From Zcash to Aleo: Howard Wu on Why Confidentiality Is Crypto's Last Mile

0:00Josh Han Welcome back to the content suite in Singapore. Today, we have Howard from Aleo, one of the co-founders. Before we get into Aleo, tell me a little bit more about your background and how you got into crypto. Sure.

0:12Howard Wu Well, first off, thank you for having me. I've been in crypto for a very long time. I first got into it when I was in high school, it was about 15 years ago. At the time, Bitcoin was still very early, and that was my first experience in foray. During my time in university, I got really into cryptography, so I was doing research. The lab that was a part of all of my advisors are co-founders of Zcash, and that was my first foray actually into the Cryptography side. Over the years, we then started doing research into private smart contracts using zero-knowledge proofs. We published that work in 2019. That was also when we started the company. We've been now working on Aleo for the past seven and a half years. We launched in 2024 and now are building out all of the layers on top.

0:52Josh Han Very nice. How did you guys get from, it seems like, more cryptography research to creating Aleo? Tell us a little bit more about what Aleo is. Yeah.

1:01Howard Wu When I was an undergraduate, actually, I did not know what zero-knowledge proofs were, and I learned about it by reading the Wikipedia article. It sounded like moon magic, being able to convince someone that you know something without revealing it to them or showing them how. I got really fascinated by that. What was this really niche thing, this really small corner of cryptography actually caught my interest. I ended up joining this research lab at Berkeley on this subject. They were working on this thing that we now know as Zcash. It was a zero-cash protocol. I'm trying to productionize that, take that out. I was on the research side, worked on a lot of the proof systems that were being used for that.

1:47Howard Wu When that was finished, I like to say that Zcash is like private Bitcoin. Then we are all thinking, okay, how do we go on from there? That was where Aleo was actually born. We decided to try to build private Ethereum and enable private smart contracts, basically. That was the transition on that front. Nice.

2:06Josh Han If Zcash is the private Bitcoin and you guys are the private Ethereum, I would love to learn more about what are the use cases For private smart contracts and how do you see Aleo being the most useful?

2:18Howard Wu I think the main thing to point out is that, look, when you look at crypto today, the UI/UX of money in Web3 is Broken. Right now, when I'm going out and tapping to pay with a stablecoin card, I'm revealing everything about myself because the merchant and the vendor Learn my address. With that, they can see everything about me. If I take my salary in crypto, they can see how much I make. If I go out and shop in other places, they can see where else I spend and how much I spend and how often I'm Spending. All this detail becomes public knowledge. That's a huge problem. To me, I think that this is an opportunity to create a much better UI/UX that an average person would expect. When I sign into my Web2 bank account, Only me and my bank can see my information. No other strangers can see how much I'm making or how much I'm spending or where and why.

3:04Howard Wu They don't see late payments. They don't see any of the debt or whatever that people might have. That's something that is private. This experience doesn't exist in Web3 today. You see all these people right now talking about stablecoins. No one's talking about confidential stablecoins. There's all this interest around these crypto neo banks, but no one is addressing the problem, which is that the emperor has no clothes right Now. Everyone's walking around just exposing everything. This is the reason why we decided a private smart contract layer is necessary. In terms of the use case, there's all sorts of use cases. I've already alluded to here with payroll. Imagine if you're paying your employees in stablecoins and we're seeing this a lot more in emerging economies. This is a huge problem because you can then see how much your boss makes. You can see how much your colleagues make.

3:50Howard Wu It's an HR nightmare. That's an issue. As I mentioned, you go to a coffee shop, you tap the pay, the barista sees your wallet, sees [unclear], but you can also see Everything about the coffee shop too. You can see how many customers they have, how often their customers come back, how much they spend on average, how much they made today Over yesterday, this week over last week, this month over last month. Your competitor down the street can walk in and for the price of a cup of coffee, learn all that information as well now. This is the challenge is that all of this business intel is just being revealed openly out there. I think that now we have the opportunity to actually fix this problem.

4:27Josh Han I don't think I'll be the first to admit when I've sent money to someone on-chain and then you naturally look at how much They have on their balance. Sometimes you're surprised by different shitcoins they might be allowing or different investments that they've made. That privacy makes a lot more sense now. Are you guys building out these apps yourself or are you guys working with partners? We'd love to learn a little bit more about what are the apps that I could start using on Aleo.

