Episode link:
https://www.citizencosmos.space/shadeprotocol

Episode name:
Carter Woetzel, privacy, trust & silk.

In this episode, Citizen Cosmos speaks to Carter Woetzel, co-founder of Shade Protocol, built on the Secret Network. Carter delves into his book, Building Confidence in Blockchain, what inspired him to write it and why he feels we should read it. They discuss the concept of trust in Blockchain and how we can solve the trust dilemma. Citizen Cosmos and Carter debate whether regulators are actually needed and whether what they actually do that is worthwhile. Carter discusses some of the projects being built on Shade Protocol, like Silk, a privacy protecting stable coin for Cosmos. As always, Citizen Cosmos ends off with the Blitz and gets Carter to speak to his motivations and projects that he has great respect for.

Citizen Cosmos
Good space-time, y'all. In this episode of The Citizen Cosmos podcast, I speak with Carter Woetzel, the chief researcher of Shade Protocol, a privacy focused Defi project built with Cosmos SDK on top of the Secret network. Along with Carter, we discuss privacy on blockchains and smart contracts, Homomorphic encryption, auditability, and trust. We also talked about simplifying gas, non-traditional stablecoins, futuristic tokens and our perception of time in blockchains.

Carter
Crypto’s at the crossroads of all those things. So many times, in this space we lose track of why the technology is valuable. And so why is decentralization so important? What is the problem that blockchain is ultimately solving?

Citizen Cosmos
Lets gets rid of everybody and go into chaos and destruction! That's why we need privacy. There is no difference to the model of government or to the model of the Mafiosi.

Carter
How much security do you need? How much privacy do you need? But if push comes to shove, it's not actually sustainable. It's harsh to hear. We live in a space built on speculation. The capital is here to speculate.

Citizen Cosmos
Before we rocket off into our next episode. Here are some news from the sponsor of this episode at the Cyber Congress DAO, the foundation has started its delegation's policy for validators on the Bostrom Blockchain, and the Space Pussy Network was launched with 96% of its supply to be dropped to various Cosmos ecosystem chains. Hi, everybody. Welcome to a new episode of the Citizen Cosmos podcast.

Citizen Cosmos
And today with me is Carter from Shade Protocol. And if you guys don't know about Shade Protocol or Carter, well, we're going to hear all about it today from Carter. Carter, Hi, welcome to the show.

Carter
Thank you so much for having me on. It's a huge, huge fan of the podcast and look forward to being able to tell the world a little about Shade Protocol and what we have on the way.

Citizen Cosmos
Yay! Well, first thing is first, do you want to tell us a little bit about what you do for Shade Protocol? How did you get to do that for Shade Protocol and anything else you want to add about your own story with Shade Protocol?

Carter
Yeah, absolutely. So, my journey started in 2017. I had a family member in tradfi that introduced me to cryptocurrency and blockchain, and I started reading as many books as I could on the space, really dove into Ethereum and Bitcoin and the ethos behind it. And as I was reading all these books that were out there, I realized a lot of the literature was not well-written.

Carter
It was either way too focused on the tech or way too focused on the investment side, and there wasn't really anything that was somewhere in the middle. And so I spent three years writing a book called, Building Confidence and Blockchain. You can find it on Amazon or Barnes and Noble. And so, took three years of really trying to create a good piece of literature that I wish I could have read when I first started in the space. During that three years, kind of looked around the space and I said, Where's the privacy?

Carter
Right? These are these totally transparent blockchains. How are we going to be able to integrate back into our everyday lives? How can we have commerce and competition, if we don't have privacy like we already do in Web 2? So, I tried to find like where people are building privacy, and that's what I found Secret network in the Cosmos ecosystem.

Carter
I actually helped write the Secret Network White Paper, so I have a background in finance and computer science. Always loved the economic side of things. And of course, crypto's at the crossroads of all those things. So I helped write The Secret Network White Paper, was super plugged in with the protocol and development team and eventually spun up a validator with the other co-founder, Mohamed Petla.

Carter
We actually validate on multiple different Cosmos chains, like Osmosis, Secret Network, Juno, there's a couple of other ones too, but those are like our biggest ones. But we didn't really want to settle just for being infrastructure and just being like a white paper and documentation contributor. We actually wanted to go make apps that could change the world.

Carter
We wanted to take advantage of this tech stack. That's what Shade Protocol is. We want to bring global connectivity to privacy preserving Defi. We're talking about privacy preserving stablecoins, privacy preserving dex, privacy preserving lending, privacy preserving staking derivatives. Fundamentally, we believe that if we want to onboard institutions into these financial applications, there has to be privacy on the smart contract level.

Carter
We have to protect consumers. The example I like to give is if I'm running a Web 3 company and I want to pay my employees and I did it on Ethereum, I'm like, everyone can see like how much each person is getting or if I'm closing a deal with a contractor, they can see all of those amounts. Or if I'm an institution, I take a massive leveraged position on MakerDao.

Carter
Everyone knows precisely what my liquidation price point is, and so there's a lot of risk to transparency. Now, on the flip side, you also have to have auditability, and that's also what Secret Network offers as well, and we can dive into that. So anyways, long and short lead researcher, we closed a $5 million private raise at the end of 2021 to build out the full suite of privacy preserving defi products.

Citizen Cosmos
We'll talk Shade Protocol for sure, but I want to get to know more about use first because I like this. This is a cool story, right? This is the kind of stories I like. I'm going to be honest with you, I think a lot of the founders of crypto projects, has been noticed by myself personally, that when the person has been through the journey, you know, and I think it's not a discovery I'm making here, I think is just one on one logic right, they’re kind of more aligned with what is really going on.

