Guy Itzhaki & Guy Zyskind: Fhenix – FHE-powered End-to-End Encrypted Ethereum L2. Ep. 530

Transcript

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practices and infrastructure that are usually exclusive for institutions you can stake directly to cors one's public note from your wallet set up a white label note or use the recently launched product Opus to stake up to 8,000 eth in a single transaction you can even offer high yield staking to your own customers using their API your assets always remain in your custody so you can have complete Peace of Mind start sing today at chorus. one welcome to Epis Center the show which talks about the Technologies projects and people driving decentralization and the blockchain revolution I'm Felix and today I'm speaking with gu itaki and gkin were respectively the CEO and founder of

Phoenix Phoenix is an e theor t is focusing on enabling computation over encrypted data via fully homomorphic encryption we're going to get into uh what all this means in a second but first of all let me welcome my guest today so welcome guy and Guy thanks K thanks for inviting good to be back awesome yeah exactly yeah um guy Z you've been on here already you have a big background in crypto uh building like multiple of the like Cutting Edge projects in in sort of the Privacy space at least from my perspective um so maybe we could start there and and kind of

start with the usual epicenter question of you know how did you get into crypto and uh how did you end up at at Phoenix now in the end y so uh good to good to be it again I think uh we've had that conversation or at least i' I've said that uh I've told that story a few times before um I'm celebrating a decade in crypto which is either an achievement or something to be ashamed of I'm still not sure and I'm still deciding but it's been a decade um I got into crypto in around uh 2014 actually even 2013 um really got caught up with the technology um I was starting my masters at the same time and decided that I

really wanted to focus on research and more deep diving into what we can do with blockchains um Beyond just Bitcoin uh ethereum was in like Alpha stages back then was just starting out and that was very inspiring for me and then I landed into the problem of uh privacy um and specifically uh came out with this problem which is today it's already like a well established problem but back then it was really novel um how do you do private computation on the blockchain how do you basically do confidential smart contract and uh that was uh what I focused on on my thesis uh using uh secr

multiparty computation Technologies at time um and that led to a project called Enigma which eventually turned into secret Network it had a few iterations um and secret network is today like one of the largest Cosmos chains that specifically focuses on private comput but it uses for the most part uh trusted execution environment which is another technology um and and a few others um but then in the last couple of years as I was going back into research mode I kind of became convinced that H is the the future um and basically decided to focus most of my time on that and uh you

know that kind of turned into Phoenix in the last like six months or so right yeah awesome we're going to get a lot into the different like sort of technologies that are out there and how FG compares to them so I think that's like kind of key to understanding you know what what Phoenix actually is and maybe also like clearing up some confusion for our listeners but yeah first guy itaki maybe you can give us a little bit of background how how you met your your name cousin and the started in crypto yeah for sure um so my background is a little bit different than the typical uh Crypton native folks uh I've been at Intel for many years um I think

somewhere around 2017 is where I started actually working on blockchain I I was leading Intel's trusted execution environment ecosystem development and did several projects with Intel sgx uh one of them was actually to build um a private blockchain Network for a financial institute um a stock exchange um it was a permission Network for landing Securities and it got me quite excited about the technology and um actually I was you know 2017 it was a a very fun year to be involved in and I got invited to tons of conferences um to represent Enterprise point of view of blockchain uh and in one of the panels I

met gu zisin uh we started chatting and I think it was very clear after a few minutes that um you know we have a lot in common specifically about the the desire and the need to introduce privacy into that space um in 2017 and 2018 morphic encryption was just you know an idea wasn't really mature but sgx was and you know I worked with guy back then about the usage of te is within his project but I kept on monitoring the progress around FH and and was quite excited about that um in 2020 I I decided to uh take a liote at that space and and did a gig uh working on the Olympic Games I'm

