Unchained - Why the Privacy Coins Mania Is Much More Than Price Action - Ep. 945

Episode Date: November 14, 2025

In this episode, Josh Swihart, CEO of the Electric Coin Company, which created Zcash, and Harry Halpin, co-founder of Nym, join Laura to delve into why privacy coins have taken off, and why technology is suddenly at the center of conversations involving governments, financial institutions, and national security officials. They discuss what’s actually driving the privacy coin renaissance, why transparent ledgers create risks far beyond user behavior, and how technologies like zero-knowledge proofs and mixnets are reshaping what’s possible onchain. Josh and Harry also break down exchange support, institutional interest, the Zcash DAT, upcoming Zcash upgrades, and whether Ethereum or Solana (or others) can realistically add privacy to chains that were never designed for it. Thank you to our sponsors!  Mantle Uniswap Guests: Josh Swihart, CEO of the Electric Coin Company Harry Halpin, CEO and Co-founder of Nym Technologies Timestamps: 🎬 0:00 Teaser Clip 🎙️ 1:14 Introduction 🌅 1:29 The reasons why Harry and Josh say we’re in a privacy “renaissance” 🛡️ 11:00 Why privacy matters, and how Harry first got pulled into the space 🔐 15:59 How zero-knowledge proofs and other privacy technologies actually work ⚡ 21:12 Why Josh started Zcash and what his long-term vision looks like 📊 24:48 The real-world ways Zcash is being used 💸 28:40 How the Winklevoss brothers are backing the new wave of privacy projects 🏛️ 30:12 How centralized exchanges should support privacy 🕵️ 35:56 Why financial institutions are suddenly interested in privacy and why governments see it as a national-security issue 🌐 38:42 How Nym aims to protect metadata and network-level privacy 🪙 44:47 Why Nym has a token and what role it plays 🔭 49:53 What’s coming next for privacy tech and for Zcash 🧱 54:55 Whether Ethereum, Solana, or other L1s can realistically add privacy to chains that weren’t designed for it Learn more about your ad choices. Visit megaphone.fm/adchoices

Every country wants to be able to kind of protect its own privacy or the privacy of its citizens. And by allowing these kind of transparent transactions, or at least not supporting the option to encrypt them, they're creating risks actually to themselves. Hey, everyone. Welcome to Unchained, your Nohyber resource for All Things Crypto. I'm your host, Laura Shin. Before we get started, a quick reminder, nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit Unchainedcrypto.com. Mantle is pioneering blockchain for banking, a revolutionary new category at the intersection of Tradfai and Web3. Follow Mantle underscore official to learn more.

Are you a builder who needs to add on-chain trading to your product? The Uniswop Trading API from Uniswop Labs offers plug-in-play access. to some of the deepest liquidity in crypto, all with zero hacks. It's on-chain execution at an enterprise level. More liquidity, less complexity. Visit hub.uniswap.org to learn more. Today's topic is privacy coins. Here to discuss our Josh Swihart, CEO of the Electric Coin Company,

and Harry Halpin, CEO and co-founder of NIM Technologies. Welcome, Josh and Harry. It's great to be here. Great to be on. For many years, experts always bemoaned that people did not seem to care about privacy. And I don't just mean in crypto after things like the Cambridge Analytica scandal in which the company used users' Facebook profiles to target them with political advertising, survey after survey showed that people claimed to care about privacy but didn't actually do

what was necessary to keep their information private. And the same was true for privacy coins in crypto for a long while. But then in late September, all of a sudden, Zcash jumped up to what is now more than a 1,000% increase in price. Manero has jumped by about 50-ish percent. Suddenly people somehow seem to really care about privacy or at least privacy coins. So why do you think privacy coins are suddenly having a renaissance? And Josh, why don't we start with you?

Yeah, I think, I mean, there's probably. a few things. One, there is a narrative shift and we see some of the narrative shifts happening because of overreach in governments, like specifically in the UK and the EU. We've seen it with Canadian truckers and some of those stories. So there has been an increasing amount of attention and living within the Zetash community, like I've seen it kind of gradually grow and grow over the last couple years. And so this kind of uptick just a couple months ago where it seemed like suddenly everybody was interested, I think has actually been building for some time because we've seen that interest within the community and we've seen community engagement increase over time.

There's also just this kind of broader geopolitical stuff that's going on with kind of greater divisiveness, concerns about political concerns and things like that. And so, like, I know people that are, that want to have mobility with their wealth. they want to be able to secure it without these kind of fear of future restrictions. And that's been happening. And then just quite frankly, I think, you know, with like Zcash and some of these tools in the early days, they were very difficult to use. And so we've worked really hard to make it accessible to normies to be able to shield their wealth. And we've seen within Zcash, we have something called the shielded pool.

And we've seen an exponential growth of the shielded pool over the last 18 to 24 months. Just people downloading, easy to use a wallet. We shipped a wallet called Zashi, storing it on a wallet and on hardware. There's a keystone integrates with Zashi and allows you to shield. And then we allowed for swaps to make it easy to get in and out. Because in a lot of places around the world, you can't get access to Zek or shielded Zek because the exchanges don't support it. So when we did the integration with near ints to allow for swaps in and out,

we've saw the growth of the shielded pool, which is kind of a great analog for adoption, not really necessarily price, but adoption, just went absolutely parabolic. So it's been a fun season. I think we're just now kind of awakening and some of it is very reflective. So they see the price increase. they go down the rabbit hole, they get more interested, they discover more, and then that has a net impact on the price for adoption. Harry, what about you? What's your theory? Yeah, I mean, it should be obvious. Privacy was part of the original ideals that motivated Satoshi Nakamoto. He didn't

really obviously know how privacy worked very well. He had some interesting ideas. Each kind of Bitcoin transaction gives you a new key, but that's just simply not enough in a world of massive surveillance and data analysis. And we've seen that over the last few years in blockchain technology, firms like Chanalysis and now, you know, national firms, and I'm such as Palantir, and I'm sure government agencies very much have the ability to track transparent chains. And Bitcoin is a transparent chain. So if I'm not going to give investment advice, but if I was an investor, and I said, well, there's this thing called Bitcoin, which is completely transparent, and every move I make can be tracked and therefore halted or, I mean, halted, but at least halt taxed or somehow, you know, something could happen to me.