Citizen Cosmos
And that's why I always try to ask for the story and to try to understand, where is the guest coming from and what of their involvement before that? But you mentioned the book and I also have it written out here. I'm going to be honest, I haven't read it. I don't know if any of our listeners have. Can you talk a little bit about it?

Citizen Cosmos
Maybe shill it a little bit and maybe we will for sure include that in the description notes, like everything else you're going to mention. But just to say that I'm sure that it will arouse interest. So if you could shill it a little bit, I would love to hear about the book.

Carter
Sure. It's funny because I really don't shill it to like… the books doing really well, actually organically, which is fun.

Citizen Cosmos
I understand.

Carter
But I guess what I'll say is the first half of the book is really like the simplest explanation we can get for blockchain while still giving people a nuanced appreciation for the tech. So my mom and dad have been able to read it and they're like this, you know, when I read it, it made sense and I was with you and we try to use simplified analogies and what I really like to laser in on is the attributes of blockchain that make it powerful.

Carter
So many times, in this space we lose track of why the technology is valuable. And so why is decentralization so important? What is the problem that blockchain is ultimately solving?

Citizen Cosmos
Why? Why? I'm going to put you on the spot, man. I want to know the answer.

Carter
The answer is trust. If you go back and read. So David Chaum was one of the original professors that wrote about blockchain, even before Satoshi, way back in the 1970s, 1980s. And the concept was like, can you make a system where two pieces of technology can somehow have a language, a system of communication where we can trust each other without needing a third-party intermediary?

Carter
Can we have truly peer to peer communications? And so right now, in centralized organizations, we're forced to trust a counterparty. FTX is a great example of this. We give our funds up to someone else and trust that they have our best interests in mind. We have to trust a human. But what if, instead of trusting humans, we could trust cryptography?

Carter
We can trust networks and protocols. These things are objective. These things are programmatic, they're automated. And so the irony of blockchain technology is its goal is, that it's trustless trust. You can trust mathematics; you can trust these economic systems. But that's the problem with adoption. Fundamentally, to get the technology adopted, people have to trust it. And I find that the most ironic thing, the technology is there to solve the trust problem, but people are still learning to trust it.

Citizen Cosmos
I love this, because this is a huge topic of our podcast, of course, and I think a good third of our episodes in one way or another are dedicated to discuss those things. And I'm absolutely glad to have you as an author of a book about those things on and to hear your opinion. One thing I will ask and you know, I love doing this with questions is what's your opinion?

Citizen Cosmos
You know, I mean, you were talking about trust and, you know, blockchain has enabled us a trustless technology. I love what you said, a language to me that was like music to my ears when you said language, because to me that is exactly how I see that. But to me, one of the biggest things about trust and blockchain is that people still forget, that there is a blockchain in between the people, and blockchain is not exactly P2P technology.

Citizen Cosmos
P2P is when I me and you decide on something without anything in the middle. Blockchain is the man in the middle, a decentralized man, but it's the man in the middle. And this is a question and I guess like a little bit into privacy here, but feel free to answer as you wish, of course. How do we as normal users, as users who are not able to read code or maybe we all are able to record, I don't know.

Citizen Cosmos
Depends on the user. How do we learn to trust blockchains? I mean, it's a kind of a paradox, right? It's a trustless technology, but we need to trust blockchains. So, what do we do in this case? What do we do here?

Carter
So I have an answer that most people don't like, and the answer is that it takes time. All of these systems right now are experiments, even Bitcoin. It's been, what, roughly 14 years at this point. In the time span of humanity, 14 years is not a long time. Ethereum's been around for like six years. The crypto space.

Carter
our sense of time is so warped because the technology is iterating so quickly and builders are sprinting ahead and trying to get to this end state. But fundamentally what I believe will happen is we're going to have a subset of protocols that are going to be here three decades from now. They're going to be here for five decades from now.

Carter
And every single year that ticks by is proof to the people that can't read code that like, hey, a lot of people are using this. It works really well. It's fast, it's fluid. These apps make sense. This makes my life easier. I feel more empowered. So I think that's the hard answer. This stuff is going to have to just take time to prove itself and everyone trying to jump in right now, you're still an experimenter.

Carter
It's interacting with these new apps. The UI UX is not super simple compared to something like a Venmo like experience. And I think that it's just the tech on top of just like time improving. I think we'll also see professionalism in the space also continue to increase. So like the first people that jumped in in the last five, six years with the ICO boom, there's lots of fast money people are spreading through trying to create products.

Carter
There's a lot of flash in the pan. How do we attract users? But the real sign of really solid products is the maturation tied to the user experience, such that like when your mom and dad come in and use it, it's not like, you know what the freak is these eight different buttons. This is confusing. And I think like the bridging experience in crypto will continue to improve the mobile experience.

Carter
We're still so early on the mobile side of things. With crypto. There's such a long ways to go on that front compared to Web 2. So in summary, why do people not trust it? Because we haven't really the key variables is that the tech is a proven and the UI UX doesn't tell people that they're safe. And I think both of those things will improve with time.

Citizen Cosmos
For sure. Time heals everything, even if you're heartbroken. I'm joking. Of course, heart broken people and this was a side joke. Well, you didn't mention it, but you were like, hinting towards adoption. And I'm going to again, go like this for everybody who's not seen. I'm just being cheeky, right, with Carter and asking him questions from the side.

