Bringing Privacy to Public Blockchain | KBW2023

hello everyone um so yeah thank you uh for coming to this panel on on privacy I think which is like I the next really cool Frontier I'll quickly introduce myself and then we'll have some introductions from a and Alex um actually it's really nice to see some familiar faces uh i' been at the leading the protocols team at state fish and then where I knew AWA and then Alex uh my grad school adviser when I was studying cryptography and distributed systems was also the co-author of the Alo paper so it's a very small small world um yeah so maybe we could go down the line a maybe you could describe a bit about your background how you came to namada and then maybe as well for you Alex um hi everyone my name is AWA I'm one of the co-founders of namada and anoma um I had a pretty non-standard to the space um compared to many other Founders actually my first job in the space was at Chen analyst CH analysis and I was working there basically on applying ml to break privacy on bitcoin oh yeah hey everyone it's a pleasure to be here I'm Alex I'm the CEO of Alo um I think it's it's standard to have a non-standard background into crypto and I guess I also have a non-standard one but uh I spent the first 10 years of my career in the US Army um and actually got introduced to bitcoin working in the Middle East um with folks that we were training at the time the were these were Syrian rebels um that were fighting the Assad regime and I was introduced to bitcoin through that experience uh finished my Army Career went to uh went to grad school was introduced to you know some of the the more deeply technical cryptographic Concepts that you know um I think a lot of people are integrating today into the space one of those Concepts is zero knowledge cryptography which inspired me um I ended up taking a job in Venture Capital right after grad school and then ultimately found my way to Alo which is um a new ZK layer one so great um maybe we won't get into the deep technicals first but maybe if you guys can describe tldr versions of maybe aoma namada and then Alo and then we can get into the the dirty the dirty W I'll focus on namada actually so the tldr of NADA is um basically if you're a multi-chain user as in you hold assets on ethereum fungible non fungible assets and you interact with different chains and applications like osmosis and Cosmos would it use for privacy and the short answer to that is that nowadays there are very limited um decentralized systems that allow you to get privacy Zach tornado cach and a few applications in ethereum and they're so limited um in the Privacy guarantees that in practice don't provide enough privacy um so the ironic reality of of today in uh with privacy is that every crypto user actually uses centralized exchanges for privacy and that is because um when you do that when you make a payment from an exchange when you look at at a B Explorer all you see is that it comes from binance Kraken and so on so it breaks the linkability between your transaction history and your identity um so this is really sad because the entire purpose of this space was to decentralize right to remove intermediaries and bringing better proper is like privacy and somehow with the lack of privacy in the existent systems we're going back to square one which is actually the lack of privacies becoming centralization Factor so um with that we built namada and then the main purpose of namada is to bring in uh privacy in a way that we haven't seen before so it's designed to bring privacy in a composable way and what that means is for users that we assume that users want to continue using the assets they currently hold so let's see um us C us on ethereum E their nfts on those systems um and also like atoms um uh use dexes like osmosis dydx um and what we give them is basically the ability to continue doing so and holding these assets but privately that is a fundamental new design of how we bring in privacy as opposed to how new systems require you to historically basically to want a privacy you can have to buy into monetary policy go to specific platform no application um and the other main advantage of composable privacy is that applications and based layers like eion do not have to make any changes to support privacy uh yeah and Alo I think that the tldr tldr is ethereum and zcash had a baby and that would be that would be Alo um and it's a little bit of a kitchy way to describe it but I actually do think and am excited about Alo because I it's a synthesis of many ideas that have come before in the space right um like for example this is the zero knowledge cryptography that zcash pioneered and you know this idea of smart contracts that really inspired you know ethereum now almost 10 years ago um so it's a synthesis of those two ideas it's also a synthesis of the two I guess most prominent consensus protocols right proof of work and proof of stake in Alo we have a proof of work mechanism around incentivizing provs uh to generate zero knowledge proofs for the protocol in order to bootstrap an ecosystem which could then serve to you know help enable transactions for regular users um but you know we're also since we're building a new proof of stake blockchain which we'll have you know starting in a couple weeks 55 validators from around the world who will be participating in that using the you know latest and greatest in proof of stake bull shark narwhal consensus um so it's a synthesis at that level and then lastly it's a syn synthesis of permissionless with privacy right and I think that's something that has never been done in the space before I think there are some you know there's some protocols where you can achieve privacy like you know actually I guess maybe the simplest way to achieve privacy is to send your money to an exchange and then