Privacy as Financial Infrastructure

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1. 0:00

   Gentlemen, welcome to the privacy panel. Welcome to the confidentiality panel. Quick round of introductions before we get started and let's get it started. Matt, we'll start with you. Hey. Yeah, my name It's great to be here. My name is Matt Henderson and I'm the uh product manager of uh Near.com.

2. 0:18

   Awesome. Good to see you again, Matt. Aaron, hey guys. Jim, thanks for uh thanks for having us on. And Robbie, good to see you again, man. our uh our days go way back. So, uh maybe we'll crack into the lore later, but uh yeah, it's Aaron from Houdini. I'm the chief revenue officer over there. Um but yeah, pleasure to uh to be on today.

3. 0:38

   I love it. It's good to see you, Aaron. Eagle. Uh hey guys. Eigor from uh from Infinex. We run a a super app. Uh I run Treasury there and commercial. and Evac. Uh, hey everyone. Good to be here. I'm IBECK and I'm a founder of Unstoppable Wallet. Uh, been in crypto since 2014.

4. 1:03

   Built a lot of stuff, but yeah, mostly that's the product we go by. Beautiful. Well, it is virtual near day, so I'd be it would be a miss if I didn't start with you, Matt. Near.com just brought in privacy first, confidentiality first as a default on Near.com. Uh we are active power users.

5. 1:23

   We just also rolled out our rollup front end for near.com. So exciting day today. Maybe just walk us through kind of what that product feature stack uh roadmap looked like because you guys launched and it was kind of a toggle button but now it's the default. talk us talk us through your perspective on why that is the priority and kind of what steps you had to go through to get there um just to kick us off here.

6. 1:48

   Sure. [clears throat] Well, when we first built uh near.com it was just built on um on near intents uh on the near blockchain and we wanted to build um a financial app for um for the people coming to blockchain. We wanted to uh to deliver the the benefits of blockchain to to everyday people. And um the first kind of uh way we we did that was by abstracting um most of the primary blockchains and and assets. So people go into their near.com account, they see all of their assets in

7. 2:26

   one place. And in the long run um we believe that um that the people who are per who are non-native uh non-crypto native people uh coming to near.com they will have an expectation of privacy um because that's that's um kind of their expectation to some extent in the in in where where they are. So we want to meet them there. We want to meet them where they are. And so the organization began developing the the near confidential

8. 2:58

   uh technology and uh as soon as that was available we began uh we immediately added it to near.com. Not all of the features that we have uh could run on near confidential intents at that point. Um and so we u over time started uh getting um all of the feature parities for the sort of the trans the transparent side and the confidential side. And once we had pretty much everything running uh in

9. 3:28

   confidential, we decided to uh basically disable the non-confidential side so that when people come to the to the product, they don't have to they can't really make a mistake. They can't uh they can't end up in Yeah. So that's how we got here.

10. 3:45

    Very cool. Awesome. My my question now is like what you know why why now like what is the biggest component or contributing factor to confidentiality and to privacy frankly catching the bid both psychologically from a narrative perspective it feels like privacy has the most momentum than it ever has and also you know obviously in in the in the financial markets as well but we're

11. 4:10

    seeing it in Zcash we're seeing it in confidential infrastructure Matt like you just described and I take it you know everyone else here that's building in the privacy segment has also seen an uptick in activity. And so that's that's kind of my question is generally what is the trend that you guys are seeing now?