I could be someone knows how much Bitcoin I have. I could be kidnapped and torn up in little bits and buried in a desert, but as if that happened in Dubai, because someone knows my Bitcoin address. Or, or there's this magical alternative, which looks exactly like Bitcoin, but which keeps. your balance is private. So it's not, so no one knows exactly how much I have. I would obviously choose the latter. And, you know, I knew a lot of the early cypherpunks such as Lynn Sassiman, who people think are Nakamoto. And a lot of them, they all had this critique of Bitcoin from the beginning that didn't have privacy. And now people say, okay, well, look, Zcash has been around a while and it works. And it gives people privacy. So it's an obvious bet. The main issue has been

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

these things until it causes you a problem, right? Right. But I just want to like to explain, it is true. Most people just don't, right? Like you're saying like it's so obvious, but to like, I would say probably 90% of people. they don't think about it. But let me, let me respond. I think, you know, I, I'm on a public podcast with you. So I expect, you know, thousands of people, any random person can listen in.

And that's like the kind of cognitive bias I bring to the show. I know that's going to happen, you know. So I'm not going to, for example, put my bank account on screen and give you a list of my transactions right now. But, but, but if I'm just like chatting with you in a cafe and I'm like buying a coffee with my, I don't know, my credit card or my lightning wallet or whatnot. You know, I think my cognitive default, my basic intuition situation is there's not thousands of people, including governing agencies and private companies, listening into

my conversation with like my friend in my cafe or my mom at home or looking at every single transaction I make. That's just not people don't think about it because that's not natural. It's actually not natural to have everything completely public. This is a freak side effect, a digital age that's being weaponized and used against us. I think if people thought about it, they would definitely say, oh, yeah, that's kind of weird. Like, I don't know if I want everyone to know all my financial transactions or the contents of all my conversations. I really want like Mark Zuckerberg between me and my mom.

Do I really want, you know, do I really want chain analysis between me and my coffee purchase? Probably not. So I think most people, they just don't know. And Josh, do you have a theory as to why it is that most people don't seem to really care? I do think they care. I think they just have different expectations. I think that's what Harry's kind of talking about. So, again, like if I use my credit card to make purchases, I have an expectation of a certain amount of privacy that the person at the cast register can't see my balance, that the people behind me in line can't see my balance or my transaction history.

I know that I've given it up to a credit card company. What people don't realize is they sell that data all over. So it's actually not very private. And so lots of people get kind of information. But it's kind of hidden from the user. I think if they could see, I think if the credit card companies and the banks were very transparent about who can see what, I think it would actually freak people out.

And I think they would care. With something like Bitcoin, if you're on a public, you're on a public database. So you have no expectation. There's no intermediary in between that says they're protecting your privacy. It's just out there for everybody to see. So if you're going to transact online and hold the balance, if it's on a public database for everybody to see, for all time, it can never be erased.

Like how does that change your behavior and what you do with your money? Ultimately, if you're being watched, your behavior changes. You just act differently, right? if your curtains are open, you act differently than if your curtains are closed. So some of it is just a realization, but I think there is an expectation of privacy. It's just for a lot of people they've trusted intermediaries to provide some blanket or some layer of privacy. And I mean, Harry went into this a little bit earlier, but I was curious for you to also explain,

like, you know, what do you think can happen? people are like, why do you think they should care about privacy? I mean, he got a little violent with his. You might also have reasons that trend in that direction. But I was just curious for your thoughts on why people should, you know, prioritize privacy. Yeah. So actually, my Genesis story with Zcash goes back to when I was building tools and realized for ad tech and realized how little privacy people actually had. So what we were doing was building aggregating data. This was pre-C Cambridge Analytica,

aggregating data across over two dozen different social media sites. We could scrape things like images that people posted online and those images are geotagged and their date tags so we know who you are, where you live, where you like to travel, what style of traveler you are, whether you have discretionary income and got to a place where we could even infer a lot. like whether or not you're good at your job. And it became very, very creepy for us with the tools. And that when I went down the crypto rabbit hole a couple years later, it was like this is a disaster.

So not only can I aggregate all of this social media data that people are willingly posting online, but I can map it to their, to effectively their crypto bank account, right, their Bitcoin address. And I can map their whole transaction history. And then what can I tell? And then what can I do? Like we saw, there was, Harry mentioned somebody that had just recently got murdered or a couple that had recently got murdered outside of Dubai.

There was another one in the UK where, fortunately it ended well, but they had hacked into his phone. So they got my, his map my run data. They were able to see each day where they were starting and where he was starting and stopping. And they knew they knew he had crypto, so they showed up at his front door. Those kinds of situations where you're marrying. not just your transaction graph with a cryptocurrency, but that with all of your other data that's posted online is a very real risk and it's being used to exploit.

That was kind of the big realization for me again. It's like my history in realizing like we need actually a better option. And that's when I went looking for a better option. And somebody told me about this project that was starting called Zcash back in 2016. Okay. And Harry, what about you? How did you get into privacy technology? Yeah.

So I used to work for the inventor of the web over at MIT called Tim Berners-Lee. And we were trying to just make the web a better place, hanging out, adding cryptography to browsers, because essentially back then everything was unencrypted on the web. And during that period, We had this essentially revolution in Tunisia and then Egypt and then a failed revolution in Syria. And people got in touch with me because I was a kind of expert in security and privacy. And they said, how can we kind of access the Internet? How can we access the Internet privately and securely?

And at that point, there weren't that many good options. You know, there was Tor and messaging. There's really nothing. Signal didn't exist back then. People use Skype. People use VPNs. And then what happened to me is that, you know, friends of mine, people that used to work at Mozilla, you know, the Syrian government tracked them down because they're communication patterns and put them in jail and murdered them. Actually, visit the jail in January.