I'm a fan of sports and when the Olympic calls you you cannot say no intel was a sponsor of the Olympic games like the opportunity to work on the Tokyo games and the Beijing games I'm non blockchain related but just very cool technological innovation in that space um we can do a podcast about that you know for like a couple of hours as well at some point and then you know 20 22 um the the the itch came back and um I transitioned to lead the FHA um business activities at Intel Intel is building a hard accelerator for homeomorphic encryption it's it's public it's part of a DARPA initiative and uh throughout that I basically scann theti enire market so

figure out the usage within cloud service providers Federal entities Financial institutes um and I have to say that that the progress around F has been quite uh um quite depressive we'll get into that later on about some of the key challenges including performance and complexity and and how they're being solved and I also met Zama which we'll chat about them as well and in earlier this year I was in Israel visiting Guin and he told me that he's noticing the same progression with FHA and that was really the sign for me to to to leave in until and and join Phoenix Right awesome that's amazing that we have we have both of you here

like the experts on this topic I think yeah we saw a lot probably most people are very familiar with ZK and like sort of the progress in the ZK space and in in its connection to crypto and and sort of the Cambrian explosion of um like research in in that area but I guess FH is sort of themes more undercover still and and maybe you'll be able to shed some light into into how how it can be applied to crypto or or why why this may be a game changer but yeah maybe first of all we can start off with I guess like just the concepts of like mental model of these different Technologies how how do they compare and and how um yeah do they work and how is like

sort of the like maybe end state of it is if that is even like correct to say that's sort of like how I guess I look at it um could you like yeah kind of compare maybe for me like one of you guys um you know what what secure multi part computation tries to achieve and maybe how yeah maybe let's start there and then we can get into like how te achieve it and how FH does it first of all I mean I think at some point people in crypto will have to kind of get used to the idea that it's not either all all of these technologies will play a part in like dmba um I do agree with the assessment that FH is probably like the endgame

solution in the sense that it will do like most of the heavy lifting and most of the important work when it comes to like encryption and private compute or secure computation whatever way we we decide to Define it but you will still need ZK regardless even not just for scanning but but but uh for some other things uh you would still actually probably want like te or some form of like Hardware security model which are like a lightwe version of T is closer to how the wallets in how they work so all of these technologies will have a power to play uh NPC as well um but just to give like a very very quick overview let's let's start with the problem not

with the solution so the problem that we're actually trying to solve in blockchain is essentially what's known as secure computation and secure computation has two branches one of them is you want the computations to be correct and trusted that is something the blockchains already do right like you write a smart contract on ethereum by definition the reason you useum is because it's a trusted platform you know that that code is Law and you're going to get a correct result so that bunch is solved and has been solved for about a decade then there's the other Bunch when it Define secure computation and that is confidentiality or privacy again different people use different terms and

that is the idea that like you have a multi-user system right like maybe I have my data you have your data gu Sak has his data we want to run some program some Logic on top of all of our data but for that logic either to be to have either we just don't want to share like our private data with each other for privy or for the logic to actually make sense we aren't able to shame it like think about a game of poker for example right in a game of poker each one of us has our own deck of cards if everyone sees each other's deck of cards I mean it's not about carrying about your privacy that's just a poker game right like you can't actually do

that functionality without privacy baking so that is really the idea of secure computation you you have multiple users sharing data they want to be able to share their data privately such as other participants and even the the computers running the program itself can see the data and also they want to know that the results are correct that is a problem right like the problem is how they get both correctness which block Sol then I get privacy Al for privacy then you have those different Technologies right that people are getting used to at this point so I'm actually going to leave ZK and F to the to the end so I'm GNA talk

about two techniques that are maybe easier to grasp one of them is trust execution environments um T's are fairly easy to understand right there's like a magic Black Box inside of your processor inside of your computer and basically the assumption is that no one can break it and that no one can probe into what's going on there so and so basically if you want to do a computation privately then all you have to do is you have to encrypt your data from the outside with some key that exists only in that black box and then you send like your code and encrypted data to the blackbox that uh um uh T the the the data is actually

being decrypted inside the computation is done inside and only the output maybe gets revealed uh to you or to someone so that's kind of like you know using the hardware you use Hardware to simulate the effect of computing over private data but there's obviously a big assumption here that no one can break that BL box I have two things to say about that like gu people have seen that BL box has been broken before and even with secret that has been an issue and even with other systems on the other hand I do think people overestimate the problem with this like P are and evolving technology and many of those actual problems are going to be solved over time but it's you know it's it's

always going to be a simulated solution it's not a purely cryptographic solution and it's always going to have its problems the the upside is that it's very fast and very and very cheap in comparison in compared to like deep cryptographic Solutions um the other solution is to use something called NPC NPC um I'm not going to get that's actually probably the hardest one to explain in a way because what happens with NPC is that the data is being split it's it's kind of like a blockchain the that mean split across like several validators or nodes in the system and then they run they take like a program a reg program and they