Citizen Cosmos
You kind of talked about adoption. You talk about mom and dad and, you know, two things come to my mind when I hear about those things. And one is, well, first of all, our mothers and fathers, you know, a lot of people are like, oh, crypto is not adopted because my mom can't use it. Jesus people, your grandparents, I’m not talking about you specifically, but in general have used punch cards to code.

Citizen Cosmos
Believe me, what we see now is much more UI friendly than what it was before. Second thing, which I do, and this is the question, about adoption in your opinion, because I hear different opinions in my personal opinion, adoption has happened. Everybody knows what a Bitcoin is, literally, not just in Europe, not just in America. You go to Latin America, to Africa, to I've travelled, I've asked people, to Asia.

Citizen Cosmos
People know what it is. The usage hasn't happened, adoption, the people, okay, it exists. We might not trust it for the reasons you just said. Right. But that has happened. And my question is, do you think adoption has happened in your opinion or do you think adoption is only when everybody will use it? And that's what you will say.

Citizen Cosmos
Adoption is when.

Carter
I joined the space, I had a vision that I would be able to go to any coffee shop and buy coffee with crypto. I had a vision that these smart contracts would fundamentally replace services in the finance sector, and I think to date a large percentage of crypto has purely been speculation. They’re vehicles for speculation. And to be honest, the reason Bitcoin is known so well is not because someone came to me and said, Hey dude, you got to use this Bitcoin thing.

Carter
It's way easier to like pay for your rent or buy groceries. That's not why we discovered the tech. Most people, they discovered the tech because they heard, you hear that bitcoin went to 22 K, did you hear Bitcoin went to 40 K and until people are discovering the technology because it actually impacts their lives beyond just being a vehicle for financial speculation.

Carter
Until we've reached that point, we haven't achieved adoption. And the reason I believe we haven’t achieved adoption and there's a couple of things. One is the gas user experience, the concept of like in order to pull off a transaction on certain like blockchain, in order to use an app on some other blockchain, I have to have the underlying gas token, right?

Carter
I think that's like so much friction from most normal people. That problem has to get solved and I think that’s problem number one, a lot of these apps the gas. Problem number two is privacy. There is a reason crypto hasn’t bridged back to commerce because, you need some form of auditable privacy. I should be able to go to a cashier, buy a hot dog with crypto, and the cashier should be able to check a block explorer and be like, I know how much money that person has in their crypto wallet.

Carter
That's a security risk. That's a real world, tangible security risk. As a business, if I'm engaging in lending on a blockchain or those payments I was talking earlier, I don't want competitors to be able to snoop on block explorer data and be like, Ooh, he had 40 customers today at this time of day, they bought the product and this is how much they spent.

Carter
Total transparency. It's not like commerce. Commerce needs a degree of privacy. Simultaneously, you can't have a black box of privacy. You can't have so much privacy that you're incapable of being audited by a government. Total privacy can lead to nefarious things, right, in terms of how companies use it, like money laundering. And those are the things that these regulators are rightfully concerned about.

Carter
I believe the end game in order to achieve adoption would be a world where I'm on some blockchain, I have encrypted transactions, encrypted app interactions, but my auditor comes to me, says, hey, I need to look at your transaction history. I can hand them something like a viewing key. They can decrypt. They can see all of my stuff, but my neighbour can't see all of my transactions.

Carter
My neighbour can't see my crypto balances.

Citizen Cosmos
I'm sorry to cut you out there, but I want to like get into that. This is a good conversation. I like it. That wouldn't stop the auditor from sharing that information with anyone that he wants to. Okay. That would be and not following the code of conduct, but if he wants to, he can share it. Right.

Carter
There's truth to this. And so, this is where there's a really interesting trade-off. So I always said privacy and sovereignty are intimately intertwined. And what I mean by that is until you hand over the keys to your data, you're in full control, right? Because it's all encrypted. In an optimal world, you could hand over a viewing key that expires in 10 minutes, Right?

Carter
They have 10 minutes where they can view the data, or maybe they only have access to a certain subset of the data. But you are correct, at the point that you've given someone the ability to view your data. They could store it, they could be nefarious with it. But what I do know is ultimately, we have to try to find a technology where people have the sovereignty to comply.

Carter
They should choose to comply, probably. That's up to the users, up to the citizens that want to be compliant with the governments that they benefit from, the countries that they're a part of. And we need to give regulators a path to trust the users and for users to trust the regulators. And I think we at least need to get the tools in place to do it. Fundamentally, as you've pointed out, whenever you relinquish control to someone else, custody of anything, you're trusting that actor.

Carter
And it's a fair observation.

Citizen Cosmos
I really like your comment of it's by choice. Privacy is a choice. And if I choose to hand over my viewing key or any other, so to speak key, to anyone, of course, I know that I'm making the choice. I like that answer. But you mentioned the regulators, I mean again comes to mind. But isn't it kind of easier to get rid of the regulators?

Citizen Cosmos
I mean, the last 5000 years I really have not heard one person stand up and say, Hooray to the regulators, they really did a good job. I love my government, really love them. And, you know, it's kind of never happened. I mean, it's a double-edged sword for a lot of people. Privacy, they straight away go into the extreme of, okay, if I'm private, that means there is no regulator, there’s no government is pure, I don't know, chaos, destruction.

Citizen Cosmos
I'm not saying anarchism on purpose because that's got nothing to do with chaos and destruction. But on the other hand, I guess what you're talking about, and correct me if I'm wrong, isn't that you're talking about, okay, we need privacy, we need privacy by choice. And if somebody wants to be private, they should be private. I mean, I'm kind of the first person to be honest with you.