12. 4:26

    How real is that uptick and why do you think it's happening right now? Open question to the rest of you guys if you want to start Aaron. Yeah sure I'd love to go ahead. Um yeah man I I think it's a I think it's just the nency of the industry to be honest Robbie like I I think as uh crypto becomes more sophisticated and uh really what I mean by that but like as individual retail and institutional adoption becomes larger and like the

13. 4:54

    metric for that being like you know more self-custodied assets as a percentage of overall net worth um privacy starts to become a real concern and a and a real value ad um for Wales. So like you know one anecdote towards that is our average transaction size at Houdini swap is somewhere to the tune of 3750 to to $4,000 right which is pretty significant compared to like a like a unis swap or a sushi swap or a pancake

14. 5:24

    swap which is just obviously just pure you know lowest cost fastest speed uh public routing right um and so I think it really just speaks to retail getting more and more um not only sific sophisticated, but as assets under, you know, personal management grow, I think privacy becomes a real concern, there's a lot of issues to just having, you know, public wallets with hundreds of

15. 5:49

    thousands, if not millions of dollars, uh, you know, within them. You become susceptible to social engineering, to to all sorts of fishing, to, you know, wallet poisoning. And I think privacy, uh, is really just merging into the category of of OPSSE. Um, I think it's really easy for crypto Twitter to to paint narratives on privacy around moneyaundering and terrorist financing and you know all the uh you know like [snorts] the the kind of like the social clipping and you know those are the narratives that that hit the hardest uh

16. 6:20

    from a views and and you know awareness perspective but what privacy really is is is kind of in that category that that we spoke around around OBSC you know it's like VPN Brave browser you know Houdini for transactions and you know, cold storage. That's kind of what we call the the the crypto starter kit. Um, but it only it only resonates with people that, you know, are are sitting on serious net worth and that's just uh that's just a product of time.

17. 6:47

    I I think it's like uh the issue with privacy is uh um people just never cared. It's not like it's been it's not like it's a new thing, you know, it's been around for forever. Like they no one really cared. But the the the the reason that exists uh now is so prevalent is because it's like the last bastion that we haven't we haven't conquered.

18. 7:09

    We have had uh everything from uh onchain exchanges through to uh NFT marketplaces, but we still don't have like a good privacy solution for Ethereum. And so now you're starting to like pick this up as people are starting to look for areas where they can make they can make money from their investments. And it's it's this kind of like a a you know crypto is a giant casino. It's a uh price gets narrative

19. 7:39

    price gets narrative. And so the more that something goes up people are like oh we should we should really take this seriously. And then the more people that get involved, they're like, "Oh, actually privacy is a thing and the real world just takes it for granted because it's there by default." And actually maybe we should focus on this. And then you start to you start to see like uh organizations like Near Intents create

20. 8:03

    privacy for any asset and you're like, "Oh, okay. Wow, this thing actually works." And then so you've got this kind of uh narrative building effect, but it's not like it's new. It's the it's the absence that the market just has nothing else left to build. And that's why that's why like, you know, for Zcash, they say it's it's the last it's the last 100x that we'll see in crypto that isn't like this random memecoin.

21. 8:26

    Uh, and that that's probably true because you you you don't have the opportunity to have like a new unis swap competitor that that will come and do 100x. Like, what are they going to do that unis swap hasn't done? like what will they do that doesn't exist on Salana already? Probably nothing. And so that's why you're uh you're attracting the you're attracting the people that are attracted to the price. And that that is the way that crypto has worked over time. Um you know it's really exciting. You want to come in, you want

22. 8:58

    to make money, you want to start learning about a new thing and then suddenly that is the narrative and the narrative has been formed. Yep. Anyone else have something to add there about why now? Yeah, from my perspective um the kind how I um how how I view it is the the first level was the distinction between permissionless and permissioned and I think a lot of us or most of us um are

23. 9:27

    experiencing more and more friction in the in the financial system. Um we make bank transfers, they get stopped, we get called, we get asked for source of uh funds documentation. um we have to go through endless KYC's and then KYC's have to get repeated and then uh there's breaches every day of KYC companies and so I think most people um we in the crypto community kind of take it take this for for granted but we

24. 9:55

    begin to want to have a part of our life which is permissionless and over time it feels like that slice of life that's permissionless and and sort of self- sovereign begins to grow relative to the other side and this trend will probably continue into the future. So, as more and more people outside of crypto begin to experience the same thing and they come into the space, they're going to have this expectation for privacy. and