send it out if we want to call that a protocol but that's you've never been able to do that in a fully permissionless way and this is something that we at Alo are very passionate about is you know permissionless is what defines blockchains it's what makes them special I think compared to other types of Technical architectures and so yeah so in short Alo is a new ZK layer one hybrid proof of stake proof of work blockchain that uses zero knowledge cryptography in a permissionless setting to enable new types of applications in web 3 that have never been possible before I I'd really like to get into the infrastructure differences between namada uh and and Alo but before we get there um I I I I'm curious as to your opinions or or or or thoughts about why it t has taken so long for our space Maybe um to get the type of what we'd hope to see is this sort of mass adoption for each of your protocols to have the types of privacy versus what we had with like very transparent blockchains um maybe we were using those transparent blockchains incorrectly before or and and people are just using it in a way that uh was not aiding privacy or and and then why do we have it today and and why is it taking so long um so from my point of view there are two things so the main thing is that we needed some time to develop a technology to make this possible so the advances in cryptography specifically knowledge proofs have actually improved a lot in the last year so it's been around for a while in research it's been a while around for a while since zh Appo first but they have been actually optimizations and Improvement that made it possible to create more accessible uxs around these applications for example running Z or creating Z proofs and running these applications in browser and that is actually very important to make it accessible for any user in crypto not just for seph punks um that there's another aspect to it which is um the multi chain has developed a lot more before we came from like more the maximalist point of view right the average user will hold just Bitcoin just e Maybe few other all coins but nowadays the user is multi chain so they will hold different things across different chains with different consensus and security domains and the thing that we have seen greatly evolve in the last recent years is inter reability protocol so IBC is a great standard um that non permission and then is completely neutral um we've seen a lot more Bridge designs so particularly a lot of them sadly go more to like the trusted semi-trusted model which I don't think is a great design especially for users um but like at least from our side we are um pushing more for the direction for bridging where it's a lot more about providing the best trust guarantees for the user so not adding um centralizing factors or trust assumptions to it so I think that's another aspect of why nowadays it is actually possible um I was like few years ago you know making real privacy access for users was like harder but today is not work science anymore is a matter of prioritization yeah and I'll build on that so I think I want mention some important ux reasons why this hasn't been adopted I'll say something maybe a little bit controversial but that I that I truly believe I I don't think blockchain or cryptocurrencies have come close to reaching their potential precisely because there is no element of privacy like there's no way to Shield what you do everything is fully open and transparent by default right and I think that's one of the big reasons that the space has been held back because if you think about the financial system you know many times we talk about as something we're trying to replace you know the user experience of the financial system like if I send Daniel a bank chire you know all of you in the audience don't know that right like Daniel knows that he received it he knows the amount I know that I sent it but the world doesn't see that right you know I think some people use venmo right but commercial Banks when they're settling between each other at the end of the day don't use venmo for this exact reason right there's a lot of reasons why we would like our financial lives to at least we to have some control over who can see what to have some control over the visibility of it right so I think I think in some ways that the lack of that has been what has held back the space from seeing adoption I think it would otherwise would have already seen um so that's that's one thing that I think has has really held the space back the one other thing I'll say is I think too often we we think of these systems as just Standalone independent but in the reality these are systems like just like the web you know are are decentralized networks right and you know our day-to-day I mean how many hours a day do we all spend on our phones or on a web app or something like that the fact that we've kind of architected things to be separate like there's a whole separate user flow there's a whole separate app and everything I think that's also from a ux perspective that's something else I would mention that's something for us at Alo in particular you know a goal that motivates us is a world in which like you can run a node that's verifying a bunch of you know blockchain state in your browser transparently you know your interactions on a web page are zero knowledge proofs that you're generating on your client side device and the whole thing is transparent to you but it's a fundamentally more secure and more personal web experience and the web has been extended in that case to include Financial transactions instead of just the flow of information I do you have something actually just wanted to remark on the the first part of everything that Alex said which is what people are not realizing today is that because we lack privacy in the