Citizen Cosmos
That gets rid of everybody, go into chaos and destruction. That's why we need privacy. But I guess you're more referring to the privacy by choice, not about having privacy and hiding everything from anybody. So it's just but okay, we need it because it's our right.

Carter
The example I like to give, so Secret Network is actually really cleverly named. That's the network that Shade Protocol is built on top of. Because if you think about a secret, a secret as a piece of information that only a subset of people know about, that you've let them in on that information. A secret implies sovereignty. You chose to potentially share a secret with someone and you didn’t share it with the whole world, you shared it with one or two other people.

Carter
And ultimately you had the sovereignty. It's not like someone forced you to share the secret because only you know the secret. They won’t know that you can share it in the first place. And that's kind of what I think privacy should aspire towards. Sovereignty for the user. A path to share and an education around the risks of sharing.

Carter
Now, on the regulatory front, your comment on like when have regulators, I guess in terms what is the purpose of a regulator? I would say the purpose of a regulator is to put in protections and guardrails that are ultimately supposed to protect consumers. And consumers don't necessarily have the time in their life to know the risks that they're interacting with.

Carter
That's the original goal of a regulator. That's at its purest heart, it's supposed to be protections for people that don't know they need to be protected. Now, how often is that actually instantiated properly? How often is regulation done in a holistic and productive fashion? Very, very rare. But I do believe that we should build tools, that if that type of regulator does come into fruition, that people have a path to integrate with that.

Citizen Cosmos
Definitely, definitely Carter. I'm smiling because, well, what you're describing is the work, how the Mafia works. They protect you for money. You know, it's true. There is no difference. A lot of people don't think about it, but there is no difference to the model of government or to the model of the Mafiosi, right. The mafia says, Oh, you need protection, so give us money, we'll protect you.

Citizen Cosmos
The only difference is that the Mafia doesn't really protect from itself. Mafia protects from everybody and itself. The government protects only from itself. And not somebody was like, Give us our money. If you don't give us money, we’re going to put you in prison. Which we build a using your money, by the way. And if you don't give it to us, we'll put you there. First, we’ll beat the shit out of you, and then put you in the prison.

Citizen Cosmos
And that's all of the countries, developed, non-developed, you know, unfortunately. But that's not the point. I just wanted to hear your opinion there and to understand like how you define privacy, because that's very important to me to understand that. You mentioned the Secret Network, and I want to ask you like I guess, let's go into the technology a bit here that you guys use.

Citizen Cosmos
How do, how does the user and I guess this is coming back to the question I had previously, knows that what he's doing on a blockchain is private and not necessarily Shade Protocol. But of course, please do explain how it works with you guys. But Monero or anything else. How do I know if I don't? I don't want to trust the other people who check the code.

Citizen Cosmos
I want to know that what I'm doing is private. How can I do that? Is there such a way or I have to be able to audit the code?

Carter
You don't have to be able to code. I think the simplest example is like for Secret Network. You go to a block explorer, you can look at your transaction you just sent and in the body of the message, you'll see a bunch of mumbo jumbo, essentially the body of the message that holds like, Hey, where did they send it to?

Carter
How much was sent that's encrypted and anyone can go on the block explorer and look at other people's transaction is be like, I don't know what's going on there. Right. There's still some block metadata, like the block number, timestamps. There are things that exist as it's a network and it has to be like shared information. But at the end of the day, you can verify for yourself that this data is encrypted and you don't have to look at the code to be able to acknowledge and see that.

Carter
Now in order to trust that the network itself and the nodes on the network can't sneak peak or somehow have like unpermissioned access to data, that takes a deeper level of skill. That does take like a coder to like truly, because it's the rules of the game are clearly outlined. But not everyone can read the rules, right?

Carter
Being able to read a block explorer is kind of watching the game and seeing the outcome, but you don't know the rules that defined the game, if that makes sense. So you can get halfway there, just not with as much nuance and depth as if you could actually read the rules themselves.

Citizen Cosmos
I absolutely agree. Again, I guess this is going to be the same question, but I'm going to go to another one. In your opinion, are the privacy sort of field or the privacy readiness? I don't know if I'm putting it correctly, of course. I'm probably not in terms of English, but how is it looking right now? I mean, the blockchain?

Citizen Cosmos
And to what extent are blockchains private today? To what extent a user can be sure that what he's doing is private? I mean, you already said that it's not. But there is you, there is Monero, there is other projects out there. How safe is a normal, how am I an average user? And you know how often do we use privacy instead of thinking we use privacy?

Carter
It's pretty bad out there. I've talked with folks from Chainalysis. I've talked with employees from Chainalysis behind closed doors. If you're on a public blockchain, you can't hide. It's you're in a desert perfectly flat. You can't dig a hole really. You can't fly away, like it's all there transparent. You're competing against extremely intelligent programming that draws correlation between exchanges and wallets and app interactions.

Carter
I always like to tell people, like every time you make a Google search, you're up against incredible artificial intelligence. It's a completely unfair fight. People don't even know. It's not an even playing field with what you're up against and totally transparent blockchains are similar in that sense. It's all there. You're naked. And first off, I want to say that I'm a firm believer in supporting all the different types of privacy.

Carter
It's going to be a spectrum, eventually. It's going to be a full spectrum all the way from Black Box to like maybe less secure, but more compliant. There's going to be a full range that emerges. And for now, I support privacy in all of its forms because right now we just don't have it in blockchain and crypto. That's my starting point.