4:53Howard Wu We're definitely building out an ecosystem. Just this past year we've gotten Circle to issue their first confidential USDC on us as well as Paxos issuing confidential stablecoins on us As well. We also have now gotten hardware wallet support with Ledger and we've also gotten embedded wallet support with Dynamic. We're building also custody solutions with different teams out there. This is starting to become a broader ecosystem. I like to say like every L1 is like its own island until it's connected with the rest. We're very proud of you working with NEAR and also with Hyperlane to connect to over 30 different networks. You can now route ETH and ERC20s and Solana and all these coins over. Our goal is very different from a lot of privacy chains like your Zcash and your Monero of the world where they are trying to Prop Monero or prop Zcash as like the primary asset.

5:45Howard Wu For me, I think crypto, it's Web3, it's a web. There's all sorts of assets. People have their preferences. We want to make sure we can support confidentiality for all types of assets out there. Nice.

5:55Josh Han Giving users the flexibility that Ethereum also enables as well. That's amazing. I want to take a step back in terms of how much privacy has seemed to matter in the last year or so. I think Zcash, like you've mentioned, is the obvious winner. Throughout your research of doing ZK proofs to now, what do you think outside of Aleo or even within Aleo is the most exciting or Where do you think privacy is really needed the most?

6:25Howard Wu Well, I think people haven't realized that there's more to privacy than just confidential stablecoins. We've seen a lot of interest in this particular sector because stablecoins have been having a moment. But what I like to say is that I think we're entering this era of confidential finance, actually, because now you're starting to see RWAs, You're starting to see things get tokenized and move on chain. The reality is that as institutions come into this space and as retail starts to shift over into this area, it's going to become obvious That everything that you're doing from a financial standpoint is public, it's transparent, it's visible, it's exposed. And I think that all finance on chain is going to be confidential then because of that. For us, what we're really looking at is saying, look, right now there's a privacy narrative, it's moving really well. I think that the reality is that for a lot of these businesses, they're going to start to transition from public rails or transparent rails Into confidential rails.

7:20Howard Wu And I think that when that happens, what you're going to start to see is this movement that's what we saw with HTTP to HTTPS, And it's going to unlock a ton of value for crypto that was previously unrealized. And what I mean is when you look back at the early internet in Web2, With HTTP, When you went to Hilton.com, for example, what did you see? It looked like a phone book, you saw a picture of the hotel, you saw the address, you saw their numbers, you said, call us, Make a reservation, right? It was very kind of basic, like a phone book entry. And when HTTPS came around, what was the advantage? Now you could start to punch in a credit card on a website and you didn't have to worry about revealing your information and having It be stolen along the wire. And so that was something that was a fundamental shift and it unlocked e-commerce into the form that we now know today.

8:08Howard Wu And so billions of dollars, maybe even trillions of dollars of value was created because the internet economy became a thing with that. And that was only possible when encryption of the web became possible. Now we're starting to encrypt Web3 as well and basically making data on chain itself encrypted. And I think that that is going to open up a whole new set of landscapes that are going to create value that we don't Even recognize yet.

8:31Josh Han That makes a lot of sense. I think a lot of the information that you've been talking about about transactions now is actually a lot more consumable with AI. I would previously have to Give my best ZachXBT impression and go through addresses and transactions to kind of get a good financial picture of an address. But now that whether that's through tools like Surf, you get much more comprehensive data. How else do you see AI or agents kind of trading or impacting how crypto or cryptography is moving?

9:03Howard Wu Yeah, well, AI has done a lot of things for the crypto and for the privacy-spacing crypto. For one, It has broken a lot of schemes. It has found a lot of bugs. We even saw this with Zcash earlier this year where there was an issue there. So AI is definitely very smart. These agents are able to find that. But also, on the good side of it, agents are also helping to improve the performance of cryptography. And we're seeing this not only in our stack, but also in some of our peers. They're seeing speed ups because they're finding these theoretical optimizations or these practical optimizations in code to make their systems more performant. And additionally, they're also making our systems safer. Because now formal verification is becoming a thing, AI is able to write that stuff at scale and it's able to allow us to actually Vet the systems that we're building.

9:54Howard Wu I'd say on the other side of things, AI is also making a huge impact when it comes to, for example, agentic payments and agentic Finance as a whole, agentic markets. There is currently no easy way for an AI agent to be able to transact without revealing their data. And everyone can just stalk and see what it's doing. I think that the concept of giving an AI agent its own wallet that only it can see and control is quite a unique phenomena Because you've now just kind of unleashed unstoppability there. So I think people are going to play with that idea. They're going to take it into the next dimension. But it's certainly fast tracking a lot of the progress in crypto for us.