It's pretty terrible stuff. So I think it's not just the fact that, you know, you can be a rich crypto trader and you don't want to get kidnapped, which I think is completely reasonable. But also, you never know when your government's going to go against you or when a powerful adversary is going to come up. know I was friends of Julian Assange. I remember I was at the WikiLeaks launch in 2009. I'm Julian. I told everyone. I said, you're all going to go to jail. And they said, no, way, no, we're just doing good public things for the public good. And look what happened, right? You know, got put in prison only recently released. So you don't know, even of what you think you're doing is perfectly legal and perfectly civil and for human rights and for a better world. You never know

when someone's going to disagree with you, that person might be very powerful, and they will then weaponize your patterns of communication, your financial transactions against you. I'd bet money there's going to be a series of bank closures and bank accounts being frozen and more mass surveillance ramping up as things become more geopolitically unstable in the next few years. Okay. So let's let's now go into the different privacy technologies in crypto. And then after that we can talk about your specific projects. I just want to make sure the listeners have a basic understanding so that way they can follow the rest of the conversation. So why don't we just start with probably the one that maybe most people have heard of by now, which is zero knowledge

proofs and that obviously is core to ZECash. So Josh, can you just explain how that works? Zero knowledge proofs. They're basically math and they allow you to prove that something, some fact is true without disclosing any information about that fact. So one that's used often, like we talk about, somebody can go into, let's say to go into a liquor store. And today, somebody's got a hand over an ID and the cashier can see the person's name. Yes, they can see the birthday, which is the thing that they need. But they can also see all this other data, right?

They can see the person's address. That's information they don't need. And they don't even need to know the birthday, right? They just really need to know can this person legally buy a beer. What a zero knowledge proof allows you to do is to keep all of that data encrypted essentially and create a proof and say, I can prove that I'm 21 years old and can buy this beer, or I'm at least 21 years old and can buy this beer,

without giving you any other kind of information. And so that's what we do. That's that same kind of mathematics. is used for protecting privacy online. And so there are some other technologies that are used for these privacy coins. One is ring signatures. Obviously, there's like other technologies. Harry, do you want to describe?

More than happy. I mean, I can go into a few of the more popular ones. There's a sort of infinite amount of possible things that have been used for privacy. So ring signatures are mostly known for being, I think, hopefully until recently, use them Monaro. So they allow you to be private, but among a group. And those are the kind of people in the ring, so to speak. It's a finite number.

So the problem is like up until very recently, the number was pretty small with Monero, and it's still like a pretty relatively small number. And the nice thing with your knowledge proofs, which I think even Monero is upgrading to effectively using, I think, FCMP Plus Plus, is that the amount of people that you're anonymous with is everyone that's like ever used the, one unquote shielded private pool and z-cash. And that's not the case with ring centers. These signatures are only private among the size of the ring,

which is a parameter kind of set by the people that made the software. And so that was used, I think, in Monero and mobile coin. And that's known as a not as good design. Now, there's other interesting technology out there, but I would say none of them are silver bullets. There is homomorphic encryption, quote unquote, fully homomorphic encryption. That allows you to compute on encrypted data,

for example, ads, track, this sort of thing. It's known to be a little bit slow. Hopefully it's sped up a bit. And then you also have issues of things like trusted enclaves. So this is hardware that you kind of trust is keeping your data encrypted. And this has been very popular technologies such as, I think, Secret, maybe the first one to market with it, Nileon. There's a few others out there.

F.H. Phoenix. However, I mean, the problem with a lot of trusted enclave work is I think they're pretty good, but you still kind of have to trust the hardware manufacturer. And I don't know. I don't like particularly trust Intel over time. We've seen more and more breaks against that core technology. So people, I think, like we use trusted enclaves as part of like defense and death, but I wouldn't recommend it as the only technology.

And there's other newer technologies like secure multi-party computation and a few other. But effectively, I think if you just want to rely on pure math and you want effectively privacy on chain, zero knowledge proofs are the way to go. And I have to admit, zero knowledge proofs are high tech technology. I was work in MIT. And my across the hall for me was Madar's Versa was working on the original, at that point it was called Zero Coin, Zcash paper. And I was like, there's no way this works. I asked Madar's, he's like, are you sure it works? He's like, well, I'm not really sure.

But it looks like it works. And I was like, oh, let's try to do a transaction. And like, I don't know, like a year later, we tried to do a transaction. I tried to transact this guy called Amir Taki where I was watching him try to make a Z-Cash transaction. He had to handcraft some Jason. And we were just like terrified. It wasn't going to work. It did work.

It was very slow back then. But now it's like much easier. So I would say in terms of technology maturity, zero knowledge proofs of the way to go. And then there's like a million types of zero knowledge proofs. But they all do the same thing with various tradeoffs. on a prover and verification time, basically like how fast is your transaction? Okay. Yeah, I know Amir and yeah, he's great.

He makes an appearance, I think, in my book. Okay, so let's go into your specific projects. We'll start with Zcash. That one obviously has been the biggest recipient of the new interest in privacy. And even earlier today, it was announced that there's now going to be a Zcash dat called cypherpunk, which is maybe the least cypherpun thing I've ever heard. But anyway, let's just talk about Zcash. So Josh, why do you think it is that Zcash has benefited the most from this sudden interest in privacy coins? And maybe just, you know, you kind of like left us hanging in

your personal journey where you heard about Zcash and got interested. So maybe fill in also what you've been doing since then. Okay, yeah. So just started like the L-Typo in the personal story, I found the Zcash project because I was looking for privacy. I was a little, I had been kind of around the Minero community. I was a little bit frustrated. And so I wanted to find something better. Somebody in the DASH community actually pointed me to what the team was doing at Zcash prior to, prior to launch. And then I came knocking at the door and I said, like I was a CEO of another software company. It was just decided that this is what I wanted to do for the rest of my careers to solve work on solving this problem. And so I actually stepped away and I started knocking on Zucco's door and maybe eight months later or something like that. He finally agreed to let me come work on it. And then I took over as the actually the Zucco stepped down in December 2023 as a CEO.

