, we don't want to touch that. We don't want to talk to these guys. You can still have that and build systems that are like super cyberpunk, like no KYC, 100% Anonymous and all these things and build it on top of Ethereum. And that works great. But you can also build these other systems that sort of have similar properties, but may be designed under different constraints. Like for example, the legal framework that a specific company is operating under. And I want to say that like, I think people might judge some institutions quite harshly because of the regulations you're operating under. But if you talk to them, a lot of them, they do things like regulatory arbitrage. And they also, they're operating in an environment, just like any individual. Like any individual might be like, oh, I'm not going to do a private payment when I buy a cup of coffee because it's not worth it for me. The same way an institution is like, well, this contract, I'm going to do it in this legislation, this jurisdiction, because that's sort of where I get the properties I care about. So it's not that different if you think about it from like a higher level. It's just a matter of like operating in different environments. And if you can give them what they need, then they're happy.

David:
[46:31] Mo, Oscar, you guys are doing God's work. Thank you for doing what you're doing. I wish you guys the best. Privacy is still, unfortunately, in 2026, problem is something that the space is lacking. And so the more people working on this, problem and building towards solutions, the better. It's probably going to be the biggest unlock for Ethereum specifically that I can think of. So I'll let you guys get back to work and thanks for coming on the show.

Mo:
[46:54] Great. Thanks, David.

Oskar:
[46:55] Thanks for having us.

David:
[46:56] Bankless Nation, you guys know the deal. Crypto is risky, but that's why we're here. The institutions have landed, so we are going even further west. This is a frontier. It's not for everyone, but we are glad you are with us on the bankless journey. Thanks a lot.