basically transform it into this multi-party computation this equivalent secure program that they can run together as as an interactive protocol where they make sure that they never reveal data to each other every one of them always have like an encrypted piece of the data it's called a share of the data but they can somehow together magically compute any program and and any smart contract and obtain the output without actually bringing the data together um um with each other and the crypting it uh so that's kind of like how NPC works and then f is probably the most sophisticated

technique but it's actually easier to understand it actually is more similar to to T um really all that happens with FH is that everyone encrypts their data they send it to a cell a to a you know or to a network of servers but let's just say it's a single server for now and that server just computes over that encrypted data without actually knowing what a data it computes over and then it gets an an en crypted output and you know maybe that out output gets decrypted or maybe it's sent to some user but the the whole computation happens directly over encrypted data uh and that's really the magic now all of those Technologies they very very

directly solve the problem of secure computation they allow multiple users to somehow encrypt their data and then they allow one or multiple servers to compute the functionality or the smart contract or whatever over the data and now we get to ZK ZK actually works very differently in ZK you can't actually do secure computation um what you can't actually be you can't actually combine data from multiple users and then compute over the data privately and then produce a result you can do single user pivate computation so if I have data if I like

private data Maybe it's like my age or my date of birth and I want to prove to you that I'm over 21 so I can compute uh you know just like a comparison comparing my date of birth with age 21 and then produce through output that says look I'm over 21 and also here's a proof that I didn't cheat on that computation but if you you think about the poker example again there's no way to do that with ZK alone but it's actually not not something you can do the the closest you can do with ZK if you want to go back to that same M multi-user model is you need to have a trusted party you need to have someone

that everyone trusts right like maybe it's you Felix right where like maybe all of us trust you more than you trust us or that we trust each other and so we send you our data you run the computation in the cim see everyone's data and then you can send Ave to everyone that you know you ran whatever complication correctly but at the end of the day someone to see data in that case that's so I think the best you can do with ZK okay yeah I think that's that's been a lot to unpack there I think I guess you also mentioned that these Technologies can partially work together or will work together in in a sense is that also like could you the computation

from FH some create a proof and like because I guess from what I understand in FG you still need to like reproduce the computation to prove its correctness I guess is that could you combine like FG and ZK somehow to kind of prove and make it multi-user like that or or is that another another thing okay so actually current FH so FH you know there's one thing I lost over FH there's an encryption key um but who is the decryption key that is like the the the big question you can I mean there's this there's a technique called multik where you can theoretically combine multiple keys but it's like not practical and has

other problems so really you need to have like one key or multiple keys but like all the users need to to for example encrypt their deck of cards with the same key so again who has the decryption key and if someone has a decryption key then that's like a that's like a you know like a a trusted point uh so what you do is you use NPC so remember with NPC you can split the data so you take the the decryption key and you split that across the network the entire network uh and then that network does something called the threshold decryption whenever you need to decrypt the data the network can come together without actually recombining the key

like they never the the key never lives in one place but together they can decrypt uh you know an output for a a a results so you actually need MPC to turn FH multi-user and then for what you describe yes you also I mean if you want to do verifiable SG if you want to do like a ZK FH roll up right so which works just like a regular ZK Rolla but everything is encrypted then you would have to go over the FH computations and and produces ZK proof on top of that saying hey I ran the FH computation correctly that is a very active research area but it's nowhere in Practical just

putting it out there I think like you know maybe five years plus away from that but that's going to be the end game right right yeah yeah I think that's like the recurring theme it it seems a little bit bit that like a lot of these Technologies are sort of developing like you also said for tees right like currently like there's still some problems but um as there's more research going in and as there being being used more in practice they are developing and and I think a lot of that was like when I initially read about I think for example new Cipher I think was pretty early like looking at this in 2018 19 but then it seemed like very impractical or there wasn't like anything um there so maybe can you or

maybe yeah one of you go into how actually evolved and and how it now became practical to do this or yeah or is there even like still yeah more improvements to be made more optimization so that it's even getting even better like can you maybe like kind of walk us through the the history of in that sense yeah yeah for sure so um I think when I mentioned you know 2017 2018 um FHA um you've started to hear about it but it when when we say that it wasn't mature then think the challenge that you typically have with FH is two folds one it's considered as very t for developers to build on top of that and

