Bankless - Ethereum Privacy for Institutions | Mo Jalil and Oskar Thoren

Episode Date: August 27, 2026

Wall Street wants to come onchain, but public-by-default finance creates a problem institutions cannot ignore. ETH Systems co-founders Mo Jalil and Oskar Thoren join David to explain why privacy may be one of Ethereum’s biggest institutional unlocks, what banks and asset managers are actually asking for, and why the opportunity goes far beyond private payments. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- BANKLESS SPONSOR TOOLS: 🔓NEAR | TRADE CONFIDENTIALLY, GET 20% BACK https://bankless.cc/near-pod 🔑BITKEY | GET 10% OFF USE CODE: BANKLESS | #bitkeypartner https://bankless.cc/bitkey 📊BITGET | TOKENIZED STOCKS 2.0 https://bankless.cc/bitget-stocks 🎯THE DEFI REPORT | ONCHAIN INSIGHTS https://thedefireport.io/bankless 👑BANKLESS CONTENT MCP https://www.bankless.com/premium --- TIMESTAMPS 0:00 ETH Systems 1:34 The Founders 5:28 Institutional Privacy 12:43 Real-World Use Cases 21:19 From Bespoke to Scalable 30:22 Building the Product 33:40 Institutions Are Coming 35:40 The Future of Institutional DeFi 40:24 Privacy vs Transparency 46:51 What Ethereum Can Do? 49:54 Cypherpunks and Institutions --- RESOURCES Oskar Thoren https://x.com/oskarth Mo Jalil https://x.com/motypes EthSystems https://x.com/eth_systems --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

Bankless Station, I'm here with Mo Jaliel and Oscar Thorin. They are the co-founders 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. David, thanks for us. Thank you.

Why do we need privacy on Ethereum? Ethereum. Oscar, I'll throw that to you. Sure. So I would say that if it's great technology and works great as a sort of credible neutral base layer, but obviously it doesn't have privacy baked in. And that's why you see a lot of people have been trying to figure

a solution for that, whether it's on the base layer, but also a lot of application layer. So basically that's sort of a missing piece, if you will, in the Ethereum land. And that's where we come in. Anyone that listens to Bankless already know this, I apologize and to find me saying same things for many times. but basically, 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, order to basically access the benefits of Ethereum. 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? Yeah, so a bit about myself. So I actually started in traditional finance. I used to build Algo trading systems like Goldman Sachs. And that's what I did for like five years. So I have a really good understanding 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, Tamash was based the 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 had 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 when we should talk about it. So I've been there sort of Ethereum and Cryptospace for around a decade or so. focused like a lot on privacy very early on. 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 developing various types of peer communication protocols that were useful for sensor resistance and privacy and so on. So been sort of into protocol design and privacy and so resistance specifically on the protocol infrastructure layer for quite a while now. And then I guess the last five, six years,

have been diving deeper into synodged proofs and sort of doing various tooling for it. it, including work is with some of the early members of PSC at the Ephraim Foundation, and also wrote like a little mini book on Cynodroofs, did some research related to following schemes, and some tooling for making clients are proving easier and so on. In the last three years, I've been at the Fiann Foundation and also advising them when it comes to privacy strategy and now sort of the new access layer. Yeah, and as Moe mentioned, sort of we, that's where we met and we kicked solid institutions of private task force. I think for me, one difference is that I used to

focused primarily on privacy of individuals. And while that's still something that's very dear and close to my heart, I think one thing that I notice is that there's a massive, massive demand for privacy of institutions. 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 sort of great sort of opportunities as we've been focused on for the last year and sort of building things in public as on and then spinning out into a separate entity a month ago or so. Yeah, 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 privacy 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 you said, the organization, like these systems is less than a month old, but the work we're doing spares, not just a year, but probably a decade worth of like the work that we've been looking at. There are a couple things you said, Oscar, that I'd like to learn a little bit more about. You said privacy strategy for the EF. 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? Yeah, so I think a lot of that had to do with sort of the context that PSC found itself at the time at the FAM Foundation. And I think one thing that we did