And then I stepped in during that time. So it's been the honor of my life. And I'd really grovel to get to work with this amazing thing that's here at electric coin company. The, you know, part of part of what's beautiful about Zcash is simplicity. And it's complicated, yes, the zero knowledge proofs, but it is effectively encrypted Bitcoin. So Zcash was a fork of the Bitcoin code base. At the time, you know, the scientists like Madars and others had approached the Bitcoin core team about adding zero-knowledge cryptography to Bitcoin.

But the cryptography was too novel. And rightly so, the core team said like this, it's not performant. The cryptography is new. We need to be able to trust the Bitcoin chain. Like try it out. experiment with it somewhere else. And so they did. They just took the Bitcoin code base and then they added zero knowledge.

And then it wasn't performant as Harry was talking about. It took a beefy machine, maybe four minutes to create a zero knowledge proof. And that's just not going to work. Right. So we've had to go through years and years of refinement and scale and kind of working through these issues to get it to the place where it is today. And it just took time. But underneath it all, it's encrypted Bitcoin.

Like it's 21 million cap. It's got the same properties as Bitcoin, but you have this added privacy layer. People can really understand that. It's related like it doesn't have programmability. The attack surface is very low. And so when people start thinking about what they want with Bitcoin, if they want any kind of privacy, it's an easy, easy thing to understand. And at this point, how why?

widely adopted as eCash at like, say, merchants, or, you know, what do you think people are using the shielded transactions for? And, you know, are there, do you have an idea of the demographics of who's using it, you know, whether it's certain geographies or certain types of people or? We don't have anything like, we can't, because we can't see the balances and we can't see who's transacting, like nobody can. We can see information about, like, who downloads the wallet, like the Zashi wallet that we released. In terms of its use, you can see like within the last couple months that the amount of transactions, specifically shielding and unshielding, has grown massively. And so part of that is related to the ability to swap in and out. So it's one-click swaps

through Zashi, through near intense, which we, you know, that team we've been working with for some time to make it very, very easy to move in and out of shielding. ZEC. And then we implemented something else called CrossPay, which was kind of based upon, again, something that the NIR team built, which I think was very clever. But it allows me to send shielded ZEC to anyone that accepts crypto effectively, whatever crypto they accept. So if somebody is accepting Bitcoin and you're going to buy a T-shirt or something from them, and I don't, I don't I can't do the math right now, but let's say it's 0.001 Bitcoin or something. I can send them 0.001 Bitcoin out of my shield of ZEC.

They get Bitcoin, so they don't have the privacy guarantees, but they can't see the source of funds. I can't see my transaction history. I get a state private with ZEC, but they get the Bitcoin that they want. And that we've seen a nice uptake with people using that capability. It's this kind of combination of shielded Zek, Vizashi wallet, near intent. It's kind of this promise of Web 3 where we're actually now stitching this fabric together in a way that's preserving privacy. That's so interesting.

I love it. Yeah. And I am seeing that the shielded pool is about 23% of the network. So, you know, that I can't remember, I think, like a really long time ago when I looked into this, it was only like 10%. But one question. Yeah, it's like 30%. It's close to $5 million in terms of the shielded pool where it is just a year and a half ago

is where you started to see that growth. Again, it didn't just happen over the last two months. It's been happening. You just saw kind of this upward thrust just recently. But it went from like 1.5 mil, I think a year and a half ago to five mil today, the total number of ZAC that are stored in shielded addresses. Yeah. And last question on this one, I asked about the demographics and you said you could only see

who had downloaded the wallet. I was just wondering because the, you know, percentage of the unshielded pool is much greater. Can you figure out who the users are from that? Like either geographies or, you know, what they're using it for or anything? I'm sure, like, maybe the tracing companies, like it's just antithetical to who we are to look at that data. So I'm sure that they can probably,

Probably if people are using it just like they're using Bitcoin, they have the same power to whatever they can see about Bitcoin, they can see about completely unshielded. DeCash transactions. Okay. And one last question. Earlier in the episode, you talked about how a lot of exchanges don't support ZEC. Why is that? And, you know, do you feel like that is going to change? Yeah, it is changing, especially based upon this recent push, like they, not inbound.

has been through the roof. So one, the exchange that supports Zcash to the greatest level is Gemini. And it's the same, you know, it's the same, the Cameron and Tyler, the Wiggle Boss. They're involved in the dad. They're involved in the dad, yeah. Pfeiffer book. One of the things to note about it is that they, they talked this morning about it. It is a doubt, but they're looking at it.

investing in various privacy projects broadly. So the data is one component to what they're a building, but they're looking at who is really developing interesting kind of software and solutions that protect privacy and intend to invest in those companies. So it's like a DAT plus. But anyway, so. That's cool. So it's like both a DAT and an investment company kind of like a VC firm?

or I don't want, yeah, I don't want to speak for them or, you know, and I don't know the details of how they're carving up, you know, how much is, you know, I think they've said they purchased 50 million in ZEC. And I don't know what's allocated for additional investments. But they may have been talking about, you know, earlier on the, on the spaces they held this morning. I'll have to listen. So what Jim and I did, which I think is a because they're also, they're regulated by the US government, they're also regulated by NYDFS. And it really demonstrates that Zcash can be done compliantly and still protect privacy. So if you, most exchanges in the world, with the exception of finance that support Zcash,

you can deposit from a shielded address to the exchange. So nobody can see where the money came from, except the exchange has it on their, you know, their account that it came to your account. And then they can ask you questions, right? they do due diligence and say, okay, what's the source of funds if they want to? What Gemini does is they'll actually allow you to send to a shielded address. So they're actually protecting their users in a way that nobody else in the world does,

no other exchange. Because if I'm sending front to a transparent address, then everybody can see that I've withdrawn funds to my address. I've moved out of an exchange into some other, either another exchange, but maybe into self-custody, it puts users at risk, right? You can see that that event occurred and how much of that. So what Gemini did is they enabled shielded withdrawals.

