From Scaling to Privacy: Damian Chen on Starknet and Quantum-Safe Bitcoin Addresses

0:00 Welcome back to the content suite in Singapore. Today we have Damian from Starknet Foundation, leading growth, super excited to talk to Damian. Before we get into all the things privacy that Starknet is working on, can we hear a little bit more about how you got into crypto and your journey here? Yeah, sure. So I'm Damian, the VP of Growth at the Starknet Foundation. I joined crypto probably in like 2020, 2021. I was previously a practicing M&A lawyer, but during COVID times I was getting a bit bored and I went into our firm's blockchain regulatory practice. And there I met quite a few crypto founders, which was actually SBF. So we were advising them when they were moving their operations from Hong Kong into the Bahamas, and our firm was advising us where from the Asia Pacific region.

0:51 And then from there, I just went super deep. They obviously had a lot of interest in Solana at the time. They were building a lot of projects on Solana. I don't know if you guys remember like Maps and like-- Serum, yep. Yeah, exactly. So I got into the Solana ecosystem, I joined a startup there, I worked there for two and a half years. Just went super deep DeFi after that and from there I moved into Starknet. Amazing. And I mean, from the legal background all the way to Starknet, what got you interested in joining Starknet and what excites you about Starknet today? Well, legal was actually not a great fit for me because my personality was super like, and just like doing stuff. Legal is very much about like what you should do. Starknet was very exciting when I joined. When I joined the foundation didn't exist yet and it was just the lab side and Eli who's a founder of Starknet, StarkWare, the lab's team was looking to build out the foundation.

1:39 And so when I first joined, it was practically just all systems ablaze and we were doing everything from zero to one. The culture is still very much like that today. We're experimenting a lot with like leading edge technology, we're pushing a lot of very exciting new updates to the market. And it's just good to be at the forefront of actual technical excellence that defines our industry and being able to continue to see what we do. Yeah, I mean, like you mentioned, there's so many parts of the, I would say privacy infrastructure. You mentioned StarkWare, Starknet. It can be a little bit confusing for the average viewer. So maybe it would be great if you could break down specifically what is Starknet working on today and where do you see the products we're growing as well? Gotcha, gotcha. Yeah, well, just to really step it back. StarkWare is the lab entity behind Starknet, the public network.

2:28 Before Starknet, they ran a privatized blockchain instance called StarkEx. And that was what powered dYdX and Immutable and Sorare and a lot of those big applications. Just as a bit of history, StarkWare were the first or the second, I think, grant recipients from the Ethereum Foundation at the time. So in 2018, they were given a grant to use their cryptographic proof STARKs to scale Ethereum. And so they did that as a SaaS solution practically for teams like dYdX. And then they were actually able to achieve immense scale. This was before optimistic rollups were even conceived of as a word. And then the landscape became optimistic rollups. Then obviously validity rollups, what we are, ZK rollups. And so across time, things have changed and the industry has changed a lot.

3:14 Starknet specifically came around after optimistic rollups. The business model really for a SaaS solution privatized blockchain instance doesn't really work anymore when Arbitrum and Optimism and all these guys offering scale came out that at a much lower cost. And so Starknet was created as a public blockchain. Nice. And today Starknet is competing in a very big variety of L2s or different networks. What do you think might be attractive for either a builder or a user for them to play on Starknet? Yeah, I mean, I think we hear a lot about the best tech always wins in a long enough horizon or you're on the other side and you're saying the best tech never wins in a super best distribution. I do think that over a long enough time horizon, the better tech should win most of the time.

4:03 And Starknet historically has always defined the industry standard for what blockchain technology should look like. We were the first to conceive of the Stark proving system to actually put it in production to use hash based cryptography. Now you have Ethereum, the L1 looking at scaling, the L1 using the exact same work. A lot of the privacy standard and the work we've done there as well is quite ubiquitous. I do think that so long as you sit at the forefront of the industry you're at and you're continuously pushing cutting edge technology forward, then you will eventually win. It will take time and it'll be hard, but it'll eventually come. Nice. Something that I wanna learn more personally between STARKs, like you've mentioned, it's been able to help companies like dYdX scale to the SaaS level solution, process a lot of transactions, and then there's the whole privacy angle of it.

4:57 I understand that you kind of kick both best of both worlds, but what do you think is really the value prop there for implementing something like a STARK or Starknet? Yeah, well, proving systems at the end of the day are essentially as compression systems. They take a very large body of data and they reduce it to a very small proof, and then you're able to verify that proof to verify the validity of that entire initial body of data. Privacy is kind of just a byproduct of that because when you reduce something to a proof and you verify it, you don't necessarily need to know what you're verifying because verify whether or not it's valid. Starknet for the longest time had inbuilt privacy, but we didn't actually have privacy on the network. So we posted the data to the L1 that showed the full body of transactions because at the time the industry wasn't very privacy forward, and so we were actually paying extra settlement costs on the L1 just to show all that data anyway, and also there was a lot of compliance, et cetera, things that needed the privacy to be done right.

5:59 It's different now. We've come out with a STRK20 standard, which does privatize transactions, but it's opt-in and it has a whole regulatory framework around it that allows people to produce that data should they request to do so, but I guess just to go back to your question, Zero Knowledge proofs itself are privacy preserving inherently, but we've used it in a way that wasn't privacy preserving and now we're moving towards a compliant privacy model. Nice, and we've talked on this podcast and the hot subject is definitely Zcash. We've had also smart contract layers like Aleo who want to build the equivalent of private Ethereum. Do you think there's use cases there in terms of having more smart contract like transactions being private and what are some of the use cases you see that fit really the technology you guys are working on?