is sort of try to move that into the Fian Foundation and seeing sort of what type of privacy things if Fian Foundation focus on. That is now morphed, and there's like a lot of other people I don't want to talk too much about sort of for a Fearing Foundation and what they are working on. But what I would want to add to is also what Moda said is that as sort of part of the institutional privacy task force at the Eferent Foundation, what we were trying to do is basically connect to these two worlds, where you have,

institutions on one hand and an ecosystem on 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 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 talking to various companies in the space and protocol engineers and so on and explain to them, here's what the users actually are looking for. And that's where we sort of develop the privacy market map, where we sort of talk about these specific requirements

and its users are. 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. one. And then basically doing POCs and write-ups show things that are missing, like how you can combine as building blocks, sort of create protocols and solutions as a fit what the issues are looking for. Yeah, I just want to add one more thing on there. It's really quickly because I think, Oscar, I know you mentioned TSC and folks that are listening might not know what that is, but actually the Ethereum ecosystem has been deep in privacy for many, many years. So I know privacy is like a really

hot top now, especially last year with Zcash and, you know, all these two of these privacy protocols. but the EF has had a cryptographic research lab for seven years or so, right? And that's what that was known as PSC. The privacy stewards of Ethereum, just like the group of people talking and building about privacy solutions. 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.

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. 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 sort of a firm foundation, but other people in this space like C-Cash and independent resources, we've been sort of pushing up and making a lot of the cryptography actually usable. And then the sort of companies 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 some a bit to go because a lot of the institutional use cases, they are not unnecessarily 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 L2. But if you look into the specifics, oftentimes there's, there comes to certain tradeoffs.

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 spectrum, you have people who are 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 a higher shore and security use cases. So it's very much depends on the specifics we're talking about. 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, it's I think largely more of an engineering problem as opposed to like a research problem. Self-custody one, but it still has a usability problem. A seed phrase on paper is still a single point of failure. Phones get lost, devices break, backups disappear. BitKee is a self-custodial hardware wall built for that reality. It uses a two of three multi-sig with keys split across your phone,

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Neer.com is simply the best way to be on chain and be in control. Get 20% of your trading fees back using the bankless link in the show notes, not investment advice. 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 just about engineering. Can we go through like 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 like 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

for in the conversations that you guys have. Yeah, so I can add a bit of color here. So first of all, I think when 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, we talked 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, you know, kind of 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 could give you some examples, right?

So one is that, you know, we were definitely talking to a particular organization, let's just say, tier one investment bank, where they do this thing known as interdealer compressions, right? So what happens 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 a year. And what happens is that this

trust of Ziraparhi, they look at this bank's trade 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 of brings in terms of compressing these trades down. And they

first will have less capital requirements because they don't have to get that ready. They have less transactions that have to do. And we basically had someone that come to us and they were like, well, hold 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 technology like Ethereum, a shared state, could give them this without this particular third party. But the problem is then the entire world gets to see everything. So that's an example of like 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. Yeah, also that out on that, like I would say we talk about privacy a lot and I think that's great. It's very important. But I don't want us to focus only on that because oftentimes 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 security properties. And and if it's sensor persistent and so scalability and so on. So 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 users, they already have product market fit.

So they already have like a system with like billions of dollars flowing fruit. And you 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 vibe coding an app or whatever. Like it requires just 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 specific equations around us and so on.

So I think that's like another thing to think like a bit more holistically about it, that it's just like multiple properties and they all have to be satisfied in order for the things you actually want to move over on two things. I know what 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 of edge case kind of problems are out there. 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 had 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 a story you could tell us about like an example that's like worked so far? Yeah, I can tell you a story. I don't know if we can mention names because.

Yeah, I would figure. Yeah. I mean, if we're talking about privacy. Yeah, yeah, yeah. People don't like to share it, especially the bigger you are, the more that you have, that you basically don't want to share. But we can talk about a couple. So, for example, so we're talking about payment. Everyone understands that, right?