So you can see that a withdrawal occurs from Gemini, but you can't see it where it went. They know where it went. You've KYC'd into the exchange. They can comply. Regulators agree they can comply, but it protects their users. We're hoping that more exchanges will do that. It's kind of a mix of compliance teams ticking boxes,

like not being motivated to do due diligence or do the work to support shielded completely on the exchange. And some of it has to do with technology. So they use hardware security modules. The hardware security modules have to be updated to be able to support the cryptography effectively. And so unless there's like a commercial demand in customers saying like do this, they just, they're not going to do it, right? They're just not incented to do it. That's so interesting because basically,

yeah, the customer themselves is KYC at the exchange. And so the government could send, what's it called the SARS, or whatever it is, a request for information. Sorry, it's exchange that sends the SARR. But the government can still request information on that account. But if that person has withdrawn to a shielded, Zcash address, then basically at that point, the trail goes cold, like in the exchange itself.

Yeah, so basically the exchange has an obligation to like reports suspicious behavior, create SARS or something like that if there's a specific. And if the government comes with a warrant and they've gone through proper channels, then they can get the information about the user. And then that user might be, you know, law enforcement or whoever could go after that user and say, okay, what happened to the, where do the funds go from here? So they've got the tools to do it, and that's really how the U.S. law is set up. What we've done with transparent chains is we've kind of like,

they've circumvent the Fourth Amendment. And what it is is users just saying, well, I don't care about this notion of unreasonable search and cheese. I'm just going to make this available to you all the time. And so law enforcement doesn't have to go through, the legal process of getting a warrant to justify surveillance. They just get the, they just get a surveil. So what this does is, yes, you have to KYC into Gemini, but you've got this added security where law enforcement really needs to follow the law in order to be able to get your information.

Okay. So in a moment, we're going to talk about NIM, but first we're going to take a quick word from the sponsors to make this show possible. Mantle leads the establishment of blockchain for banking as the next frontier. UR is the access layer that transforms Mantle network into a purpose-built vertical platform, the blockchain for banking that enables financial services on-chain. UR unifies and vertically aligns Mantles focus on payments, trading, and assets, MI4, MEath Protocol, Functions FBTC, supported by developer grants, ecosystem incentives, and the industry-leading distribution platform.

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Get access to the same liquidity that powers billions and swaps through one powerful API. Visit hub.uniswap.org to learn more. Back to my conversation with Josh and Harry. Before we move on to NIM, actually, I did want to ask Josh one more question because we often hear that it's not just people who are kind of like trying to evade government authority or whatever who can benefit from this. But oftentimes we hear, you know, for instance, financial institutions could benefit or whoever. So can you just talk a little bit about some other demographics than the ones that people traditionally think of that can benefit from privacy coins?

Yeah, sure. So, yeah, we often talk about, we think in terms of ourselves and us as individuals and having sovereignty and being able to transact securely without and safely without somebody spying. But to your point, it's also, it is financial institutions. Like, it's a non-starter to be able to, and just businesses in general, right? If I have my, if I have my balance sheet effectively on a public ledger or I'm transacting with customers and things like that, I don't want to expose that. Like, I don't want to expose it to my competitors.

I don't want to expose my customers to, you know, unreasonable, like, security issues because they happen to buy a cup of coffee or a t-shirt or something like that. And so it's really kind of incumbent on businesses that are accepting crypto really kind of think about the information they're exposing about their customers and about themselves. And in fact, finally, like, it's a national security problem having transparent ledgers. And I've had numerous conversations with regulators about this. It was interesting. One that I had with someone at Treasury a couple years ago, they said, we recognize that having everybody, all U.S. citizens' balances in trends. transactions on a public ledger is a national security problem, but it's only a national security problem with crypto is mainstream.

And we don't intend for crypto to go mainstream. Not that they can control that. So, well, they, they, they, they battled and they lost. And it is no mainstream. So now it's a national security problem. So if you think about it, right? So if the US, in the context of the US, if the US government has access to everybody's transactions, histories on a public ledger and their balances and they can see them. Yes, they can go after bad guys and they can, you know, they can see all that information. But so can hackers and thieves, so can North Korea, so can other foreign governments who they may not want to be able to see U.S. citizens' data. That's why it's a national security problem, right? It's every country wants to be

able to kind of protect its own privacy or the privacy of its citizens. And by allowing these kind of transparent transactions, or at least not supporting the option to encrypt them, they're creating risks actually to themselves. Okay. So now, Harry, let's talk about NIM. NIM is focused on a very particular use case for privacy, which is VPNs, as you kind of talked about earlier. So explain, you know, how you feel like this kind of fits into this wider focus that we're

seeing in the crypto community on privacy and how you've been. trying to grown him. Yeah. I mean, I think it's important to, when you talk about privacy, what you really want to talk about is your threats and the kinds of data those adversaries can get. And, you know, blockchains are pretty amazing because when I was like kind of working back for Tim Berners-Lean, we had the Snowden revelations, we said, oh, wow, that's so crazy. like every single transaction I'm saying over the internet that's not encrypted is basically

like recorded on a giant hard drive probably by the NSA in Utah that wild, right? I mean even cryptographers thought that was sort of paranoid and it ends up being kind of true. And that isn't even involving blockchain technology. That's just involving I'm accessing the internet. I'm using WhatsApp. I'm using email. I'm going, I'm web surfing. And all that information is also required.

Blockchain is a sort of special because it's transparent blockchains are a kind of form of self surveillance for you. You record that data and you distribute it to other people and that's useful for financial transparency, but maybe not useful for everything. And so what occurred to me when I was kind of working with the kind of the inventors of the web and the internet is that, you know, they didn't really have privacy in mind when they built this entire edifice. And the reason is because they were a bunch of academics. They were building in a pretty trusted academic environment. They didn't even think like financial transactions were going to go through this thing. This was barely imagined. There was this 402 coding HTTP, which everyone actually just like forgot about until very recently.