Carter
It's like I support it. There's going to be trade-offs, there's going to be a spectrum. What's unique about Secret Network is that it's encryption on the smart contract layer, so things like Monero and Zcash is purely transactional privacy. That means A to B is obfuscated. With Secret Network, It's not just transactional privacy, it's also app interactions. So if I go and swap the metadata tied to trading from A to B, if I did that on Uniswap, Chainalysis could look at that and be like, mm, I can see all the parties interacting with this pool.

Carter
I can draw correlations, something like on Shade Protocol, a Shade Swap, your trades are protected, your lending positions are encrypted, your stablecoin transactions are encrypted. Right? So that's the fundamental difference why Secret Network is special is back in 2016, a group from MIT set out to say, can we do more than just transactional privacy? And we went on miannet in 2020 and we've been live for two years and really no other network that I've seen has live privacy preserving smart contracts.

Carter
It's been two years. We're still kind of waiting to see that. Secret Network doesn’t claim to be the king of privacy in terms of transactional privacy? I trust Monero's privacy more, transactionaly. But in terms of proof of concept and pushing the boundaries of what I call functional privacy. Secret Network really is a trailblazer, in my opinion.

Citizen Cosmos
What about Dero? I know they're not in the mainnet yet, but I didn't believe they were going to build it. Sorry to the Dero folks out there, but I've been watching that for four years and I was like, Wow, they actually really did manage to build something. I was like, Oh my God, it works.

Carter
Yeah. So Dero is an interesting one because so Secret Network uses hardware level encryption for essentially all the nodes on a network are running something called secure enclaves. They're all essentially the encryption happens, the decryption happens inside this enclave, and the nodes themselves can't even look inside of this hardware level environment. So the trust assumption that Secret Network makes is tied to hardware.

Carter
And Secret Network’s actually migrating away from hardware level encryption and it's going to be heading more towards a combination of fully homomorphic encryption with hardware level encryption. We actually want to combine the best of both worlds because they both have their own trusted option. And to my knowledge, with Dero, I believe they've achieved Homomorphic encryption, but not fully Homomorphic encryption.

Carter
And I have to rereview the full depth of the difference between fully Homomorphic versus Homomorphic, but we'll just say that fully Homomorphic encryption is the Holy Grail, if you can achieve that end state. It's really hard to get there with something that's also computationally efficient and scalable. It might be something where you make one transaction and It takes 10 minutes for it to go through because everyone computing that computation, it's so computationally complex versus Secret Network.

Carter
We have six second transactions, right? We're ripping through all these different absoluted transactions. And I believe what we're going to have one day is a bunch of different privacy preserving blockchains, with different trust assumptions, different use cases and different speeds and performance and scalability. And all of them should be able to talk to each other, and we're able to kind of create the full spectrum of like, how much security do you need, how much privacy do you need?

Carter
And you'll kind of find that given tech stack. So Dero’s great, excited to see them continue to evolve the technology and for Secret Network, I'm excited to see us migrate away or at least experiment outside of the trust assumptions that we've originally made on the privacy side.

Citizen Cosmos
Would love to see more and more development. I mean, I could even imagine like a layer one and then like another layer one for the computation. And one question I did ask Tor in 2020 when we had Tor on, was about he did mention also the hardware encryption and I don't want to make it hard, but as far as I understand you guys use an Intel piece of tech and as far as I'm aware, Intel hasn't been the best friend of privacy, especially, you know, if we're talking about like chips and burn in chips on motherboards and stuff like that.

Citizen Cosmos
So you did say already that in your opinion, right now anything goes, we have to cut some corners. But the question is about the future. In the future, are you guys still planning to work with that? And even though that's partially like come out there, it's not open source? Of course not. But or is Secret got other plants and Shade Protocol included to ditch that.

Carter
Yeah so the way I like to think about this is the difference between maybe like an engineer and a mathematician. A mathematician strives for purist solution, proofs, theorems, permanency, an engineer strives for a functional product that solves a solution and that usually they have a model. And when you have a model, you're inheriting the assumptions of the model.

Carter
And so the way I view it is like fully homomorphic encryption is the mathematics that we're trying to achieve. That's like, man, if we can get there, we're going to have mathematical proof that we're fully safe. But in terms of engineering, in terms of getting something to market. Trusted execution environments, whether it's from AMD or from Intel, are incredibly useful products.

Carter
These are flagship products for these institutions. They use it all over the place. So, if these trusted execution environments break, they're losing billions, right? Like because they have huge clients that are blockchains that are also trusting the privacy of the tech. So, there's a lot at stake for them. We're inheriting the assumption of, hey, we have to assume the hardware is safe.

Carter
It's a big assumption. We'd like to eliminate that assumption, but it's an extremely useful assumption to hold because if it stands true, you have this very scalable, very performant private blockchain. And so like I said, I'd like to achieve a world where we don't have to just trust the hardware, where we can have some sort of key rotation schema that combines fully Homomorphic encryption, working with hardware level environment, and that that would be the beautiful mathematics plus engineering solution that gives you the promises of mathematics with the scalability that we all need to have an actual functioning blockchain.

Citizen Cosmos
You mentioned UI UX before when we were talking about adoption and about other things. And what stage, in your opinion, because obviously Shade Protocol is a defi protocol, right? Not just the privacy protocol, it's also defi. At what stage are we currently in the industry, not necessarily just the Cosmos ecosystem, but in how you guys solve it in Shade Protocol?

Citizen Cosmos
The whole thing about UI UX Defi, adopting more users and so on and so forth.