centralized systems it's actually becoming centralization Force as um people are actually using centralized services in crypto to achieve privacy and and this is because public blockchains nowadays were what actually wors privacy than the financial system than web too um so yeah just want to remark on that uh I I'll admit that was a bit of a a leading question because I think one of the main differences between namada um and then Alo is that you you have like this default uh interoperability from the Geto and then Alo is like a standalone you have your own domain specific language and then we are talking about how there's just been this sort of evolution from let's say existing l1s or or app chains that um have maybe not the the ideal set of properties that we would like to have like like privacy so is this now like right we're we're talking about an evolution of these new chains that you guys are uh have been building so if you if you are better than a theum at at at default or or or whatever like so interoperability then you are interacting with other let's say blockchains that don't have the satisfactory type of properties that you would like versus maybe like kind of I wouldn't say Alo is siloed or or isolated necessarily but you guys probably have your very strong reasons for not being also interoperable like gecko but you have your own sort of like very strong opinions of like how you need to De develop your ecosystems so yeah I'd be curious as to like the the the rationale behind like at your default interoperability States and then how you guys see yourselves as an evolution in terms of connecting or not connecting with other older ecosystems um so there are two kind of like design directions that we are taking right like in the case of NADA um what we want to prioritize is that let people continue doing what they're currently doing but privately um add think the least friction possible to the user and the least friction possible to these applications these infrastructure layers that will require like multi-year Ro maps to actually support privacy um so there's like One Direction that so far no other um project that focus on priv has taken and there's the other approach which is um let's make ethereum but fully private um bringing new applications that just provide better privacy um uh by default I think what's going to happen is that um well my assumption is that so these systems will eventually end up inter oper interoperating um on one hand I think there is a um a strong case for people will continue preferring to use use let's say Unis swap like not that many applications in the them that actually use right like there's Unis swap there's maybe open c um in the customers World there maybe osmosis um this may be dydx in the future but fundamentally people want to prefer to continue using these applications um and then our approach is more about okay how do we let them do it uh continue using them with privacy um this is not to say that there are no synergistic uh points between how anoma approaches privacy and aloh has purchased privacy actually the really the thing that would bring the best privacy in multichain would be if we enable actually private Bridges across systems and it is even better if there are more systems that provide um what we call the shield set so anonymity sets and with like more developments and Research into interoperability protocols that will allow us actually to connect entire mul the chain into one big anonymity set and that would be like the thing that will provide the best privacy actually we should actually pursue towards something like that and really if you look into um into crypto into blockchains there's just no privacy sets right um so like I think uh it would take a long time until different privacy approaches become competitive I think for a long time it's going to be like primarily going to benefit from collaborating and connecting uh yeah so I guess the question is kind of on the philosophy of like what motivated our design and and why did we go you know one route versus another um I mean look there's the the first obvious question is like hey there's a lot of layer ones out there why make another layer one you know there's lots of other blockchains we've already heard like what's what what are you guys bringing to the table and and the motivation behind that actually in fact Alo was conceived initially this is four years ago now as a layer two um but unfortunately every Layer Two well what we found is as a layer two you have to contend with with all of the design decisions at layer one right and it's not to say these are good or bad in some sense but I guess in this in the sense that you're optimizing for a specific outcome which in our case was a performant permissionless privacy preserving system um that we found that the underlying architecture of ethereum just wasn't built for that right specifically the Privacy preserving nature of it right you know and I won't get into technical details but some of the cryptographic curve choices Etc you know are just not there's a significant per performance penalty that you pay if you inherit that right and this is something that I think has actually affected a lot of the teams that are building ZK EVMS in fact last year I gave a talk at this conference um or I'm sorry was eth Soul was is Alo a ZK evm and spoiler alert maybe because the term ZK evm is very very wide and a little bit flexible um but in in I guess in all seriousness you know the the need to optimize performance to enable some of these new use cases you know you know like privacy preserving Financial transactions like another one that I didn't mention that I'm really excited about is identity and a new form of authentication authorization that's privacy preserving and permission list that interoperates with a modern