Like, you know, I do a payment to you and doing that unchanged. Everyone sees it. It's the use case that, you know, bog standard. For a particular jurisdiction, it's a bit non-stand it 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 payments are great, but we need to be able to do it at scale for an entire nation. 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 DTP. Like they usually have two actors. But because of this particular country, they have a revenue requirement to have four actors for payments. This is the sender, the receiver, the order. 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. And they tried 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? Can they do it in a way that it 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,

we're 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 on what you could potentially do on Ethereum. And they're like, hold on a second. We've tried, you know, I don't only name the protocols or the teams, or we tried X, Y, and Z for three, four years. We published a natural report about this is a 16-page report on why we can't do it. But it seems like, actually, this like piece of work that's coming out of the EF could work for us.

So they basically reach out to us and they're like, hey, hold on a second. We'd love to have you guys, you know, 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 only 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, have we not published it, have people not had seen it, they probably would just put that on the back corner for a very long time. Or worse yet, gone to, I say worse yet, gone to some kind of private network. I would also add a little bit to that that like, if you think about institutional sales cycle,

they are quite long. So oftentimes, like, it requires quite a lot of work to sort of get something going and there's like, you know, some confidential around that. And then it takes a while until you actually sees the complete fruits of your labor. So that that's generally like a thing.

And I think one thing we noticed at EF, and this is also one thing that gave us, I guess, idea that it makes sense as a separate for confidentiality, is that we had a lot of engagements and collaborations with various institutions. and there were many cases where people like, okay, so we would love to sort of continue working with you guys.

How can we sort of pay you? We're basically going to say, no, no, no. We're a nonprofit. Like we have to be neutral and so on. We have to say no. And sometimes we're sort of some conversation stopped because it's extremely important that if you're in financial, stays incredibly neutral and so on. So we kind of have to back off there and let other people sort of take the, 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 spinning out now and into a separate four profit entity, it's a lot easier to have 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. 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. 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 AVE, 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 like 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 isn't, don't we just need privacy a little bit more baked into like Ethereum core rather than doing bespoke stuff on the margins? How would you guys respond to that? Yeah, I've actually got a really good answer to this. So a couple of things. I think one is that we could do both.

That's one. I make things 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, which 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 truly 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 dvPs 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 it 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 reasonable components and put them into a place where it essentially become 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,

this IDME, so Belagie talks about the IDMAs. 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 of business. And to get them on chain, you have to start from that side as opposed to the Define native side. And I think, like you said, like there's different people working on both. but I don't think actually enough people are working on the tradfai site

that then converts them to Ethereum as opposed to there are many teams already on the crypto native side that are kind going the other way. So having both is the way to do this. Yeah, I would agree with that. And also, like, I would say, like, in general, the space has invested a lot in, like, generic infrastructure, if you will, and, like, if you build, they will come.

It doesn't always the case, especially when you're talking about these laws, institutes with, like, very specific requirements. So I think there's value in, like, 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 taking on specifications that are written in such a way that

can sort of be generalized or use to the extent that is special case, you sort of make it very clear. So it's like swapball or or plugable or sort of modular and so on. And then I think in general, like basically privacy is amazing. We'd love to see that and that would just enable some even more use cases. So we definitely support it. 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 if you're when we talk about liquidity, there's like solutions when it comes to interability, like if you're an 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 more quality.

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 like over 100 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. We've seen a lot of teams that have tried that and it hasn't worked for them. Is ETH Systems a startup or a nonprofit? What's the legal entity behind ETH Systems? So, ETH Systems is a for-profit entity. Profit, okay. Yeah, 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 a for-profit. Is that where you guys are? Yes, we are. Yeah, yeah. I was like, okay, wait a second. If you guys are having all of these conversations

and 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 that is what you guys do. Yeah, yeah. So for us as for a for profit organization, for a couple of reasons, actually. And this is something that we did.

Actually, we talked about this quite a lot, right? I think there are a lot of nonprofit 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 sustain and defund 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 a profit organization to go through procurement. Like being a nonprofit, it's actually a red flag sometimes and they just can't work with you.