Carter
So, I mean I think there's really two or three pieces that are involved in this and two of them are kind of out of our control and one of them is in our control. The first one is wallets. Wallets are what users touch. It's them, it's their account, it's where their stuff is stored. And we have seen wallets really, really improve over time from just like sending money from A-To-B or staking on Cosmos.

Carter
The part we can't necessarily control is like wallets need to be built to be integrated into apps and that kind of interface, that type of interlocking intimacy between app builders and wallets has a long ways to go. Just being honest. Like the Keplrs of the world, the Leap Wallets of the world, like the Metamasks to the world. That's going to be something that over the next ten or 20 years, the tools can get so much better as an app builder to like, fully leverage the wallet in a useful and coherent way.

Carter
But that's kind of out of like a Shade Protocol since we're building Silk, our privacy preserving stablecoin, Shadewap, Shadeline, all these things. We can't fully control the Keplr and these wallets, we can try to work with them. The second piece is gas UX. This concept that like I go to some layer one and in order to be able to use an app, I need that underlying gas token, you know what I mean?

Carter
Most people want to be able to like trade, kind of like an Osmosis, right to osmosis’ advantage, like to be able to make a trade without needing the gas token. I think if we can solve the gas problem, which I think wallets are probably going to have to solve or apps are going to have to find some sort of workaround where like you can interact with the app and you don't even need to know that you're using a gas token in the background.

Carter
If we can fix that, that's going to be a huge leap forward. Wallets, Wallets integrate with apps, gas, UX and the final one is on the apps. The final one is when you go to shape protocol dot I O, what's actually presented before you. How easy is all that interaction? And to be honest, that just takes an obsession with quality, that takes the user's prioritizing because you vote with your money.

Carter
If everyone's putting all their money on some crappy UI UX, everyone's happy with that. Then like people are kind of signalling we care more about functionality than the UI UX. But I think what should happen is the capital will slowly follow improvements in UI UX, in terms of help desk experiences and tutorials, documentation, and we're part of that. You know, we're part of front running and trying to push the industry forward and it just takes time, takes alot effort.

Citizen Cosmos
Could you a little bit talk about the differences between Silk and other privacy preserving stablecoins and what does exactly a privacy preserving stablecoin for somebody out there and how does exactly Silk work in this case?

Carter
Absolutely. So Silk is privacy preserving for transactions so you can send it from A to B and you're going to have that metadata obfuscated versus if you have something like DAI or FRAX or USDC, when you make a transaction, all that information is totally publicly transparent and that's the starting point. Silk is private. Silk is also stable, right?

Carter
A lot of stablecoins like other privacy preserving tokens like Zcash and Monero, they fluctuate in value. People are very speculative on them. They do not have the economic levers designed to keep them at a target price, like a stablecoin. And so we believe that you need more than just privacy, you need stability, you need to have something that can function as a medium of exchange that's stable and not subject to all the volatility of crypto.

Carter
And so that's the goal of Silk to be used in everyday commerce and to be private. Now the really interesting thing with Silk is what it's pegged to. Everyone keeps pegging things to the dollar over and over and over again. And how can you claim that we're building a decentralized future if our decentralized stablecoins are pegged to a centralized monetary system?

Carter
Right? And so this is the final attribute of Silk that makes it unbelievably fascinating and differentiated. Silk is pegged to a basket of global currencies and commodities. So we have all these different currencies selected. We also have gold and Bitcoin included. There's a weight tied to each one of them and when you summate across them, you then have this target peg that's slowly moving over time and all the stability mechanisms are tracking that basket.

Carter
And the net result is that if you hold Silk, you are essentially in a perpetual hedge against global volatility and inflation. It's the equivalent of like holding an index fund in stocks. But this is the currency version. And so we believe that Silk will be an interoperability hub between global currencies. It will be used everywhere in commerce, and it will have that privacy and performance.

Citizen Cosmos
How are you planning to make it usable and especially explain it to people? Because in 2016 we had an experiment where in one of the networks were launching the stablecoin was tied to one milligram of gold. I believe it was gram or milligram. I don't remember. I think it was milligram because one gram was expensive and it wasn't easy to explain it to people, even though it sounds like, Oh, I mean, what's the difficult part here?

Citizen Cosmos
Now we're talking about a basket of things, including Bitcoin, including gold, you said. How are you guys managing to explain it? I'm bringing back mom and dad now. You know, from the beginning of our conversation, how did they understand it?

Carter
Absolutely. So my first call actually posed a question for you. What was the name of that Stablecoin?

Citizen Cosmos
It was GBG, Golos Backed Gold. It was one milligram of gold, back in Golos tokens, which were the tokens of the network. So imagine if it was like one milligram of gold back in Secret tokens or whatever.

Carter
So as a word, do you think your parents know what GBG is?

Citizen Cosmos
I hope not, because it was a Russian audience, so they definitely didn't know what GBG was, no.

Carter
Do people know what, if I ask my parents what UST is, as an acronym, would they, IST, USK, Dai, Frax.

Citizen Cosmos
No, I don't think so. No, no, no, no, no, no. No. Acronym.

Carter
Do you think they would recognize the word Silk?

Citizen Cosmos
Well, the first thing I would think of Silk would definitely not that it's tied to a basket of world currencies. I would recognize the word Silk, but, um. But I see where you getting at, and I like it. I like it a lot.

Carter
So a lot of thought was put into this word because Silk has global significance. It was involved in trade in Asia, Europe, Africa. Silk is something that flows. It's inherently sounds smooth, kind of fast, kind of premium. And so even actually, if you look at the Silk logo, it’s a circle, and there's a little kind of U-shape in the middle of it and Silk is actually, stablecoins have to represent stability.