6:49 Yeah, so I think Zcash is great, right? And I think Zcash taking off is very intuitive of the industry's move towards new privacy. And I think privacy was something that Satoshi contemplated for Bitcoin, even during the early days Bitcoin forums, but never actually got into the end state of Bitcoin. And so I think Zcash having that PMF is very much addictive that people want this for their store of value. But at the end of the day, Zcash is just a store of value. It's a private Bitcoin. It's not a programmable smart contract layer. You can't have decentralized finance and smart contracts exist on top of it without an L2. And so I think there is room for a programmable private Zcash. And so that is kind of the framing that we're going for.

7:36 We have scale, we have compute, we have a base chain that works that people can build on top of that they can opt into our privacy that has liquidity that can come in from other networks too. And so in that essence, I think we're kind of different from the Zcash. But yeah, I definitely think the industry is very much moving towards that area. There's parts of my investor brain where people talk about Zcash as private Bitcoin. But at that point, maybe on a smart contract layer that's private, you could also just bring in Bitcoin. And now that would make Bitcoin private. But there's other concerns regarding Bitcoin's long-term security, whether that's quantum resistance and things like that. I want to get your take on where's the current state of quantum and what are some solutions that you guys might be working on.

8:22 Excellent, yeah. So this is partly why I also say that Starknet is always at the edge of leading edge technology. It's because we, from the very early days of designing STARKs, using STARKs to build Starknet, we designed it to be in a future-proof manner. And so the network well, STARKs by themselves as a primitive are post-quantum secure. The network at the moment is in the process of being upgraded to be post-quantum secure as well. And we've also just come out with a proof of concept that allows for a Bitcoin transaction today and Bitcoin mainnet to be post-quantum secure. On that last bit, we're calling it QSB, but essentially what one of our researchers have done is they managed to use the existing rules of Bitcoin today and they've managed to introduce a new spending mechanism on top of your public and private key. And that particular mechanism is a hash-based authorization.

9:11 And so even if a quantum came online tomorrow, the way they break your Bitcoin and steal your Bitcoin is they take an exposed public key, they run Shor's algorithm and then doing so, they can derive your private key and then they can use your public and private key to authorize a fraudulent but valid spend transaction recognized by the network. They move your coins out of your custody into their control and they market sell or whatever. You've just essentially lost your coins. They've stolen it from you. What we've introduced with QSB is this new hash-based authorization mechanism, where even if a quantum computer took your exposed public key, derives your private key, and then tried to steal your coins, they still need that hash-based one-time authorization to do so, and that's post-quantum secure. That can't be broken today. And so they would still be unable to do so. The limitation though is that QSB is opt-in.

9:57 So you have to move your Bitcoins from an address that doesn't have QSB into an address that has QSB enabled. And then for it to move out again, you'll need to pass the QSB component. And so it doesn't really solve the problem of like, Satoshi's coins being vulnerable, or all the lost coins in history being vulnerable, but does solve the problem of like, I have a thousand Bitcoin or a hundred Bitcoin, where should I put those? Well, you should probably put some portion of it in a QSB address if you think quantum has some possibility of happening, just so that you're hedged and you have an insurance taken out against the quantum threat. Very cool. I'm sure that you hang out with a lot of cool cryptographers who are working on the bleeding edge. Definitely not autistic. Yeah, very smart. And I'm kind of curious from your perspective, are you genuinely concerned about quantum resistance?

10:46 There's a lot of conversations regarding hard forks or where Bitcoin is gonna go. And you guys are offering this solution with QSB, but where do you currently stand regarding the current landscape of quantum and how users might be needing to get ready? Yeah, like realistically, we're just one player within the broader Bitcoin ecosystem. And for the longest time, we've contributed towards Ethereum, contributed towards broader ZK cryptography. The reality is that Bitcoin Core as an organization is designed to move slowly. And I have the utmost faith that the smartest people there are going to make the right decision that protects Bitcoin when the moment arises. But until that moment arises, until there's like an existential threat, the network is designed to be resilient and it's designed to move slowly to ensure that the wrong decision isn't made.

11:36 And so the question to us hasn't really been like, how realistic is quantum? When will it come? It's more just what can we contribute to this broader problem? And so what we've decided to contribute is like a temporary or like a solution that can be used while this actual thing is being resolved. And I have the utmost faith that it will be resolved when the time comes by the core Bitcoin community. Very nice. So when needed, there will be some kind of coordination. And until then, you guys will be working on solutions for if it happens, right? Exactly. As we continue, I'm curious if there's anything else in terms of Starknet that you wanna share or give people updates about.

12:22 I think we've been building in a few directions, right? We've been building towards privacy, which is a generalized privacy stack that builders can use. We've been building towards quantum security, which is really a product that Bitcoin holders should be able to use themselves. And then we've been working on productizing additional use cases for Bitcoin holders. And that's in our stock PDC Bitcoin wrapper that you can stake on the network and own yield for. So I guess it kind of depends where you sit within those three categories. If you're a builder and privacy is something that benefits your particular application, then I think we have the most sophisticated general purpose privacy stack on the market available at the moment. STRK20 allows for any ERC20 asset bridged into the network to be put into a privacy pool where you're then all balances transfers spend is completely shielded from the network.

13:10 But then you also have an opt-in viewing key that allows you to produce it to an auditor or producer to anyone you wish to to decrypt your transactions and then I think on the Bitcoin side it really comes down to your risk appetite and what you're looking for whether you're looking for protection insurance or whether you're looking for yield and or we have products for [unclear] as well. Amazing, Damian, thank you so much for joining us and sharing really the quantum resistance forefront of Bitcoin as well as all the cool things that you guys are working on at Starknet appreciate your time and yeah I appreciate you thanks bro