25. 10:19

    um I think is we're just fortunate that the technology is coming together now where we can deliver that that privacy um on any spectrum that they need whether from state level uh anonymity to something like what we offer at near.com which uh is compliant uh allows you to uh get an attestate an an attestation of your uh transactions and so um yeah we that's why um I think this is this is

26. 10:47

    happening today because that that slice of our life which we want to be per uh per permissionless is is growing for everyone. Yeah, you're you're absolutely right. It's growing in market share and I think it's you know it it is resonating with more and more people as you know the surveillance state kind of continues to creep in. People are just thinking okay well you know if you know the the the you know people are always watching with their phones and the government's got

27. 11:11

    these things and they're out there you know they want to protect themselves. to want to protect their money and kind of shield it from prying eyes. Um, but at the same time, we've got this convergence on our hands and tradi and defi are converging right before our eyes. Like we've all seen the rise of these stock tokens. You know, you can point to Robin Hood, you can point to, you know, another chain, but the tokenized equities push is increasing.

28. 11:36

    Tra more and more trades coming onchain and getting tokenized for better, for worse. And so these are kind of bringing about what we're calling the compliant era of crypto. And so we've got these really weird competing forces because on one hand it feels like we're returning to our philosophical roots. We've got the cipher punk ethos that is returning. People are embracing privacy again.

29. 11:58

    Feels like that hasn't really been seen since, you know, 2013 to like 2015, 2016. But at the same time, we're getting all these compliant assets on chain that don't really mesh well or harmonize with, you know, the cippher punk ethos. These are compliant things.

30. 12:15

    They require like shareholder rights and and, you know, disclosures and compliance and all these things. They don't necessarily align or, you know, agree with one another. And so when you guys are building infrastructure, I mean, we've got, you know, all across the docket, right? Infinex, Houdini, Near, etc., are unstoppable. Like how do we how do we reconcile these two forces when we're building infrastructure that

31. 12:38

    in theory is supposed to support both sides of this movement? Again, open question. Feel free to just jump in. Whatever you guys What do you give whatever you guys have? Yeah, I I mean I can go first here. Like you know, so like like I've been at Houdini since the start and you know, like I've helped build this tech from the ground up. So I think it's um you know from our perspective it really depends on on this the stakeholder right

32. 13:05

    like as a as a user of the platform you expect all the you know the things that we've already talked about permissionless you know non-custodial um you want safety you want reliability you want privacy you want price and speed aka execution right but as an owner and an operator which is what we are of a business you need to make sure that you're you know you're protecting uh yourselves, right? And like to, by

33. 13:30

    the way, to get reliability and trust and security and be around in crypto for four years, you you need to have some, you know, level of compliance that ensures that you can have staying power in crypto, right? Or else you just see a project, you know, come out and market themselves as the cheapest and the fastest. They put compliance on the back burner and then, you know, we don't see them in four months, right? So, that's how we've been able to to stick around

34. 13:52

    for four years. I think a lot of the um the lessons and the principles that we used when shipping privacy tech was what were the options available four years ago, right? It's like yes, you can go custody your assets at a centralized exchange and it's you know it's an off-chain order book, excuse me. So you get so you get privacy but you lose you lose things, right? You lose custody, you know, like you know you can you you

35. 14:16

    take on FTX risk, let's just call it that, right? Then you had the other side of privacy which was like the onchain cowboy pure libertarian decentralized mixers like the tornadoes, the coin joins, the wasabis and you know like retail loves it. Volumes go through the roof. You know tornado gets the vitalic shill and and everybody's wag me wag me wag me. But then you know like Roman

36. 14:41

    Storm and the devs are are in front of the SEC fighting for their lives, right? So we try to kind of take the best of both worlds. So from a user perspective from Robbie using Houdini, you get all the aspects of you know what like self-custodying permissionless abstracted privacy. You're not jumping through a million hoops. You get the price and speed that you're comfortable with. But from an owner operating perspective, we know that we're screening, you know, all the wallets for