So for those two reasons, we basically went with the, basically a for a profit route. Knowing, by the way, that we have so many sister organizations and friends in the ecosystem that are non-profit and they can kind of prepare, take up the mantle there. And also, like, just personally, like,

at least for the last seven years or so, like I've mostly worked out of non-profits. So I definitely value that. And I think there's amazing value in terms of these like R&D and going really deep and public goods and so on. So that 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 recent moment in terms of commercial counterparty and so on. I would add that like we're not only doing that. So the way we approach is we kind of have these two work streams. So one is business driven and another is open source. In ideal world, they are like 100% sort of align this one. But the business driven work, a lot of it is talking 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 on. 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 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, taking on specifications, so on. So we think that's extremely valuable both for the ecosystem as a whole, but also in terms of like, 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 property is they need open source solutions. Like you can't just sort of hide things and do sort of security biosecurity. So all these insurers, 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 do sort of key a balance between the two, both sort of being very pragmatic in terms of business demand, but also very principal in terms of open source work and pushing it out with permissive licensing and so on other people can build on it. 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 I were doing is that you end up having four proper institutions funding some of these public goods and become great for the rest of the ecosystem. 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, Uniswop or Avey, where you are you 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 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 that is like a product that you guys build. Like, where are you guys in that spectrum? Yeah, I think this is really clear for us. It's definitely the latter, which is basically we, oh, we love products. Like, I was a CTO of my last company, building products.

Austin's been bringing products to the entire life. Products are the way to go for, like, scalable kind of solutions. But like you said, it's a spectrum. 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 understand what they're doing. But the goal definitely is to take some of these learnings and turn this into like scalable products that you can roll out in basically mass.

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? As I mentioned before, like the institutional sales like is quite long. So it's the kind of thing where it's 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 deep 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 to go double down on. Yeah, and to us this 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 business, 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 that I like that will stop. I'll make a prediction. Over the next 24 months, you can see a whole number of businesses pop up that I like

that. And the reason why I say 24 months is because a typical institutional engagement will take kind of at least 18 months. Like, it takes you a number of months to get to talk to them and educate them, and then almost a year to kind of, you know, get the initial version out. What's the appetite these days for institutions to actually come on chain and do things in like the decentralized public blockchain context?

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 trying to 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 this is going to sound terrible, but actually, I'm a really bad salesman. So most of them are 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, first of all, one thing that's amazing about it is that they understand the value of blockchains. Secondly, I think I've got to get credit to defy here. They can see what's happening in defy, and that really, really interests them. So the things like RV 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 I'd even kind of classify as institutional defy. Like, and you'll see for various organizations and defy 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 longer. time. So up until recently, we've got 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 flood gates 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 try things out. But last year, something really changed, where sometimes the CEO would basically pick up their phone and talk to the innovation team. We're like, hey, look, you guys have been working for five years. We actually want to do business now. Maybe one way that this unfolds is we have the defy ecosystem, the main core campfire of Ethereum, the uniswapes, the stable coins, you know, the pendels, morphos, like all that kind of stuff. I'll call it the center of Ethereum. It really feels where all the

heat is. And institutions are looking at it and be like, well, that makes sense. I want to go play there. First, there's going to be a very distinct. distinct, parallel, dear or 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 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 defy 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. 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 not in your heads. And so, like, first it starts off completely separate

and then we'll 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? I wonder if you've 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 like, there's like a path, right? And they are somewhat further along.

And some are extremely sophisticated. And they already thinking about this. Like they have, they're thinking deeply about like how to be integrated with these institutions of Defi, how does this is composed 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 there's a new system, is 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 or something like that. And they have a compliance officer. And the legal framework which are operating under was written for, for the old world. So all of that needs to update and that goes into like,

has everything we do with like policy work and like how do you even map this to tick capabilities. And that's like in 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. I mean, I've talked to asset managers. I'm talking about like traditional asset manage that they 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.

Like people are saying, hey, how do you do this? What gets unlocked? Like paint a picture for me. I know this, I know privacy is hard and crypto moves, I think, slower than it did in the past when we were, you know, 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 time frame? 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 US stocks without being the US, without giving away my

identity because I have digital, you know, I have like a DID system. 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 defy. 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 ownership over 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 place is already doing it. Hopefully that happens on Ethereum. 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, like, 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. Like, Lightning is a joke of a product. And just because it's hidden behind 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 defy interesting and like trusted in the sense that we can inspect source

some of our defy systems. If we hide everything, how do we know, anything is actually going on. How would you respond to that? Yeah, so I think a question I'd have is like, I think some people often mistake privacy to be meaning hidden. I think a privacy really is who can see what, when, and how. And, you know, for example, when I do a transfer my bank account right now, I can see it. The business receiving can see it, but in 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'd 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, you know, 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? Yeah, the things I would