Carter
And so, if you look at all the other stablecoins out there, you'll notice that they have jagged edges on the logo. So, Silk's logo actually has to solve a problem where we're supposed to represent fluidity, but then you also need to represent stability. And so, Silk has these two, this middle section, it's fixed to the outside edge and it's connecting two points.

Carter
So, it's represents a transaction, a river, a trade route in the middle. Long and short, without me falling down this rabbit hole too much. I believe that the naming component will be one of the strongest advantages of Silk, that there was. We were brave enough and bold enough to use a word that everyone globally recognizes. You're not buying some weird three letter acronym.

Carter
You're buying Silk. You don't need to fully understand, like, Oh, I'm holding this very complicated basket full of global currencies and commodities. I think what happened is the first subset of users, the first 10 million people will know, Hey, I'm hedge against inflation and volatility. That's why I hold Silk. I think the next 90 million people will hold Silk because they know their friends are holding Silk and that word gained traction.

Carter
It gains, just like Bitcoin as a word gains reputation over time. How many people actually know how the internet works? But how many people use it? How many people know how Bitcoin actually works, but how many people use it? And I believe if the utility is apparent enough, if the brand is apparent enough, then after we onboard that first 10 million, it's a network effect and network effects are the strongest thing you could ever achieve.

Carter
So long and short. We still have to solve the education for that first 10 million. We still have to make it very clear what the attributes are. But I think some of the, a lot of stablecoins suffer from a brand problem. They suffer from not being attached to something in our real world that people already understand. And that's what we're really going to be leaning into.

Carter
We'll see how well it works. But to your point, of course, it's an uphill battle. It's the most absurd uphill battle to create a currency scratch and to get millions of people to trust, get millions of people to use it. We are up to the task.

Citizen Cosmos
I'm loving the optimism with the 100 million users. I like it already. This is good. Something to pay attention to, of course. And we had this interesting discussion, well, partially discussion on the liquid staking debate. Think we did and I guess this is a lot about Defi and this is something I would love to hear your thoughts here. What is your idea about appearance of value inside of a protocol?

Citizen Cosmos
You know, I mean, a lot of the times we look at a protocol or a token or anything else and it seems that the only value it accrues, sometimes it’s not even fees. Sometimes it's just inflation and, well, not monetary supply,  sorry, rather to speak. Right. Inflating the monetary supply and hence pain outs or burdens. And sometimes we don't even have fees in built into protocols, let alone other things that we can think about.

Citizen Cosmos
So, the question is this, in your opinion, what is the way for Defi protocols to move in order to attract more real value to the underlying tokens that are in those protocols?

Carter
Value comes from providing a service, fundamentally. To have real sustainability for a protocol, you need to be consistently providing a service beyond just, I'm giving you a portion of inflation. What problem are you actually solving for users? I think lending products do a great job with this. They essentially allow you to do more with your collateral. I get to lever up on my collateral, get to mint out this liability in the form of a stablecoin.

Carter
I mean, I'm in a leveraged position, but the protocol empowers you to do that with your assets without having to like, give you some inflationary reward. Right? It's just a genuine good service. The lending and the borrowing, people are, you know, borrowing out their assets. People earn yield as the person lending and the borrower gets to go and do something valuable.

Carter
These are all real genuine financial services. I think decentralized exchanges will eventually there. They suffer from a problem of you can't create a good trading experience, you can't create a good service unless there's liquidity there. So we somehow need to attract liquidity to create the service that users will use. But what happens if attracting that liquidity is more expensive,

Carter
than the value derived from providing the service to users with trading. And this is something that all dexs are struggling with. It's a difficult model. So in summary, I think protocols have to be laser focused on where are we actually creating value in the form of service to users and how do we make it sustainable. A lot of protocols, 95% of protocols are just kind of inflationary beasts that do a great job of attracting yield, TVL and providing a service.

Carter
But if push comes to shove, it's not actually sustainable. It's harsh to hear, we live in a space built on speculation. The capital is here to speculate. The capital is not here because it gets to be used in a useful way, but give it a decade and we start to capture traditional finance and people bring their capital here to use it as opposed to like yield farm.

Carter
And I believe the sustainability will be there. And the protocols that were always focused on sustainability will be the only ones left standing, to be honest.

Citizen Cosmos
Will that capital be non-speculative? How can we? I mean that capital could also be speculative, right? As far as I imagine. Let's hope not.

Carter
But I guess what I'm saying is like the end state and I think Uniswap is getting closer. Essentially what they do with like with V3 is that people bring their capital, they create a pool, there's no incentives, there's no like emissions at them to make the pool. But so many people want to use that trading service and the liquidity providers happy to take on the risk.

Carter
That's like boom, capital was provided. People are using the service. Value is generated without ever having to emit a token to attract that value. It's just like the ability to plug into Uniswap and create markets was the service and we didn't have to spit money at people for the capital to come and start providing that service for users.

Carter
That's what I mean, is like the tech has to be good enough to plug in that people come and make their own markets, people come and bring their own capital. And it's not just because they're chasing a yield, that the protocol is dangling out in front of them.

Citizen Cosmos
I think definitely the value of sometimes is overlooked. Sometimes the value is much closer to us. I think the value of not having to give my data to a centralized exchange is something already included in the Uniswap price, in my opinion, you know. Kind of a resume Blitzs for this conversation in particular because definitely I feel like we need to dive deeper into Shape Protocol.

Citizen Cosmos
But of course, I think that what could be done on a different format. So, for sure we need to because I would love to understand how you guys work and all the features you have. But for this conversation, kind of small Blitz. Give me three projects, preferably outside the top 20 that you follow and you think are interesting to watch.