37. 15:13

    for AML and ATF and OFAC sanction list and just doing everything we can on the compliance side to ensure that, you know, Houdini doesn't doesn't file Chapter 11 in the next week because, you know, we're we're fighting in front of the SEC for our lives. So, it's just kind of like it depends on your perspective and and these these two forces are always going to be push pull, right? like the user wants more cowboy,

38. 15:36

    the operators want to feel, you know, that they can go to bed at night knowing that, you know, no illicit activity or criminal activity can go through their platform. So those two forces are always going to be, you know, opposing, but like look at, you know, look at any technology that's really cracked through and made it, you know, to the big leagues. Like if we were talking about getting in a stranger's vehicle, you

39. 16:00

    know, that wasn't KYC 10 years ago, you'd probably be like, "What's up with that?" You know, and that's just that's just Uber, right? You'd probably be like, "Oh, sports betting plus prediction markets plus cryptocurrencies. Like, that's a moneyaundering powerhouse." Like, guess what? That's that's just Poly Market partnering with CNN these days, right?

40. 16:20

    Like these these people that push the agenda, they almost and and that do it right. and then like you know are professional about it and act with like class and operational excellence are usually the biggest winners of the cycle, right? hyperlquid taking complex margin options trading you know high net worth derivatives accredited investor style stuff and just shipping it to retail into you know 10x levered up 10x you know short down on crypto assets and rwas like they've simplified it um you

41. 16:52

    know like they're they're the biggest winners for the reason because they they kind of push the the tech and they push the compliance but in a in a way that makes it uh you know profitable and and just like a product that everyone can love and trust.

42. 17:08

    Yep. Anybody else have something to add there? Um, okay. Yeah, let let me try. So, I think there are no standards yet for compliance. I mean, if you look at uh I I mean, everyone does KYC now, right? or IML and it's in many cases it's just ridiculous to the to the extent it can go you know you have people complaining that they're not able like to get their funds out from the exchange despite like giving everything they could so and the problem is that that operators like like if it's

43. 17:47

    exchange or some other organization they are and the compliance itself they are kind of separate you know like in traditional finance uh you'll often like have a situation where a compliance department is actually independent from the from the bank itself. So and they get to decide like uh what will really happen to the to the to the case that specific case.

44. 18:11

    So uh going back to crypto, we are right now at the stage where everyone tries to maintain the status quo of making money if you are making money some one way or another by providing by trying to connect traditional finance with crypto, right? So you you you still want to keep that money flowing but at the other hand you need to stay compliant and depending on like the services you provide you

45. 18:35

    there are just a you you pretty much have to do a lot of things. I mean if you are like serving European users, you need to like get Micah license. Uh and I I'm guessing like the the list is really large. I mean depending on on your area of uh of of your business. So uh so yeah, the problem is there are no standards yet. So and everyone is trying to uh just like stay compliant by uh

46. 19:07

    yeah by by just trying to uh uh integrate whatever like uh IML or KYC solutions that are out there. So that is one thing. Secondly, the crypto itself right now is not um is fragmented and in my opinion we have like three types of people. We have OG's people who came to crypto for the self self-s sovereignty right and there are like were a lot of us I'm guessing prior 2017 and then we have digents you know who are like trying to make money from from the meme tokens and the new generation of

47. 19:48

    meme tokens are tokenist stocks which are kind of getting popular right now and then we have people who are uh kind of trying to actually trying to make uh traditional finance and crypto work and I think near is a good example of that.

48. 20:03

    So uh so the point I'm trying to make uh the standards are going to emerge and right now we're like in this wild west where everyone is try is first trying something and later finds out whether uh is that business model is actually sustainable or not uh or whether like uh yeah they need to wind down or just introduce some draconian uh KYCML measures you Yeah.