the second one is performance and I think even today when we talk about FH there is this notion of FH is still very very complex and very very slow but like everything in life there has been progression and this has been constant progression throughout the years and what we see today is actually that these problems are starting to be resolved so let's maybe start with the developer complexity because the data is encrypted you can't really operate the way you operate on a regular program right there is no if and else because you don't actually see the data itself so you need to have the the the the application being built in in a specific way um to

for having developers do that there is a very limited set of people with that skill set so what's been built in the last couple of years is actually a set of compilers that abstracts a lot of the complication from the developer that's where I think Z really shines and you know Zama is a partner that we're working with and uh with the introduction of the FHM and in that case basically developers can just write smart contracts without any need to understand F whatsoever they basically uh Define we're solidity based so developers don't actually even need to understand you know any different new language and they just decide you know which asset they want to encrypt on the blockchain and and they encrypt that

part so I think in terms of complexity that problem specifically for the blockchain is I can say probably kind of resolved um the second part is is computation now here uh we talk about FHA as if it's you know one monolithic entity but actually within the FH World itself there are different schemes uh some schemes or you can look at them as like variant are better for some applications and others are better for others so you have schemes like ckk and bgv which are probably better when you're doing machine learning and artificial intelligence type of of of computation in our case the scheme that uh we are using is is TF and uh this one

um has something called programmable bootstrapping which means that that the noise is being cleed every operation that's being done not not so much important for that case but um I think that the Improvement that's been happening is also on the scheme level so the schemes are becoming more efficient thus making the computation better that's part A of the of the solution and the second part is clearly hardware and as we get better Hardwares better CPUs better gpus and and the next couple of years also A6 coming into Play We definitely see the path for uh resolution towards that um FHA unlike uh MPC uh is is computation bound and you

see that MPC is more of a communication Bond but with FH it's more computation Bond so the more Hardware you throw on FH the better performance you get and uh we're actually um seeing significant progress that's happened in the last couple of years and you know I I came from Intel so I know the hardware space pretty well and we can definitely see that in the next 12 to 18 months there are I say over a dozen companies that are building dedicated Hardware accelerator for FH which really gives us the signal that um performance is is going to be resolved in the next couple of years awesome yeah maybe I guess let take that to the Phoenix like sort of

blockchain level in a sense like you already mentioned you need this MPC uh to have the decryption key for fhe so I assume there are some roles in the network of of of Phoenix like I guess validators or maybe like like different roles are yeah maybe you can explain are is this going to be like one role that the people have to run these Hardware accelerated fhe Hardware uh and also do this NPC or are you splitting these these things up like how how is sort of the network architecture of of Phoenix going to look like if that's already clear or like I guess how you're

thinking about it I'd say it's pretty clear at this point uh we put like the main building blogs that we've been building in in in our L2 white paper if people want to read and go into a bit more detail but generally speaking like we kind of landed the the right architecture is nl2 wallup architecture um for for the for the the same obvious reason that the wups make sense in gml like there is no reason to replicate the computation across like all validators in the bwar is enough to have like one node or a small number of nodes like like do the actual computation um in sequencing and all

that and then let other just validate um and with FH that makes even more sense right because FH kind of like ZK requires like very heavy dut the cryptography that's very very expensive those are you know those those are hard servers if you need to L consent on top of that and start to sync validators that's gonna that's going to take too long so anything that that relates to execution is better than done individually or in small groups anything uh done with with validating you know anyone can do it with a longer P window uh we're taking the optimistic call up approach because like I said ZK ZK ZK F walls are not are not going to be

practical for quite a while um so you have the same r that you have in a wup but then you have another additional role which is the pressure Network the tral network will have the share decryption key it's going to be run by validators and whenever users request like a decryption or re encryption operation then that Network which is going to start small um but IDE eventually it's going to become like very very large like that's like our long-term goal um uh that that is going to actually end of those and actually we're coming up and seeing over like other like stuff that accelerates like

