Josh Cincinnati, Executive Director at Zcash Foundation, Talks Future of Blockchain


(upbeat dance music) – Thank you for joining
us for another installment of Future Blockchain. Richard Dulude, one of the co-founders and partners of Underscore VC, here with Josh Cincinnati
of Zcash Foundation. – Hey. – Yeah thanks for joining us. – Yeah thanks so much for
having me, great to be here. – So, you know, I’d love
to start out and ask what brought you into
this wild world of crypto. – Yeah so honestly as is usually the case with opportunities like this, it was a great deal of serendipity. So I co-founded an Android
application startup that was a big failure,
as these things often are. What is entrepreneurship without failure? – What was the startup? – It was called, so the
company name was Onespire. The idea behind it was we
wanted to take your lock screen and wallpaper and figure
out better content for you and it would be great opportunity
to take up some landscape on people’s cellphone
and this is way back in– – That’s pretty valuable landscape. – Yeah I think so. So that was in 2011 to 2013, and I had the really
good fortune of hiring an Android engineer who was very early on into the bitcoin talk forums,
and when we were kind of at the water cooler, so to
speak, talking about things, he basically just
introduced me to this world, and I had previously had a
politics and math background so I was immediately queued up. Like I was primed to just be
obsessed about this stuff. So after his introduction I
just went into the rabbit hole. After that company, after
it failed I ended up joining a block cipher to be a
developer advocate there. Did that for about a
year and a half and then ended up joining up. I had a brief stint at Lyft
but while I was at Lyft doing dev advocacy, I
had a part time volunteer to the Zcash Foundation,
turned into a part time job, turned into running the Zcash Foundation. And so that’s kind of it in a nutshell, but yeah, it was really sort of luck and a certain I think
mentality and personality. The other thing I think
contributed to that I graduated business school in 2009
and consequently I have a high degree of skepticism
about our financial system which was– – (laughs) Understandable. – Yeah, so I think that also informed my perspective of that as well. – Yeah I think it did for a lot of people. So great, well tell me a bit
about the Zcash Foundation, what you guys are looking to achieve, kind of the problem that
you’re trying to solve. – Yeah for sure, so obviously as you can guess by the name, we’re deeply associated
with the Zcash protocol. The protocol itself is all
about basically trying to create electronic cash in the true sense online in that cash is is really
fundamentally anonymous, it’s private, you can
engage in cash transactions without having to ask anyone’s permission. And Zcash, the way that it has been built particularly if people start adopting the shielded address component of Zcash, very much has those, has those properties. And so originally the Zcash company, which is now known as the
Electric Coin Company, they’ve changed their name a little bit. But they were the ones that
have done the vast majority of protocol development. They are the ones that
took the academic papers that existed beforehand from
Zerocash and converted it into an actual running
in production protocol and the foundation was
created basically to be a counter balance to the company. Originally just sort of, we
started off just doing some exploratory grants, but now
we’re now growing to a point where we want to act as
a kind of hedge against and a check against the company’s power. Because I think, you know,
something that’s on the mind of lots of people in this world is how do you have, how
can you build a protocol where there isn’t just
sort of unilateral control over the direction of the
protocol and governance. So that’s the main
purpose of the foundation, but right now is about being a hedge. I think long term we’re all
about our mission is all about privacy-preserving
payment protocols online. It’s a bit of a mouthful, – Yeah, it is. – But yeah, so that’s our,
that’s our long-term goal. – So you mentioned the
concept of a shielded address, is this default for
everybody whose using Zcash? – So right now. Right now there are
effectively like two classes of addresses on Zcash and, or transaction. Well, technically there are
three kinds of transactions that you can engage in but
two kinds of addresses. So the two addresses are
transparent addresses and then z addresses. If you engage in a z address
to z address transaction, that is, theoretically speaking, the most private transaction
you can engage in in any blockchain protocol today. The issue prior to, particularly prior to the Sapling Hard Fork upgrade was that, it’s pretty computationally intensive to make a proof to do
this sort of transaction. It would require a lot of
RAM, so most people that were interacting with it were doing
so on the command line with their private keys still connected online. It was kind of an onerous experience, and so a lot of people, in order to make it easier
for people to integrate with the Zcash ecosystem and also to help with sort of auditing the supply, there’s these transparent
addresses and those addresses are effectively just
like bitcoin addresses. – Gotcha. – So if you do a transparent
to transparent transaction– – Yeah, we can see it, it’s on blockchain. – Everyone can see it,
it’s on a blockchain. But then there is the weird
intermediate where you can actually do a transparent
to a shielded address or a shielded to a transparent address, and in that case it’s like you, from a transparent address
to a shielded address, you can see the origin of the funds, you can see how much,
but then it goes into this giant shielded,
anonymous pool and vice versa for the other giant transactions. – Yeah, so, you know,
a big piece of this is steering community,
thinking about community. Tell me a bit about how
you’re thinking about that in the context of Zcash. You know, is it focused on development, use, integrations, what does it look like? – So I think the biggest, I mean, the biggest two pieces for us right now are distributing out development power and getting the community more involved in developing software and