went like none of that would have been possible on ethereum today and you know Alo we're I'm very thankful to say we're three months away from launching mainnet and I I think we're going to be the first permissionless privacy preserving Network where you can do all these things and a lot of that is because we didn't have to work around unexist system now what is the drawbacks of that well the drawbacks of that are you don't get to inherit you know an already existing developer ecosystem but you know I think interoperability is is going to be inevitable in some form what form will that take I have no idea I mean honestly I have opinions but at the end of the day what will determine it is as AWA kind of hinted at is like there will be users of applications those users of those applications will more or less Define by their activity what the ultim imate solution looks like they like their you know implicit preferences will drive what the underlying architecture looks like and that's a good thing we should all all of us in this room who've been building I don't I mean I've been in the space for eight years I'm sure many people in here have been in it longer I mean we should look forward to the day where the development of products in the space is being driven by users and driven by applications that users demand instead of building things that we think that they want and that's really I think what I if we're getting to philosophy the true philosophical motivation for us is to try and build something that enables a new capability that creates truly novel opportunities and applications that we believe you know will be really interesting to end users um you know in crypto and and outside of crypto I I really want to get into what I Pro like uh talking about the different infrastructure Stacks that both NADA and Alo use um and I I think personally I think like one of the most exciting things has been like the infrastructure ecosystems that have brought about a lot of the the Resurgence of Interest both from from VC Etc right because ZK has been around since the 80s and then people had to like barely scrape together NSF grants to get money to do research but now everyone their mother wants to put money into like ZK stuff and but but can you can you talk a bit about like the ZK infrastructure that namada makes use of and then maybe Alo as well yeah um so with the the knowledge part of namada um enabl something that uh you cannot achieve with existing zik systems which is it allows all assets to share one anonymity set this is what we call the multi-asset Sher pool um and this is also in alignment with like we assume that people want to continue holding the assets they're currently holding and using um so the problem with how we have approached privacy in the centralized system with privacy coins with applications on E room um is that um actually what's happening is that instead of having one anonymity set because all users actually want privacy right that's what makes them uh what they have in common instead with the design of existing privacy we have actually been fragmenting the Privacy sets of entire crypto um and then the smaller the Privacy sets actually leads through less privacy and worse privacy guantes in practice for the user and this makes it trivial more easier for chain analysts to break the privacy um so ideally what you want is like all crypto to share one big anonymity set um the larger it is the stronger the Cy guarantees um so the main component of uh V cryptography uh with the matter is the this cryptography announce you to create one UniFi sh set and actually that breaks away like that breaks the limits of how large it can be because of this like all assets could share one set um but even if you bring it to like let's assume in the future where more um fat currencies actually turn digital and then become cryptocurrencies um the beauty of this is that there's a limitation in uh Fiat currencies which is the size of the anonymity set of the US dollar is as much US dollars is in circulation obviously we're not so concern because the volume there is massive right compared to crypto but in the future if all the US Dollars all the currencies were to become digital and where would you were to use the MSP on namada actually we will be able to create even a larger um anony set in the entire world that we can actually create currently with bats so that's just like an interesting idea um that comes from this cryptography yeah the first thing I would say is um look in case it's not obvious to everyone in this room zero knowledge cryptography is going to change the internet period it's the mo it's probably the single most revolutionary cryptographic technology ology that we've seen in our time um it it will fundamentally change the internet I mean I work hard and I know I works hard every day to make sure that our companies are part of that story but like this this idea of being able to prove something without revealing why it's true has no physical analog I mean it's why it's often compared to magic I mean this can be applied in so many different and cool ways and that's that's why we really took the approach of like again building a ZK virtual machine or ZK VM kind of a new layer one that had a ZK VM built on top so that developers through our programming language our our domain specific language Leo could write applications that took advantage of this this power that exists that's kind of inherent in this new cryptographic technique um and I think there's lots of examples like one example I I mentioned identity a minute ago um you know being able to authenticate online about some personal based on some personal facts about yourself without having to reveal those facts directly to the server right a simple use case for example is a age verification like there's not