FH that that Network can actually do like there it I think at at at the end of the day like most of the computations will be done uh via FH but you would be able to maybe speed up some specific bottom X of FH like with NPC on that Network that actually goes beyond just uh like binary decryption but that's like further down the road okay cool thanks and and I guess yeah maybe also getting back on the first point like sort of the developer experience point is it fair to say like you know F FH evm and sort of ZK evm has been sort of like is that a similar like

framing like that that like these compers do a similar job there or like how how do you think about it is it only I guess you guys are focused on evm with FH evm but is there also other like VMS that could could be supported with or is is are you also working on that or you know how how do we have to think about that yeah I think both of us both of us came from a very practical standpoint here and you know when we started thinking about about Phoenix it was clear to us that we want to make f as simple as possible to on board developer so so we had a couple of of of decisions the first one was that we want to Target

the Ethereal Community uh and solidity based we don't want developers to actually need to learn a new cryptographic uh they don't have to be cryptographic at all to to use it and we don't want them to learn a new programming language so uh the decision to go with an evm like FH evm like solution was was the first one that that was made um I I I I want to emphasize that um FHA enables you to do computation on data while it's encrypted I know guy gu Z talked about that earlier uh while ZK enables you to verify uh uh data so I don't think there I mean there not so

much similarities in what we're offering in comparison to the ZK evm I think that the usage of the FH evm is is is quite simple it there is an additional library that developers can utilize when they want to encrypt data on the blockchain and once they encrypt this data using a function for encryption uh that data is encrypted on chain and it enables to do computation on this data while it is encrypted on the blockchain and that is I would say quite easy from a developer standpoint whether it is to write a new uh contract or potentially to import existing smart contracts into Phoenix

that the transition itself is not very complex I think where the complexity starts to come is actually it's a it's a it's a mindset that that needs to happen because now you need to actually think about designing your solution with confidentiality in mind so it's not about okay let's just encrypt this data and and leave it there you know how do I prevent others from figuring out this data through other means so if you extract some assets from a pool it's not enough that this asset is encrypted you actually need to make sure that the pool itself is encrypted because otherwise people can subtract

and and figure out how much uh you've pulled so I think they're more of a design related questions but in terms of the actual building blocks it's it's it's fairly easy and and that's really where things become interesting so I my thinking about this as a v in the last two months in in the beginning I said that I view fhvm and zkm is very similar but I think the more the more we dig into it the more neiz they're basically incompatible so zkm is really about writing The evm Interpreter in a way that's amable to provve in that you know

some evm execution ran correctly if you're a developer you don't if like you're a developer that's running on on a ZK VM you just write a plain regular solidity contract you don't actually use a ZK but whoever needs to design the ZK evm circuit that is a very very very hard task to do um where is with as as guy uh and guys is saying like with FH like we are trying to extend um essentially library or a tool for like solidity developers and and to question there's no reason needs just be

for solidity like you we can support everything but like we we focus on etherum because that's the biggest ecosystem and we're the biggest te um so it's in in some ways it's closer to like you know libraries like safe math from like open Zeppelin and like those like initial libraries where you could actually just write like Fester more secure code for your smart contracts so F about to use those liabilities and solidities to write private computation code but in a very very simple way like it's as easy as using something like safe map so it's it's really not compartible it's more compartible to maybe like you know uh I think uh aex like no language or other DSL domain

specific languages that that that other companies that are building uh ZK trying to build ZK uh private smart contracts Solutions are doing but here is actually where FH really Shin I mean first of all F can do stuff that ZK private compute can because ZK as we said is our meant for private compute but more importantly because ZK is does meant for private compute then now you have to learn a new language you have to start thinking what computations need to happen with the client side what competation need to happen on the smart contract basically the back and side where is with fhvm like with

Phoenix it's just right your smart contract in solidity here's a library to do like FH computations and Bam that's all you need you don't need to to to to to know or understand anything else um with the exception of what GTI said which is not a technical component it's a philosophical component like you need to think about you have encrypted data if at some point you want to decrypt information or reval information well maybe that leaks more than than Unity so you you need to think about that so yeah it's it's it's very very different in my opinion okay okay so may maybe to summarize how how I understood this now I guess ZK VM you're essentially as a developer just building like a normal