10:34Josh Han That makes a lot of sense. Already, you've mentioned this concern with public blockchains and data being available for people to see your financial history or your transactions. But I think most people watching haven't been affected necessarily personally. I'm kind of curious if you have any stories of people getting taken advantage of or situations that you're kind of trying to decrease.

10:59Howard Wu Yeah, well, I mean, the first thing that I'm going to say is that like, look, Crypto can't go mainstream until confidentiality is a default. And that, I believe, is actually the last mile. It's the final frontier in crypto. You know, 10 years ago, we were all comparing TPS of our chains. And you know, this thing is faster, it has more throughput, this is cheaper, more gas efficient, you know, that was the game back then. It's all been solved now, you know, like you see with all the modern chains, everyone's doing either like one or two second transactions, or They're going sub second as well. I think that this is a solved issue. But I think that the challenge now is that, you know, why isn't this being adopted by people like my parents, you know, or my Mother, right? Like, it's because that this stuff still has not reached the same level of guarantee and the same level of protection and security that has Been in Web2, you know, and that's why I say like, I think there's an opportunity here to actually, like take this into the Mainstream.

11:52Howard Wu And in that process, I think people are going to realize, oh, there's like, there's genuinely a lot of gaps that were under explored, you Know, I would say, like, it's been kind of toy use cases. So for all these altcoins that have been on the market, have all been kind of entered this new era where, you know, there is RWAs, RWAs are managed by large firms who have a lot of capital, you're also looking at a lot of these types of algo traders Or quant funds, right, who are managing large books, they don't want their information to be seen, they don't want people stalking their wallets, That when they go and trade, they don't want their strategies to be copied or reverse engineered, they've poured so much money into building out These models, back testing it, hiring PhDs in physics to develop it, they do not want this stuff to be just out in the open, Right? And so this is where I think serious finance is coming in.

12:39Howard Wu And with serious finance, that's where the mainstream is actually going to start to pick it up. It's not going to be one of those B2C type of situations, I think it's going to be more B2B to C. Because for most people, crypto still is pretty difficult to use, the user experience is not great, it needs to be hooked in correctly on The back end, and then served to the user with a convenient front end, something that they're already used to, you know, with normal passwords Or logins. And I think that that is going to happen. And similarly, you know, as the as these kind of RWAs get tokenized, and you see new financial products being crafted there, I think the Vanguards or the BlackRocks of the world are going to recognize, wait a second, like if I leave this stuff out in the open, When I'm rebalancing these, these portfolios, or the ETFs or whatnot, people are going to front run us, and we're going to get really bad Price on this, it's going to be slippage, it's not going to be a fun time.

13:24Howard Wu You know, this is this is how modern finance already works, right? You know, people don't broadcast their data on the open. Every other medium where this stuff is traded has confidentiality in it. And you could even argue that like a Visa or a MasterCard network actually a little bit, it's more confidential than your Ethereum variables, because It's not just open for everyone to see. And so this is what I say is like, there's a big gap. But when this gap gets closed, it's going to create a lot of interest and demand for what we've been working on in this industry.

13:51Josh Han I think the way you've mentioned is correct, this blockchain trilemma has in many ways been solved. And you guys are working on how do we get our industry to be basically feature complete as much as traditional finance. And privacy does seem like the last sector. For all the potential Aleo users, Aleo token holders, but even actually taking a step back, I know you've mentioned that you guys have launched A token. You had great day one listing partners like Coinbase. Tell us a little bit about the journey for you. From working on the project as no token to now token, kind of want to hear about the founder journey.

14:28Howard Wu And yeah, where do I begin, you know, I could I could go on for an hour about the founder journey. But I'll say look, like it's been an interesting experience, you know, like, starting anything is difficult. And we've certainly had a lot of challenges developing our technologies, I'd say, you know, when we first started, we actually thought, oh, this is Going to be a piece of cake. We really did the research, we really built up the model, the programming model, we're ready to take this out there, let's just go. And then, you know, we hit our first test, and we realized, oh, shoot, like, the network is incredibly difficult to manage and maintain. And so that actually forced us to take all of our work down, go back to the drawing board. And that's where we came up with Testnet 2, where we had a system that actually, from a VM level actually worked, but we realized That there were some shortcomings there.