services on top of Zcash and in terms of doing, like,
core development as well. And then usage and getting more
user-friendly applications. Because I think one of
the biggest roadblocks to adoption of a lot of
privacy technologies, but even just bitcoin and, you know, kind of the older mainstays is usability is still, it’s
like it’s still very hard. It’s very hard to convince people. – (laughs) Yeah. – And to walk them through how to do this. You have to really want to do it. – Yeah, no, it’s clunky. I’m not gonna get my
grandmother to do this thing. – (laughs) Yeah, yeah, me neither. – It’s tough. – I gave my parents like
a paper wallet, you know. (Richard laughing) And I don’t think they really understood what I was doing when I gave them– – They threw it in the trash, probably. – Yeah, probably, you know. Oh well, I guess that benefits
the broader community. – Yeah, yeah. – So, less supply. – Oh, cool. So tell me a bit about, so, you know, so Zcash is successful. You create, you know, an
anonymous money for the internet. – Yeah. – What does the world look like
when you solve the problem? – Yeah, honestly, and this is
why I joined the foundation. I think the world would be
a more just and fair place in that kind of world,
where everyone has access to private financial transactions. Because, I mean, the way that I view it, you know, there’s all this negativity associated with anonymous and
private approach to currency. Everyone always says, oh, well, only criminals will use it, or it’s money laundering, etc. But the truth of the
matter is that right now only the ultra-wealthy have access to actually private funds
and private pools of money. And to me it’s like,
it’s a matter of, like, equality of opportunity. It’s unfair that there’s some people that have that level of
privacy, that is, in my view, also constitutionally
guaranteed in the U.S., but practically speaking, it doesn’t exist because of the way that
we, as normal citizens interact with banking infrastructure. And that’s unfair. Like, it’s totally unfair. There’s so much about our
financial system that’s unfair. And in a world where people are actually using, you
know, regular people are using private currency, that
would be a fairer world to me, a world where it’s not
just the ultra-wealthy that have access to that. And, you know, to respond to the idea that oh, well, only criminals will use it, I think the same debate
happened in the 90s about encryption in general, you know? – Yeah. – And there were also these, you know, the push for the clipper chip
and all these terrible ideas that would have weakened encryption. Now there are multi-trillions of dollars of market capitalization that are effectively guaranteed by
TLS and secure websites. So I think that the same kind of benefit will accrue to society as a whole, even with those negative,
those potential negative uses. – Yeah, that’s great. I completely agree. – Yeah. – You ready to jump into
rapid fire questions? – Yeah, let’s do it. – Okay. – Hopefully I’ll keep
myself to concise responses. – No, no, well, you don’t have to. That’s the fun part of it. The rapid fire from me, but
it doesn’t have to be for you. (Josh laughing) So tell me about top factors
hindering blockchain adoption. – Absolutely, like, usability I think. – Yeah. – Usability and, frankly,
once that problem is solved, if that problem gets solved, then the problems of scale come up, like almost by necessity,
because everyone starts using it, all of suddenly people are gonna realize there’s limited space,
my fees are going up, you know, why is this happening? Like, why can’t I engage in this DApp or transfer money without paying $20 or $30 or something in fees? So that’s going to be the very next thing that we have to deal with, I think. – So what would break us
through in terms of usability? – I think, honestly, having a, it might be a hardware device plus a companion app or something, but having something that’s still, that still guarantees the
degree of decentralization that’s necessary for these things to continue to be innovative, so where someone can run their own node, their own bitcoin, their own Zcash, their own theorem node. They can run their own
node from their home, still trust, only trust their own, you know, their own infrastructure, and then easily connect
their mobile device and engage in transactions that easily. And then, frankly the other challenge, which I think is going to
be really, really difficult, at least when it comes to, like, physical retail adoption, I do think it’s very easy to make any sort of blockchain related
payments seamless online. It’s much easier to do that. The real challenge then comes in, like, okay, let’s say you actually
do capture that world, how do you then translate that into a physical experience
that’s better than Apple Pay? And I don’t know. I don’t know. Like, that’s a very
difficult problem to solve. – Yeah, cool. Let’s talk about mining. Is it too centralized
today, or is decentralized? – I think everything can
always be more decentralized. And particularly, like, mining, there are a lot of problems with the way that mining works today. The main problem is that miners really have the, they
really have the opportunity to order or censor
transactions that they see fit. Most of them haven’t been doing that, because, you know, they ultimately, there’s enough of a
competitive environment that they can’t effectively censor transactions most of the time. But that’s still like a possibility, and one of the best proposals
I’ve seen to deal with this is Matt Crow’s Better Hash
proposal on the bitcoin side, where you kind of split up, if you’re in a pooled mining environment, and you have your mining
rig, and everyone else’s, and it’s one single operator. In the current world, that
operator gets to choose what transactions get included. You’re just lending hash power. In Matt’s proposal, the idea is that each individual, you know, node, or not node, necessarily,
bad name collision, but– – Participant.