Carter
Absolutely. So three projects that I found particularly interesting outside of the top 20 is Umee. Umee is not a super well-known Cosmos blockchain, but Brent over there is doing some great work trying to create essentially a risk free rating crypto, like how much is one Atom worth per day? And like how do you actually define that? And they're kind of creating these whole markets around Cosmos tokens and staking with lending and borrowing, I think.

Carter
Umee has this really beautiful Multi-Chain vision. I actually just got off a conversation with Jack Samplin yesterday. Once IBC fully comes into play with Multi-Chain smart contract calls, I envision Umee being like the rails for lending and borrowing for all of Cosmos, and I envision that being the case in a really interesting way. It won't mean it's the only lending product.

Carter
I just think it's going be a very interesting one. I think Kujira is doing some great work with their order book model, with kind of the real yield adopt defi narrative. What I most appreciate about them is their emphasis on sustainability. I think they're one of the first to kind of push in that direction. I'd like to think that Shade Protocol has also been a part of that movement too, but we really came at it from a privacy is sustainability standpoint, less so from like, Hey, this yield is fake standpoint.

Carter
So, I think we've learned a lot from Kujira and we're really, really big fans of them. And then the final one, this is going to be a controversial one. I'm a very big fan of Luna, specifically the community and specifically the builders that built on top of it. I think that that ecosystem and I've talked with like the White Whale team, for instance, Kujira was a post Luna team, Mars protocol is another like post Luna team.

Carter
I think those builders have been battle hardened. They realize that they were part of an unsustainable ecosystem and now they're all building with sustainability in mind. So, I think history will look back on Luna and it'll say that it was it was a failed experiment. But we learned so much from that experiment, and I respect all of those builders that are continuing to build despite that catastrophe that happened this summer.

Carter
And everyone's memory is so short, right.  FTX happens, it's November and people are already starting to feel like Luna was forever ago. Folks, that was like four or five months ago. That was not that was not that long ago. So those are really the three ecosystems that I'm keeping my eye on. And then dex wise, another one that's coming out pretty soon is Duality.

Carter
Keep your eye on those guys. That's another Cosmos chain that was recently announced. Brilliant team working on the dex side. And then I just also respect Osmosis and Crescent because they just, there are some of the first in the Cosmos and they continued to have a lot of users and paved the way on UI UX. So I just gave you like six answers.

Carter
But those are, those are the ones I'm really interested in.

Citizen Cosmos
The more the better, the more the better. What about two motivational things that keep you going in your daily life?

Carter
I have this unrelenting vision that we can build futuristic currencies. We shouldn't settle for dollar stablecoins. We shouldn't settle for recreating the existing financial rails and ecosystem. That's not what we came for in 2008. It's not what we came for in 2016. The tech gives us attributes that open the doors. They really do,  of permissionless,  participation, censorship resistance, scalability, privacy, like it's all there at our fingertips.

Carter
And what I sense our space is a hesitancy to fully lean into those attributes in the name of plugging back into the existing system and so what keeps me up at night is this vision for a protocol that pushes the boundaries of what's possible, even if it's uncomfortable. And I think still with privacy, decentralized collateral, this decentralized peg, it's so radical.

Carter
It is the most absurd thing I ever could have dreamed of. And we're months away from kicking off that experiment, and we might fail. Like Shared Protocol. It's, I think we’re like 30 plus builders across all the different teams. We might go out there and in a year we close up shop because the liquidity didn't come, the apps and products didn't get adopted.

Carter
But what I know in my heart of hearts is that what we're trying to do is so radical and that we will have pushed the needle forward for the next builder, for the next youngster to come along and look at what we're doing and say, hey, they were 80% of the way there and I'm going to take it 100% when I go and built my protocol.

Carter
And what keeps me motivated is like, I know there's other builders out there that are hungry to keep pushing the envelope, even if we fail. We all understand these are experiments, but it's going to take the continued bravery and courage of builders to not settle. And that's what keeps me up at night. It's two things. It's the what if?

Carter
What if we could actually pull this off? What if we could actually build something with as much adoption as Bitcoin, but with privacy and with stability? What would that do for the world? What would that unlock? What if we can actually pull it off? And then the second piece is, of course, is like, how can we push the needle forward even if we fail?

Carter
How much can we help the space and move the ethos forward? And I hope as community members and as users and as consumers, people make the decision to park their capital in protocols pushing the boundaries. Of course there's risk involved, but yeah, that's my answer.

Citizen Cosmos
And the final one, give me one person, doesn't have to be a crypto person. It can be a book, it can be a GitHub account, it can be a Twitter account, it could be a Medium account that you recommend people to read or to follow.

Carter
I would definitely say follow Guy Zyskind on Twitter. He's like one of the original privacy founders. I really respect the work he's done with Secret Labs. There's been a lot of highs and lows for Secret Network, but these guys continue to chip away and then to just like, rattle off a couple of other names that I really respect.

Carter
Jack Zampolin, Zaki, Sunny, Tor Bair, Ethan Buckman, you know, these are all people worth following, all the Cosmos folks that saw this vision and still see this vision that the world doesn't fully understand yet. And that's very exciting to be a part of..

Citizen Cosmos
Carter, thank you very, very, very much for joining. I hate time because it's too quick. Carter, thank you very much for finding the time to answer, joining us. And thank everybody else for listening and tuning in.

Carter
Thank you so much for having me on. It was awesome.

Citizen Cosmos
Bye bye.

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