application still right you're not doing any private computation with dkbm essentially right so right that's one then domain specific language right you can do like a ZK and ride in another language which obviously has the downsides of that and then sort of Phoenix or fhbm allows you to write the same language plus like these new use cases so so I guess is that correct like on the ey level like as a summary sort of yes yes 100% cool awesome and and so then yeah I guess what what becomes interesting you already mentioned like sort of the poker example um you know what what sort of like other use cases are you in

interested in or like what what what should people get inspiration from for for this or what is already being built like anything really I'm curious to hear what your what's happening on on Phoenix already or what you want to see actually yeah May I'll just start by saying that before we talk about the specific use case um you know I'm I'm more of an outsider you know in in this space you know coming from the corporate world and and I have to say that you know when I look at the blockchain from the outside it seems to me that you know the fact that there is basically zero confidentiality I know some people see

it as as a feature but for me it's a significant limitation I I just feel that we're you know if we we want to we're all here because we we believe in in blockchain and we want to see it being massively adopted but I feel like we're in this 10 or 20% and we have this 70% of a gap that that still needs to be resolved and a key component of it is Data confidentiality I just don't see how blockchain can ever become like mainstream and and very very successful without any data confidentiality for sure there is like no chance that any corporates or financial institutes or government entities will use public blockchain without data confidentiality uh and that is actually why we we believe that this is not you

know FHA versus ZK versus te but you know we're all here for the same goal of introducing and making the blockchain better um we have a couple of of of use cases that that we typically talk about but I think the belief is that data confidentiality needs to be an underlying capability and and once you make it easy to use it will become very very common similarly to the way that you operate today in the traditional world where you know everything out there is assumed to be protected it may not be but you know it's assumed to be protected so just putting it out there um the goal here is not so much to

introduce confidentiality for the you know it's important to protect users confidentiality but what we actually believe is that by enabling this new capability it unlocks new applications that you couldn't do before and The Game of onchain onchain Poker is is is a good one because yeah people are like figuring out some kind of solutions for onchain gaming but they're not Tru ideal and once we introduce F or whatever type of solutions that out there you can start using it the right way um so on gaming is one um I would say uh voting is another really clear example of how

do you do voting or Dow votings uh without encryption it's it's it's quite complex now we can actually uh do that with FH um seal bit options gu let you you know talk about a few of the use cases as well yes I mean but just to drive your first point home like look I mean we're F we're not there yet and we're quite far out but at the end of the day if like people are dreaming about the converence of like AI in crypto well how are you going to have like something like a distributed sh GP if everyone can see like if I can see your prompt you can see my prompts and we can actually have like models with

like private data like like that's not going to happen so like we have to solve that call problem and then we can start thinking about like these really really cool like uh AI crypto Revolution and many things like that um but you know if you want to be more grounded to what the technology can do today and what people are looking for today then onch gaming voting or a couple but I think think you know we can't ignore the fact that there's still a lot of interest and and around Define and and most ecosystems most like e like infrastructure and protocols ecosystem have started by bringing a large inflow of users that come for the initial defi

application and so the question is what are the interesting defi related applications that can be done on Phoenix that cannot be done anywh events at least lot is efficiency one of them relates to obviously muv so you know you you you mentioned that it been very be like behind the scene talks and obviously the talk of the day and Justin Drake talks a lot about it like f has really lot of potential to like introduce Solutions and the proposer Builder separation and block building like flow in different places of the pipeline probably the lowest sending fruit is around the the sil bid auctions so uh auctions don't have to be done like on on on

every block so then like you know FH is efficiency rest of an issue like you can you can run an option and choose like a sequence Trail for for an Epoch for like you know a specified number of blocks and that can run efficiently enough and you can do that much more efficiently with FH then with the other technology and without FH then obviously you don't you don't get sealed with auctions which are far far superior than public auctions like that is a wellknown game here effect so that is like real money on the table like very plainly right that is a use case that uh Shar sequences and the centralized sequences

and and pretty much all the ecosystems are looking into right now and that is something that's very complet Phoenix can solve pretty much out of the box immediately so that's something I we looking into and there's a lot of variations about that another use case that I'm actually very very interested in it's a two building box use case but but the underly use case is actually doing something like like Thor chain like like Thor uh Swap and the lending um there's a lot of demand for doing cross chain defi in a decentralized manner like we've seen that with Tor chain but imagine that you can do it with it and then have all of the building blocks that people have done

today like all of the defi application that people have built on the the ecosystem imagine you can take them copy paste them and use them on an ecosystem like Phoenix but the underlying assets um are not just erc20 and they're not just Rob Bitcoin but they're actually native Bitcoin and Native Sal and all that complete cross chain more like how Thor chain does that and the way you can do that is because with Phoenix like a very simple use case is you can create these micro Bridges we call the micro Bridges because like you can actually have a vault inside of a contract you can have like a private key of a Bitcoin