– Participant, yeah. They would be able to
determine transaction inclusion and the pool wouldn’t really
be able to change that. – Interesting. – So I’m very, I’m really optimistic that those sorts of developments will actually redecentralize mining. – Oh, very cool. So do you think today an average person can participate as a miner? – Not, no, it’s almost, I mean, it’s kind of like the problem of actually using these things for
transactions, but magnified, because it requires even more expertise and more, I think, banging
your head on a wall just to get it set up. – Yeah. – So it’s very difficult
for people to do that today. – Yeah, very cool. – Yeah. – And so let’s look out a year. Do you think mining’s gonna
become more centralized or more decentralized in that year? – I think it largely depends on whether stuff like Better Hash gets legs. Like, if it actually
has momentum behind it and people start integrating
that or something like that, I think that there’s a chance for it, even if certain pool operators,
you know, become bigger. If the individual participants in the pool wind up reasserting their power that way, then that’s going to have a huge effect. So I can see it, if that
happens I could see it getting more decentralized. I think that sort of there’s this natural, there’s this natural kind of
tendency to scale otherwise for economies of scale that leads to centralization of mining,
and it’s something that we always need to be cognizant of. – So that brings me to scalability. Lots of work around proof
of stake, proof of… Do you think scalability
will be solved this year? I mean, the first proof of stake networks kind of, you know,
succeeding, or, you know what? – I think it’s going
to be an open question that will continue to be
developed and worked on for probably the next
decade, to be honest. – Yeah. (laughs) – I don’t think there’s anyone
who’s selling a silver bullet is making, there’s like
inherent compromises that are made when those
sorts of things develop, and I think that the right approach is going to probably take,
like a better part of, you know, decade to actually
figure out, you know. – Yeah. – But honestly, like, in the scale, like the kind of scale
that we’re looking at for these technologies, like these are, one of the other speakers today, I think it was Argent, like
made a point that like, most of these blockchains that
people are trying to build are like, generation-spanning
technologies, which is very different from what most startups are trying to
build with their products. – Yeah, that’s true. – So if you’re trying to build like a generation-spanning protocol or product like, I think it makes more sense to try and find the right
balance over the course of a longer period of time. – Yeah. – Rather than, like, potentially
trying to growth hack it (laughs) you know, in
the next year or two. But I don’t know, I think as a result of all the additional
focus the space now has, there’s a huge incentive for
lots of people to innovate. And so it could be that my rather, like, pessimistic view on that timeframe. It could be way off. – Yeah, well, we’ll find out. – Yeah. – Are you a layer one
fan or layer two fan? – Oh, I think they both have their place. Yeah, like I don’t think it makes sense to really optimize completely for just a layer one protocol. I don’t think it makes sense to optimize, you know, put all of your
in a layer two basket, like you have to do
both, and develop both. – Cool, cool. Stablecoins. Big deal or stupid? – (laughs) Oh, man. This is just, this is
not the official view of the Zcash Foundation. – Okay, yeah, (laughs) good. – This is my own personal views. – Personal views, good. – Oh man, I think they’re
all smoke and mirrors. I think it’s just gonna all end in tears. One of my favorite case studies from back when I was in business school was long-term capital management, or LTCM. – Yeah, of course. – And the real lesson behind LTCM is that even if you get a bunch
of geniuses in the room and you make grand claims about how you can completely
eliminate risk, you can’t. And my view about most
stablecoin protocols is that at least, you know, in
theory they sound great, but ultimately, at an abstract level, are all about moving
around and hiding risk. And the more than you
seem to be able to do that and the more stable it appears, the more hidden explosive risk there is elsewhere in the system. That’s not, like, strict