Now you're seeing Coinbase and Friends revived. It's pretty cool. But nonetheless, so when I was looking, I said, well, look, I mean, Zcash has solved using zero dollars proofs a pretty hard problem. They've made Bitcoin encrypted. They've made blockchain transactions private. And there's other hard problems, right? So, you know, for example, if Zcash is the encrypted Bitcoin, who's the encrypted Ethereum, right? Maybe it's Aleo's pretty interesting tech.

They're building off some tech from the Zcash researchers. Charles Hoskison has this other project called Midnight. That looks super interesting, which is also building private smart contracts. There's clearly all this other amazing stuff you can do. However, as an Internet standards expert, I said, well, let's, try to fix the problem at the basic level. And that's the most basic level of when I send packets over the internet. And it doesn't matter if it's for like a video call or if it's for Zcash or whatever.

Can we encrypt those packets and can we make them private even against an adversary, which like the NSA or volunteer or Chinese government, choose your adversary of choice, is watching the entire internet. It can actually see and record. every packet. And a long time ago, this guy called David Chom, who's an absolute genius, invented this technology called mixing, and it solves the problem. That solves the problem, like taking packets and kind of mixing them up like a deck of cards after they're encrypted, so you can't see who's sending packets to who, but you can still deliver them. And the problem

is that technology was kind of slow when Dr. Chom invented it. And so we said, well, maybe the internet's faster now. And we could actually implement this technology using some newer techniques. And this technology can be used for general purpose internet traffic. And I think that is what we built. We built NEM. It's a mix net. And it makes your technology, it's decentralized and it makes your packets kind of private and anonymous, unlinkable to who sent who, send and receiver by default. And we think that's pretty cool. And it's very useful even for things like Zcash. So, you know, Zcash, it's encrypted on the blockchain. But when I'm actually using, say, Zashi, I'm not going to have a, I mean, I could.

I'd be pretty crazy. I'm probably not going to have like a Zcash, like full node on my machine, right? I'm going to be talking via a light client, my phone, to like someone else's machine, and that machine's going to do the cool Zcash broadcast. But the problem we have there is your IP address, this little number, you know, 255.0.01.3.2.2 to whatever it is, you always have one when you're on the internet, that number, which can be traced to more or less my neighborhood, if not my internet router itself, is then revealed to the full nodes. It doesn't really matter that my data is encrypted, my IP addresses is revealed, and my timing when I sent the transaction is revealed, how many bits I send is revealed. And we also think that's all that data should be hidden.

And to my knowledge, NIM is the only kind of deployed mature technology that can do that against like an adversary that's watching the entire internet. There's other stuff that can help. VPN's help. Tor is definitely better than VPNs. And the way you can think about NIM, it's like an ultra secure and private version of Tor and a standard VPN. You know, what you're talking about reminds me. I don't remember what year this was, but there was this kind of like scandal on crypto Twitter when it was revealed that chain alysis. had some kind of presentation at Italy about how they were using, yeah,

things like your IP address to, to, you know, add more information to figure out stuff about your transactions or whatever. So what you're talking about, yeah, it definitely did cause a stir when people figured out that that was something that, you know, these different analytics companies were using. I did want to also ask, so NIM also has a coin, but the coin, but the coin itself doesn't have private transactions. But earlier you referenced using it with Zcash. So can you just explain, yeah, the transaction piece?

Yeah, yeah. So NEM has a token because when you're mixing these internet packets, you have these computers, servers, nodes in a network, which are mixing them. That's kind of the work they're doing. So rather than mining Bitcoin, rather than mining, they're mixing packets. and that token exists to reward those servers for how much they're mixing. So similar to Bitcoin mining, if I'm, you know, if I put more hash power in, I get more Bitcoin or get more ZEC, and I've seen in China those wonderful Zcash miners.

They're quite popular for a bit. Similar, I have a big server. I'm mixing a lot of packets. I should make more NEM if I mix those packets correctly, and I should be able to cash that an amount to pay for my computer and get even a bigger and bigger one. And that I think is that that is a transparent use of a token because we believe, similar to the original Cypherpunk logo, which is obviously inspired folks like WikiLeaks, transparency for the powerful and privacy for the weak or at least everyone else, right?

So powerful people, I believe, like governments or knows that actually run large amounts of servers who are doing things which protect people should be transparent. And so our token is transparent by default because we want to know, we want to be able to accurately judge who's rewarding and who's doing the mixing properly. And the token essentially is also used to access the network. So what's interesting with NIM is when we build it, like we're like, oh, we have this cool mix that. is that it was very hard to explain what a mixnet was.

We said, look, imagine it's like a super VPN. And people kind of understood that better. And we said, well, let's just make it look like a VPN. Let's like make a VPN interface for it. And then we want people to buy it. And we were, I think, the first merchant to support Shield of Zcash. You can send that Shield of Zcash over. But what happens is when you purchase access the NIM network,

you're actually using NIM tokens. We just hide it from you. So your purchase comes to us. either shielded Zcash or Bitcoin or even credit card transaction over Stripe, we don't really care. That transaction gets converted to a buy order for NIM tokens, I think currently on BitFenX, and then those NEM tokens are given to the network, and that rewards them for participating and sending this user's traffic over. Now, we want to disconnect very similarly to how Zcatch wants to disconnect transactions from their senders and receivers. We want to disconnect.

to disconnect the user of the VPN from their payment. So we don't want your usage of NEM to be tracked to the fact they're using it. And if you think about it, like the way that like centralized VPN's work are totally crazy. You're like, I'm going to trust you to keep my traffic private and secure. And by the way, here's my credit card address, which gives you like my address and my name and you can see all my traffic. That's crazy. So what centralized VPN do is actually, I think, pretty dangerous. What the decentralized VPN and MixNet like NEM does, We say we will split that traffic up on multiple groups. And then in order to say we can't connect your payment, when you pay us, we give you a zero

knowledge proof back. And that zero knowledge proof back is like proof that you've paid. And then your like little VPN client can display that zero knowledge proof. And the zero knowledge proof says, hey, I bought, you know, $10 worth of NEM tokens. Please give me access. And we tried really hard to make all this invisible to the user because I think, you know, usability is really what's going to make or break privacy attack. But wait, so I have a question.