want to retain in verifiability and. auditability is things like trading volume and market cap of an assets 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, 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-wapping 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 this like, that's not how finance should. work. And like, the other example that's happening is like there people are like looking at all of these traders on hyperliquid with regards to like Robin Hood 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. But still like you shouldn't be able to see people's trades and their and like accounts and all of their trading history. The fact that that's

fully transparent is like an interesting property and it makes her 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 as so long as I can verify all of that stuff, then then we can get the best of both worlds. Yeah. And I would say you definitely can. Like they're not contradictory read because especially with that photography and synonymous proofs 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 in privacy of the things you want to be private so I think a lot of also benefits of something like if you're in public blockchain and program related and so on that you can actually get these properties they can design the system in such a way that you get the best of protocols bankless nation we've built something for you introducing the bankless mcp Chat Chb-T and Claude are great at a lot of things, but ask them anything beyond the basics of crypto about protocol mechanics, tokenomics,

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and all of a sudden your crypto queries to your AI, LLM, whatever you use. We'll get a thousand times better. So go check it out. There is a link in the show notes. And once you become a bankless premium member, you can hop into the bankless Discord and let me know how you like it. Some exciting news. We are launching a new podcast to help people

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So let's do it together. Go subscribe to this podcast. Search the Defi Report. Wherever you get your podcast, YouTube, Apple, Spotify, or find a link in the show notes. There's a new episode waiting for you now. I love some more 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 defy ecosystem. So I don't know what this looks like, but like 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 defy 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 his life easier. Basically, how can Ethereum help you? I can solve maybe

the ecosystem, the Deco ecosystem. So we already know a lot of the folks in the ecosystem, but, like, for example, if you're morpho, if you're Arvei, or we're already talking some of them already, 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 these places 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, that's, 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. 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 take right now the number of banks that look at it is pretty large. So if you have a product, you have a, you've made some of that's really kind of intuitive or cool, or you go to you go to.

DefyP Protocol, come to our repo, contribute, open source, 4K if you want, change it however you want, but basically contribute. It's going to be great for you. I would have to, like, so we talk to like a lot of people in the ecosystem and so on. I think one thing that we started seeing the last year or two or so is that people are starting being a little bit more open-minded about like what the users might be like. And maybe this is partially because of sort of retail movements and the cycles and whatnot. But I think that's another thing where try to sort of, yeah, be open-minded about like what,

who might best benefit from using your product and protocols and so on? And think about what kind of requirements and constraints there are up and they're under. So that's something we try to make a bit more public in terms of our privacy market map. But one thing we notice a lot and it's something we notice that the Fiorn Foundation is there's a massive, massive disconnect in terms of what the institutions are asking for and of what the ecosystem provides. And we try to sort of help bridge those and sort of create a feedback loop between you two. But there's definitely a lot more work that can be done.

And this is like a ecosystem-wide effort. 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 cyphal punks 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. Yeah, one thing that made me very optimistic, I was hearing a lot of Danny Ryan's reporting from like inside. the room. And like,

Danny Ryan's a cypherpunk. And he's talking to the banks. And they're talking the same thing, but with different words. It's kind of like, 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 counter parties. And we were like, these are the same things. And I feel like there's a, 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 these things are like coming together and like touching. It's like completely opposite ends of 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 the experience as well? I would say so. And I would say it's like you have a lot of the tools that you sort of same. And a lot of the affordances that people care about what as individuals is using. They're often very much the same in terms of censor presence and privacy and open social security and so on.

And I think one of the great things about the feeling that you can, You can both have people go like, because some people who listen to this, they might be extremely skeptical and like, oh, you know, Tradfog, 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 job some institutions quite harshly because of the regulation 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,

get the problems 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, what they need, then they're happy. 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, the 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 that I can think of. So I'll let you guys get back to work and thanks for coming on the show. Great. Thanks, David. Thanks for having us. Bankless H. 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 the frontier. It's not for everyone, but we are glad you were with us on the bankless journey. Thanks a lot.