15:14Howard Wu For one, you know, the system itself didn't have any on chains, private state, everything was was managed off chain. In fact, a lot of our peers actually are still using the model that we did in Testnet 2, it was not a scalable approach, We were trying to build back then, NFTs were in a boom, roll ups were being a thing. So we started building that stuff to validate our design, our programming paradigm, and realized, oh, shoot, there's a lot of shortcomings there. So we had to tear that down, go back to the drawing board. And we came out with Testnet 3, where we basically built out on chain state, that was fully encrypted, offered end-to-end encryption, and allowed You to interact seamlessly. And that actually ended up becoming the final model that we have in run today. When we were launching, also, we had to go through a lot of the regulatory challenges that are inherent with any crypto project. And being a US based founder and a US citizen, we also had to walk the correct line in terms of how do we design A solution here, that can be easily used, not only in the US, but abroad as well.

16:10Howard Wu And so we had to set up a foundation, we had to move assets and people over, we had to figure out all of those Logistics, it was not an easy process, you know, it took a lot of time. Fortunately, we had some really good investors and really good partners with us. And you know, they help us navigate all those challenges. And you know, I would say since then, now that the network is live, and has been live for the last two years, you know, We've been really focused on how do we make this chain as usable as possible, you know, I have a very strong thesis that The more usable and the more developer friendly your chain is, then the more adoption you're going to have. And, you know, I think that especially in the privacy space privacy is very hard. It's very hard to begin with, because most of the people working on it have PhDs in math or cryptography or computer science. And, you know, I think that to get the average developer to be able to adopt it, and then the average user, then to appreciate It, you have to go the extra mile for it, because it's very deep tech, you know, like the average person doesn't know what zk Is, they don't write a zero knowledge proof is they never heard of this thing.

17:08Howard Wu And like, it's kind of like the internet, like you shouldn't have to know how TCP/IP works, you know, you have to abstract it Up to a level where it becomes actually usable. So, you know, that's in that founder journey for us, it's, it's now shifting our priorities into going higher up in the stack. And this is where in the past year, you know, we launched this thing called Shield Wallet. Shield Wallet is basically a privacy first multi Asset wall, it supports Bitcoin, Ethereum, Solana, obviously, Aleo, USDC, USDT, USDG, we're now going to add even more altcoins, we're also going to Start bringing stocks and generally RWAs onto it as well. I mean, it's to allow people to be able to hold any type of asset that they're used to confidentially. And in the last 30 days, actually, we just launched a brand new product, it's called Shield Swap. It isn't confidential AMM, it's a Uniswap V3 style.

17:54Howard Wu So it's concentrated liquidity, and it allows you to trade without revealing your identity without revealing your portfolio, certainly also hides your trading strategies. So people can't reverse engineer copy you in that sense. And you know, these are the things that we think are going to help to drive a lot of the long term needs for for This chain as well. And so we're investing very heavily in these, because once you have that, for example, with an AMM, now you have a price Oracle, and You can TWAP that right. And with that, what does that open up? It opens up, you know, your Aaves or Compound equivalent, so you can have lending and borrowing on chain. Additionally, now you have this Oracle feed, which you can use to now fund perps, right? And now now perps can rely on that as a signal for pricing things efficiently. And so these are kind of all the basic primitives. We want to do it well, we want to do it right. So we've taken our time to do it correctly.

18:40Howard Wu But you know, I see this as kind of all of the main challenges you have is like, just getting to some of the basic Things that people appreciate already in crypto requires so much of a heavy lift from the grass underneath and abstracting it into, into a good Place and working with good partners to get you into the right spot and then navigating the regulatory landscape, especially privacy to make that work. Well, all this stuff has to come together. It doesn't all happen at once. And it certainly doesn't happen overnight.

19:07Josh Han Yeah, I mean, I've learned so much about how not integral privacy seems like it was in the beginning of crypto. And now they're there, we really don't know how much we need it until we don't. Right. And it's great that we have another solution with you guys building Aleo. If there's any other last messages that you want to give to our audience or to Aleo fans, please feel free.

19:30Howard Wu Yeah, I mean, I'll just say, look, Shield is live. We're in the App Store, the iOS App Store, the Android Play Store, and also the Chrome extension. If you don't have it, please download, give it a try. We're always looking for more feedback on it as well. So we have a discord and we also have a telegram group, please join it. And with that, you know, I would say like, give it a shot and let us know how it is. Amazing.

19:51Josh Han Howard, thank you very much for joining us.

19:53Howard Wu Thank you for having me.

19:53Josh Han Appreciate you.