So if I am buying NIM tokens on BitFNX, then somebody can figure out that I'm probably using the NIM VPN, right? Yes, but you're not buying them. You talk to our credit card or payment processor, currently BTC Pacea. Then we say, oh, thanks for the money. Here's his zirinolage proof that you paid. Got it, got it, got it. And then we do the order for you.

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

And then you can imagine zero knowledge proofs for all sorts of things like, you know, identity or I don't voting. I've seen some of that. That's worked pretty well in some places. And so that's kind of our tech in a nutshell. Okay. So I wanted to ask quickly about just a number of kind of new developments that I think are happening on Zcash and Josh and Harry, if I miss Annie, feel free to, to, you know, add additional ones. But as far as I can tell, so there's one ZSA, which is enabling companies, Dow's and individuals to create shielded by default. assets on Zcash is L1. So it's it's sort of like an ERC20 on Zcash or something that's like shielded by default. That sounds interesting. And then there's Tachyon, if I'm pronouncing that correctly,

which will make Zcash less computationally onerous, which is why I think it probably took a while for private transactions to take off just because it just required kind of more gas, et cetera. As you talk about, there's now this integration with the near intense, which is, you know, what I think is causing a lot of a lot of this activity. So it sort of feels like we're on this precipice of just, yeah, like real, you know, transactions happening privately and the technology making it, making it easier, yeah, to do it by default. Is that how you're thinking about, like, where kind of the next wave of privacy tech is going? Well, I mean, we have an expectation of privacy when we're online, right? So we have, I mean, Harry with NIM is like solving a massive problem with people being able to track packets and be able to track what's happening behind the scenes.

But we have some level of encryption with HTTP where like if we're buying something from Amazon.com, but in our credit card, there's an expectation that that information can't be kind of sniffed out. Somebody can't steal our credit card, right? And it works and people use it. because it just feels part of like your normal everyday kind of activity. It hasn't been that way with privacy coins, right? It's too complicated.

The user experience just isn't there, but that's changing. So we now have these wallets where we can hide all the complexity kind of behind the scenes. The user knows that it's private, but they don't have to go through any additional hoops. So if it's just as easy to have a privacy option or not privacy option, it's not even a privacy option. It's just the option. option for being able to spend and I know I'm safe and secure. It's just got to feel like that.

So in order to get to billions of people, in addition to the UX, we need it to be able to scale. So it's really, you know, it's really hard to scale blockchains. So Tachyon is actually a project that was started by a former ECC engineer Shumbo. And his mission was to figure out how to get Zcash to scale to billions of people, to where sending small, big, doesn't matter. We could handle that transaction load in a deep kind of decentralized way. And he figured it out. Like one of there's a without kind of going too deep down it that rabbit hole or that

with too much technical information, there's this huge problem with Zcash. It relates to this kind of accumulation of nullifiers. It's these things that when you spend your Zcash, it has to create this nullifier to prove that. that you're, you know, that your coins. You think of like a serial number, maybe the easiest. Yeah, yeah. And it just kind of builds up over time.

And so if we're gonna scale a Bitcoin like blockchain and kind of get rid of this nullifier problem, how do you do it? So that's what they've solved, but Sean solved and now has built a team around to go and deliver that over the next, you know, 12. I think they're saying 12 months is probably 12, 18 months. I don't know will be completely scalable. that way. We need to improve the user experience so that we don't have to deal with seat

phrases and addresses and things like that, that Normies have a tough time kind of groping or understanding out of the gate when they're first getting onboarded. And then there's these other efforts. One of the beautiful things has happened with Zcash over the last couple of years is this proliferation of different people and organizations that are building stuff. So, you know, there's a group called Ketit, who's building this notion of Zsays. So that, yeah, that allows an issuer to issue an asset on top of the Zcash chain and have it completely shielded. So if somebody wanted to do a stable coin or they wanted to do a Bitcoin, they could using

Zcash tech. But it requires an issuer to be able to do that to manage issuance and redemption. And then there's other kind of fee market things and things like that that are going on actively. somebody's looking at a kind of hybrid proof of work, proof of stake. That's where Zucco currently is with another team called Shielded Labs. And then the Zcash Foundation, it's just like this ecosystem is growing and it's growing really quickly. All right.

So last question, I'm sure you guys know that there are other bigger blockchains that are already looking at adopting privacy. So, you know, we did see the price increase suddenly in late September with ZCAP. and other privacy coins. And then in early October, the Ethereum Foundation announced that it was establishing what it was calling the privacy cluster, a team of 47 researchers, engineers, and cryptographers to establish privacy as a first-class property of Ethereum. We've long heard Bitcoiners talk about adopting privacy. And, you know, I have seen a few sentiments online that just make it seem like there are users

in these ecosystems that, you know, I feel like privacy should just come to their chain and they shouldn't have to go elsewhere for it. So here's one clouded mind, said on Twitter, and saying that the entire timeline thinks privacy coins like Monaro and Zcash are better than Ethereum. After the Ethereum ecosystem went to war with the U.S. government, you can literally use your anonymized eth and a plethora of on-chain permissionless protocols in Defi. What the fuck you got to do with your Zcash bro? Shielded and buy drugs?

Let me tell you, drug dealers don't even want Zcash, dude. And then another one, Asger MSB wrote, Are Privacy Coins actually useful? What niche do they fill that something easier to use like Tornado Cash doesn't fill? So, and then they wrote, I've been investing crypto since 2017, and I don't want to use a new blockchain unless there's a really good reason. So how do you guys address that sentiment? No, I'll mention this really quickly.

and not let Josh go into the details of Zcash. We, you know, we're a merchant, right? We essentially sell a mixed app, which is a super VPN. And we want, obviously, people that were really into privacy, like Chelsea Manning and so forth are our super users. And we want to take payments from as many different kinds of people as possible. And in fact, I think most of our users currently pay, I think most people paying credit card.