mathematical proof, but that’s just, that’s been informed by that, you know, that scenario. – I think it’s a fair comparison. – Yeah, yeah. So I mean, we’ll see. Honestly, like, when it comes to, there is this distinction between, like, algorithmic stablecoins
and people that just have, like, you know, audited reserves that are one-to-one matched by some, like, you know, embedded protocol
on a given blockchain. And even though the part of me that wants permissionless, you know, the permissionless finance, dislikes the idea of there
being a central authority that is mitigating that. – Yeah, that’s the whole
premise of the bitcoin. – Yeah, yeah, it’s like, to get rid of those central authorities. So I dislike that aspect of it. But from a perspective of wanting people to be able to engage in some
kind of fiat, like OnRamp, I think that that’s actually
like a better approach compared to trying to do
stuff algorithmically, where I really feel like
you’re just gonna wind up, something’s gonna blow up at some point. – Yeah, yeah, that makes sense. – But again, that’s personal
opinion, not the Foundation. – Yeah, yeah, the debate is out. – Yeah, yeah. – Which is good. It will be interesting to see. So on that vein, sovereign crypto assets. Do you think they’ll exist? You know, the rublecoin,
the U.S. coin, the… – Yeah, but I think they’ll exist, but they really shouldn’t be called cryptocurrency, you know? – Yeah. – They’re going to be, I
think they’re just gonna be improvements that probably
should have been made by all of these central
banks, like, eons ago, but they’re now finally facing competition for assets that can be traded
seamlessly electronically. So there’s this real desire for them to finally get up to speed. In that regard, I think
they’re gonna happen, but I would hesitate to
call them cryptocurrencies. – Yeah. – They’re gonna be like more improved, more accessible banking EPIs, maybe, you know, would be a better
definition in my view. – Cool. – But they are, they’re gonna happen, I think there is a degree of
inevitability around that. I just, I wonder to what degree they will actually be competitive with native cryptocurrencies. – Yeah. – It will be interesting to see. – Yeah, no, I think it
will be the great battle. – Yeah, yeah. – So good. Do you think U.S. regulation is clear for startups operating this space? – (laughs) No. No, I think there’s a lot of, so there’s certainly a lot of regulation around securities that
actually is quite clear and can apply to lots of people building things in this space. But once you start getting in the realm of assets that are automated
to a certain degree where there’s no human interaction on how that automation takes place, I don’t really think
there’s enough guidance from any regulatory authority
on how to deal with that. I’m just very glad that seemingly there’s been a lot of, like, it’s been very light touch
in the U.S. in general with some notable exceptions. But they have been very friendly toward new ideas and applications and, you know, for various watching approaches. And I’d be really, I mean, would be really saddened
if that took a turn. But right now, there’s still
ample amount of ambiguity that people can still
operate in this space, but that ambiguity brings
with it a lot of risk and it would be great if there
was more clarity, I think. – It’s tough. No, it’s tough. So final question would be, what’s a project or a cool company that you respect and admire in this space? – There’s so many. Honestly, it’s hard to pick just one. But if I had to, if I had to, I mean, obviously outside of
the Electric Coin Company, the Zcash Foundation. – Yeah. – But if I had to pick one, I think Casa is probably the most interesting. What they’re doing, and
in general their mission to maintain kind of individual
sovereignty as a service, is extremely appealing for I
think the cipher punks among us that continue to work in the industry, because they’re trying
to build that bridge between people still running
their own infrastructure, but having a user-friendly, you know, completely streamlined approach to securely interacting
with crypto assets. So yeah, I think I’m like most impressed by what they’ve been building
and what they’ve been doing. – Well good, we’re talking
with Jeremy later today. – Oh great, that’s wonderful. That’s awesome. – Good. Well Josh, really
appreciate you joining us. – Yeah, great being here, Rich. Thanks so much for having me. – Thank you, that was a
really fun conversation. – Yeah, yeah, it was great. Thanks. – Yeah, thank you.

Leave a Reply

Your email address will not be published. Required fields are marked *