Vault encrypted inside of a smart contract and then people can like deposit and withdraw um like native Bitcoin and use that um in a decentralized fashion inside of like Unis Swap and and other de application so that is something that we really really want to focus on because or hopefully in K developer to focus on because we think there's a huge Market there right yeah that that seems super interesting I guess it's like Tor chain is is using some like threshold signature scheme word that validators share this key and can you explain how how this is different again maybe yes so in Phoenix like instead of

having like a a threshold key what you will do you will take like just a key or generate a key but it's in you generate it with in FH so then the key is always encrypted and you just store it in a contract State like you have a Bitcoin private key you don't have to split it you just take it as even crypted you put it on a on the on the solidity smart contract in the state and you literally have an operation say like sign and in the contract you do an encrypted sign and then you only decrypt the signature you never decrypt the key so the key is always encrypted and now you have a smart contract that is actually can act as a you know as as as a wallet um there

is an NPC assumption as again as well in the sense that the ultimate FH decryption key is split across the network um and so if you ever are able to reconstruct that key then you can decre the the private key in the contract uh so it's not as much as it is about the better security model although we can argue specifics why it is more secure but uh that's too too many details I think the point is programmability like in to chain like the team had to spend a lot of time that building an NPC Port of course to split the key and then build you know a Unis

swap kind of like a variant on top of it that uses it and then like build a lending protocol and each one of those takes to ke but with Phoenix one Ser that building block where you can keep an encrypted key inside of the contract like a Bitcoin in Crypt p and people can send to that address the money deposit and then that contract can sign transactions um a can basically sign uh Bitcoin transactions then that's all you need um from a from like that's all the different logic that you really need then someone else can come in and come and just take like Unis swap f it maybe

it's of themselves full KCK and then combine like take those like like like those contracts that I told you those like micro Bri contracts and put them as assets into their unisoft clone into their other clone into whatever so the programability of using now crossan assets becomes like completely easy and solved and all the def5 developers don't actually have to deal with it once that building block is still as opposed to something like thr ch right right right yeah super super interesting and and these so these micro Bridges someone would have to build like some something there like some sort of how how do I have to imagine it I guess

because in this NPC world you have to build like some sort of Light have to have the light client and and the nodes the NPC noes have to run it is is this similar here or you just need like some sort of code more or less so we need to take care of the TR Network that's like a big Bas in of the Phenix protocol that's always going to be there but beyond that FH is much simpler than then it's not simp like the the the math is harder actually than MPC but but running it and and by the way that's one of the reason since I became bullish I'm an NPC person like most of my research is on NPC but like I'm more bullish about FH because FH simplifies from an engineering perspective and a developer perspective a lot of the stuff that NPC

doesn't so from a developer perspective like once we have like once you have fhvm like the library and you have a tral network and we're building those right like some of uses like Zas underline libraries but like we're building like everything on the sides and on top and and and improving that and all that and once you have those then all the developer has to do is literally take a solidity contract that will have an API to generate a key an encryption key in the contract right like the in like through the liary they will be able to sign transactions within the contract um within the solidity contract from the liary uh without ever ever decrypting the underlying pivate

key and they won't have to worry about pretty much anything else so I'm not sure if that answers the question but it's like really once have the building blocks it's all dead and simplified yeah and and I would say this is really the goal which is to build a very strong set of capabilities that then enables developers to take and build the like so Tor chain and and other Solutions without having the need to spend a year or a year and a half to build your own protocol uh with with a lot of cryptographic complexities because it's all pretty much baked in the underlying Phoenix infrastructure makes sense thanks thanks so much for expanding there I think um

we we talked a lot about I think one question that that I wanted to address and we also talked behind the scenes already before a little bit about it but I guess you know privacy and blockchain we have like this sort of uh relationship where on the one hand you you want it obviously like so institutions can use it um but then you have this other side essentially where like having private transactions and private um things can also mean that you know not even the government or someone can look into it and and maybe you have like compliance issues right so like one big example there was like tornado cash and sort of how how that impacted the ethereum like landscape uh through for example also flashboards but but in many