49. 20:33

    Can I can I just play devil's advocate here? Like like the one of the problems that we have in crypto is where we're exceptionally good at creating products that people don't want. And this is like it scares me a little bit because this is a this is a one of those things uh that we we think that we really need where everyone needs to be compliant and everyone needs to do KYC and AML and then we'll build a solution for it. and we're like great we have this fantastic product and there are no users because

50. 21:04

    actually the demand is through the floor and so I I think you you need the demand side to come in in a really aggressive way uh before you have like a a genuine breakout product and a solution and it might be you know the the guys at NIA I'm I'm sure that Ilia will come out with a uh a ZK passport or an encrypted passport that you can you can do a a chain signature or proof just say yes this is my account or my transaction or this is this is my KYC and here is the

51. 21:36

    you know here's the hash and you'll have someone like Infinex or or or another wallet um just integrate those and you can you can in a private and secure way just attach one to the other um but I'm telling you if we if we create that now and we're like guys we have the compliance solution no one will care no one will care and it won't be used and it will just fade away into the distance. You really need the demand

52. 22:03

    side to be like pushing against the door in order for something to break through. Well, I just I just don't think we have it. Like, correct me if I'm wrong, but I just don't think that we're like so desperate for everyone to to be compliant and KYC that we just we need a product in this space. Hm.

53. 22:25

    And so you think that a as we continue even despite like uh kind of the necessary compliance metrics that we have coming from like Tradf getting onchain, they're they they won't really proliferate. They won't really stick because the demand isn't there.

54. 22:42

    Yeah. They'll just they'll just do what they've done before and they'll just they'll have their own avenues. They'll they'll use an exchange or they'll use a proxy or they'll use a market maker or an OTC. they they just if we think that you the only thing stopping the the large players from coming on chain is the fact that there's no there's no compliance or KYC um that's just not it's just not a barrier like if you are a if you are a big uh big

55. 23:08

    financial hub big multinational if you're if you want to get on chain in any way shape or form there are plenty of ways that you can do it it's just uh it's just not it's not really a barrier I just don't see that like that that uh that's the thing that's stopping them, the fact that there's no there's no KYC.

56. 23:25

    Like there are plenty of avenues to buy tokens. There are plenty of avenues to trade. You've got Koshi if you want to do any any sort of sized market making for for compliant KYC purp. Uh you you can absolutely get on Hyperlquid. There there are so many market makers that will that will execute your orders and your orders will be perfect. Like it just doesn't exist. I I think that I think that we we need to be a little bit

57. 23:50

    careful in trying to convince ourselves that like this is a you know this is one of the la this is one of the hurdles that we need to get over if it's not if it's not a real hurdle because otherwise then we'll just create product for product's sake and then we'll uh we'll we'll create it and wait for the wait for the institutions to come and then they'll they'll never end up coming.

58. 24:08

    We're like oh what happened? We're so compliant these days. Yeah. Well J I think we're a bit over time here. Um, lots to kind of mull on. Appreciate each and every one of you kind of just, you know, sharing insights and thoughts. Um, yeah, a lot of a lot of weird forces kind of coming together at once as you as you've just described there. And, um, agreed on the kind of product for products sake in the past, but it does feel like we have some

59. 24:35

    really strong exports of the industry now to be proud of and, you know, kind of stand on and build around. So I think with that in mind, I think that's kind of like where a lot of investors are looking to allocate capital and I think entrepreneurs are looking to build products around kind of, you know, tokenization, stable coins, per prediction markets, vaults, you know, just general exports of things that we know are going to work that we know are

60. 24:57

    working. Um, and so that's how I'm thinking about it. But guys, thank you for your time. Um, thanks for being a part of the virtual near day and hope you guys have a great rest of your day. Appreciate you spending a bit spending some of it with us. Appreciate it. Thanks guys.

61. 25:13

    Thanks guys. Guys, take care.