really a solution for age verification online today unless you trust a you know you have a single trusted third party right and for a lot of reasons I think many governments and Regulatory bodies are skeptical to put a the responsibility of a huge database of people's personal information uh online or or with a specific tech company right so this is this is a new capability that this technology can enable it doesn't just solve a problem for web 3 it solves a problem for web two and I think you'll see these ideas that get applied you'll see more and more overlap and another really cool thing about ZK is that you know it at least in the model of Alo and it can apply elsewhere but you know when you have a model where you're executing programs offchain and then verifying them on chain you no longer have the limitation of gas and for those of you who aren't familiar with gas the whole point of gas is to make sure that you know people can't just Spam the chain with you know very intensive transactions and you know that basically cause everything to Halt right and so this is why like you could never really do any kind of serious machine learning model on ethereum even if you wanted to right whereas in the model of Alo where you have offchain computation you could run a machine learning model for a million years submit the transaction at the end that says hey I train this model according to these parameters or whatever and that would be a valid transaction just like any other transaction that you maybe was just a transfer and so I think it opens up a door to these new possibilities so fundamentally I think this Paradigm is going to be revolutionary I did want to remark on like the power of knowledge proofs is um really what we're trying to do what we what is bringing to the systems is giving back the power to the users to control basically what data is disclosed and shared with whom at all points right and this is bringing just a different kind of like uh properties to the systems that can be a really a way a more resilient um set of properties for infrastructure than the existing systems um so I think that is like the most powerful part about Z proof is giving users back the control over the data Maybe 2 minutes each um what are you most excited about for like realizing the ideal of each of your projects I really want to test um how many how many more applications will start spawning as like it can just be interfaces just by by the fact by the simple fact that we enable multi-asset privacy um because actually there are a lot of decentralized applications that solely rely on The Limited programmability of just payments let's say but I think the thing that hasn't been tested is that if we're able to create one set one infrastructure tool and allow the user to use whatever they want to pay uh uh currency they want to pay with I kind of want to with privacy of course like this is a financial system I kind of want to see if that will unleash way more adoption in crypto yeah um I think I have two one infrastructure related one application related the infrastructure side I mean for for me I'm really excited to see like I mentioned a second ago how ZK is going to change the web and I think it's going to spawn an entirely new category of infrastructure providers called provs right and this you know provs you know could could you you could be yourself aover or you know you could give someone a transaction to prove on your behalf or multiple parties you know to prove you know and have them prove on your behalf so I think you're going to have an entirely new category of infrastructure around Pro that we haven't seen at all before but I think is is going to be a very important part of the future I'm very excited for that because the way we built our protocol kind of incentivizes that and I'm looking forward to seeing what happens there the second piece on the application side look I'm excited about the applications that people are going to build but one of the you know one thing we didn't get to touch on in this panel but I think is an important topic whenever we're talking about privacy is compliance and I'm actually I think a lot of people in the Privacy space or in the ZK space kind of like lean away from people in government and they kind of would be preferred to be not known known I actually am excited to lean into you know engaging with you know big financial institutions you know governments and educate them on how this technology actually improve is is a better compliance tool than exists today right if you can imagine like something like this basically being able to um mimic you know cash right in the sense that it's not it's untraceable you can actually encode via whatever you're proving some kind of compliance check right so you can basically build a form of smart cash and therefore you can actually make the job of regulators a little bit easier right because in in effect every transaction that goes on in a given system is correct by construction right you can say like hey before you spend this dollar you need to prove that like hey you're not on a ofac black list and B you know you know you you you know you ate your waties this morning or something whatever right like whatever whatever rule you want to have you can you can encode right and so this is kind of the power of smart contracts but the power power of smart contracts coupled with the power of ZK gives you the best of both worlds right you can have a system where regulation can be applied but also consumers are protected and their information is protected and so I think the potential to have your cake and eat it too you very rarely do you get these opportunities for that but I think uniquely this technology just by its nature uh can enable it thank you so much guys than thanks everybody all right thank you very much