in many ways um yeah I guess the way I understand it you can build like these applications on on so so I was wondering you know how what's your approach like sort of compliance and confidentiality is there any any thoughts you guys have and or how are you building uh towards I guess Mak it possible for also governments to be uh involved in in this sort of Technology yeah that question came a lot you know in our early days and you know people you know they heard about tornado kit um internado case what happened was that the the the identity of the users was actually masked uh which is different

than what we are offering with Phoenix at Phoenix uh it is the content of the transaction that is encrypted but actually we're not masking the identity of the the the users who are doing the transaction and this is a significant uh difference um so if if the government has an issue they would be able to identify who the person is similar to to other blockchains that's that's no different but the content of the transaction itself is encrypted now there is definitely interest we've heard it from multiple entities about applications uh such as you know dark pools Etc and we believe that they can be resolved in a compliant matter so

have a identity which is De centralized identity cryptodon chain that goes through a compliance process and then being used in a comparison with uh with a pool so that's really it's a significant difference there is no plan here to offer capabilities similar to like tornado cache on top of Phoenix I'm going to give a slightly different version if I made this is not the the new Cas that we're focused on and this is not something I we focus on out of the box but like you you can even as it Curr stands you can use FH to build anonymity as well like there there are ways to do it and if F and

developers want to do it they can do it even if we're not going to be the one who focusing on but it is possible to build it on top of Phoenix if people choose uh and the other angle is that I do think that like even if people choose to build anonymity using FH um which is more key to tornado Cas but it works differently but still gives similar results the benefit compared to tornado cash is that FH like NPC like trusted execution environments they are completely programmable so if we go back to this idea that ZK has a lot of limitations at the end of the day when we trying to do like like private computations especially in the multier

environment FH doesn't suffer from the dra so you could techically and developers can come in and programing like a a completely privacy preserving usdc variant that also has like selective disclosures like on an agregate level like maybe like maybe like there's like a fraen and encrypted for detection algorithm running inside a smart contract that only if there's like a really really suspicious alert with a more than 90% probability then it sends that to some authorized third party so like you can actually do all of those things with Phoenix I don't know that we

will be focusing around it and definitely I think but I am kind of curious what's going to happen when developers come in and actually try to do the effect because I think then the crypto ecosystem will have to face a very difficult question like like are we willing as a as an eting to have a system like that or does that completely go against the crypto EAS I don't think I want to be the one to answer that I hope other people will be will put themselves in the position to to answer that but it's absolutely technically possible to do with FH right I think yeah makes perfect sense I do think that question is being

like sort of shifted around because I guess in the end no one really wants to deal with that or can even maybe because it's like pretty hard to be in touch with all governments and like sort of focus on that because the end you're you're trying to build technology so I think that makes a lot of sense yeah um I think we covered a lot of ground um running close close an hour I I wanted to like kind of end it by talking a bit about the sort of road map of of Phoenix and you know where where you guys are at in terms of the the launch of of the L2 or um you know test that yeah please let let me know like we're recording this year in January 8th so yeah what's the

plan for next few months yeah so um we have our devet already up and running the Le it's a limited access devet it's been up and running in the last uh couple of months uh test net is coming in q1 um and then goal for mayet is uh early 2025 um I will say that you know people are definitely encouraged to come and sign for the test net once it's available um we're going to be in East Denver uh looking forward to seeing everybody uh we're doing an encryption date uh during during that period so uh it's going to be a very interesting events we have a great line of speakers from uh all over and it's going to focus not just about FH so NPC ZK uh trusted

execution environment so again encouraging people to to join to that but test net q1 and then goal for mainnet is early 2025 awesome sounds sounds like a realistic timeline Maybe for for change it's not like super close so so I wish you the best to to like be able to to get those milestones and yeah um yeah definitely if you guys go to Denver that are listening try to check out the encryption day um I think yeah that's that's it from Mayan thanks so much guy and guy for coming on it's a really um insightful episode I hope people picked up something on and um we'll we'll link to the yeah website and and some

other material in the show notes thank you very much thanks a lot Felix