After that, it's Monero. But, you know, We want people to be able pay for our service privately. And we know that Shielded Zcash is the best tech out there. So that's why we encouraged as a merchant, we said, hey, why don't we just make so we can plug in Shielded Zcash into a VTC pay server? And someone did that. It wasn't us.

And we got working first, I think. And now we're seeing a large increase in a number of Shielded Zcash transactions also basically going up exponentially from our user base. And so you can't, you can not only, I mean, I'm not going to comment. comment on buying drugs, but you can also buy a VPN with Shielded Zcash. I think the amount of shielded Zcash users will proliferate and more and more merchants will take it. I do think there's some questions of other chains trying to catch up to Zcash. Why were we always supportive Zcash? Because I can say as an outsider, but who does have a PhD and did teach cryptography,

both, you know, worked with the honor of us, MIT and crazy places like America University of route. There's not so many people that can actually code this technology without bugs. In the beginning of the internet, we were just trying to get like TLS. We're just trying to get HCPES working. It took like five to six years after the Stodon Revelation is to take the internet from like 10% TLS, like 99% TLS. And at the time, there weren't even that many people that could code that properly. There were still bugs being found 2018, 2019. There's still occasional bugs. And so the amount of people I can actually like code zero knowledge proof in a way that's not just like, oh, I forked their repo and just jump through it on another chain, is close to like, I don't know, I would say probably like maybe 50 max on planet.

And I would say like half of those work at Zcash. So I think Zcash has this like inbuilt advantage because we know their code is solid and their team is solid and they're the first people get at working. Even like the co-founder of Google's guy, I don't believe you guys even have this working. I mean, I think it was Sir Guy Brenner who said that after Zcash presentation. And so that's, you know, and, you know, it kind of makes sense that they have an advantage. That being said, I do think the property should eventually come to all chains. It's just, I think it's, I suspect it's going to be quite harder to get there.

So we do know Ethereum's going to move in more and more privacy enhanced direction. I really support that. Well, you know, obviously it's crazy that defy, that guy thinks he's DeFi's anonymous. Good luck, buddy. like it's completely not an honorer. Ethereum's even worse than Bitcoin on this fact. You know, Bitcoin has had thoughts about adding zero knowledge proofs at various points. Adam Beck, who is a enemy of mass surveillance and a good friend, although no fan of Zcash,

he's had this great idea for years to say, why don't we just like Bitcoin is like gold, it's the store of value, you know, it's price is going to go up, there's a finite amount. Why don't we just put privacy on a side chain, right? So use maybe zero knowledge proofs, a homework for encryption, which they do have a liquid on side chain. That's a great idea. But the fact of the matter is, you know, these ideas have to be delivered. And it's easy to say, yeah, we have a privacy coin. But 90%, maybe like 95% of the privacy coins I've looked at are just like outright scams.

It's just some random guy forking a code base and using the word zero knowledge and a VR. And they're just not like, you know, I can look at the code. I can tell you like, I don't trust any of that. It took me years even to trust Zcash, and now I do trust the Zcash code base. So I think that's like the inbuilt advantage, and I do think other chains will catch up, but it will take a long time. And there's all these hard problems that even Zcash hasn't solved, right? Private smart contracts, who's going to solve that?

You know, Charles Hoskinson's talking about it, midnight, Aleo is talking about it. Who's going to solve, you know, what's going to happen to polka dot? Gav Wood has been talking about privacy. That's amazing. We can't, we don't have privacy enhanced dexes. CZ was the first investor in NEP, basically. And, you know, he's been talking about this on X saying, hey, why can't we have a privacy enhanced decks?

It's crazy than our privacy enhanced. Yet no one's really built it, at least I know of. So there's a huge opportunity out there, I think, for hardcore committed teams to make a progress. But they should learn from the masters and the masters on, you know, privacy is really, I think, the Zcash team. Josh. Yeah.

So I'll add, by the way, on the dexes near. this morning. I don't know if they've announced it, actually, but you can use it. There's shielded withdrawals from near. So you can now deposit in the near and withdrawal shielded from there. Maya, which is a sister chain of Thor chain, will soon have that capability as well. So they're coming and people realize the necessity of them and they're investing in them, which is amazing. So yeah, so with some of these things, so building, I was talking to somebody who's engaged in a privacy project that's not in the crypto space, but very well known. And we were having lunch, and he was telling me, like, for our development to add privacy capabilities,

it's like at least takes at least twice as much effort and work with the skill level that's beyond what most engineers kind of understand. And so one thing, like Harry alluded to, like one of the things that NEM protects against is something like kind of timing attacks. So when you send a transaction or you do something online, when you do it can be correlated with other information. Engineers aren't necessarily equipped to think about threat models these ways. And so the people that are really good think about these kind of adversarial attack factors when you think. speak about privacy, like what is really being exposed, not just like the core of the thing, but on the edges of these things.

It's like side channel attacks that are possible. Additionally, you have like, you have world class engineers that are, that are available out there, that are working on some of these. And then you have world class cryptographers, but you have very few people that are world class cryptographers and world class engineers. So that's that part of that talent scarcity that Harry's talking about. A lot of the privacy stuff that's being used across these different projects, like Aleo, are built on the work that we're doing at Zcash that we've done and that we continue to do. So we'll continue to innovate and drive this stuff.

Takyon's going to be a big one. And the other thing that's like really important, when you add like smart contracts and that kind of thing, you increase the surface area of attack. you're adding more complexity to the protocol. And yes, there's additional things that you can do, but it comes at a great cost. And the harming of that kind of technology and being able to do that is going to happen over many years. You have today strong privacy guarantees with Ccouch

that you just don't have anywhere else. All right, you guys. Well, we're at time, but it's been such a pleasure talking to you both. Thank you so much for coming on unchanged. Thank you. And I look for integrating NIM with Zcash at one at some point. So do I. So do I. Yeah. Rock and roll. Unchained is produced by Laura Shin with help from Matt Pilchard, Juan Oranovich, Margaret Curia and Pam Majumdard. Thanks for listening.