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Enabling A New Era For American Banking
Recorded: March 19, 2026 Duration: 0:33:19Space Recording
Full Transcription
Thank you. Thank you. We're going to bring it back up in just a second. Music Bye. you All right. Omar, are you there?
Yes.
There's a speaker.
Excellent.
Super.
There you are.
Yes, I'm here.
Okay.
Well, I imagine people will be trickling in, but yeah, just for the sake of, I'm here. Okay, well, I imagine people will be trickling in, but yeah, just for the sake of those who
are here, and there's a little recording afterwards as well, we can probably go ahead and get
started.
So anyway, we're here to talk about the new innovation from the Kari Network, which is built on ZK Sync Providium.
And maybe we can start with you giving me a sense
of what the carry announcement represents at a high level
and why did they choose Providium?
Yeah, sure.
I think when you started off in the previous call,
it was pretty much spot on.
There is a tension between stablecoins. The stablecoin story has really blown up since last year, especially with Genius Act. And it's really proven that money can be moved 24-7 permissionlessly globally as well.
especially on the banking side, is deposits are still stuck in the old ledger system.
Even within large banks, they themselves cannot move money 24-7 intrabank,
even if they are, let's say, in just the U.S.
And then you do have, you know, in the U.S., you have payment systems like FedNow, etc.,
that enable 24-7, but not every bank has access to those payment rails.
every bank has access to those payment rails. And so banks do have this issue where stablecoins
are pretty much, not necessarily, I would say, there is a fear that they will take on deposits,
particularly on the payment side. And that is where tokenized deposits really come in. It enables,
tokenized deposits pretty much are the other side of stablecoins in my opinion, where you have fully regulated deposit tokens that can start to move 24-7 globally.
And that's kind of what the Cary Network is built to resolve.
They're specifically right now supporting regional and community banks in the US,
onboarding them and enabling them to essentially be able to compete against stablecoins by letting their deposits be able to move 24-7 between the member banks in the network.
And the first use case really is enabling access to faster payment rails 24-7 that are significantly cheap compared to what you might have with ACH and Fedwire.
what you might have with ACH and Fedwire.
Yeah, this is very interesting because we have,
especially in the fraught political times that we have here,
heard time and time again, the critique of stable coins,
that there's a risk of deposit flight from banks.
And so having a way to have regional banks,
which are also oftentimes cited as being endangered by the rapid technological change,
actually benefit from crypto rails kind of undercuts that whole critique in a way.
So I'm curious also, what's changed like in the past year or so in terms of institutional adoption that this deal signifies?
Yeah, so I would say the banks have always been very interested in blockchains. They understand
the benefits of it, the programmability of smart contracts, programmability of money,
the always on rails. But the issue has always been kind of just staying in the background kind
of doing pilots and I think stable coins has really pushed that to the foreground
and kind of made them essentially it's a forcing function really right for the
industry that hey you need to adapt and you need to move forward on this I think
everything we're seeing now from the massive growth in stable coins you know
you've got different fintechs like Klarna coming out with their own stablecoins as well.
It's imperative now for them to act from a business side.
Then from regulatory side, you then have the passing of the Genius Act.
And that essentially solidified tokenized deposits as a complementary digital asset to stablecoins, but regulated.
Banks can still leverage their deposits.
They can still grow credit and lend them out.
It's still under FDIC insurance.
And it's within their four-walled garden as well.
So to me, I think tokenized deposits,
they will have a place where they'll be on the bank
permissioned rails, and then stable coins will be essentially the external money movement for them
as well. So if banks launch tokenized deposits, they can take advantage of both sides. You can
receive and send stable coins for when money needs to move out as some sort of cash, but then you can
convert them automatically into tokenized deposits when they're on your own rails
and treat them like deposits.
It has better balance sheet treatment.
There is no potential issues or counterparty risk
with the stable coin issuer.
And for their benefit, they can continue
doing the lending activities that they do
with deposit accounts.
Now, this is really interesting
because for a long time there's been sort of a tension
between institutions building on private permission chains and the kind of public composable permissionless
infrastructure, notably Ethereum.
ZK Sync is very much leveraging Ethereum. But now this solution seems to address this privacy issue
that institutions face and yet is still anchoring itself to Ethereum. Can you explain a bit about
what technically has changed to make Bravidium possible and help the audience understand this distinction between private execution and public verifiability?
Yeah, so there's really a few things that have converged.
One is the ZK technology over the last year
has significantly improved.
I mean, we're talking now with our latest proof systems.
You're essentially generating ZK proofs
in under a second per four-inch transaction.
You can reach internet scale
with thousands of transactions per second. The cost to generate these proofs in under a second per transaction. You can reach internet scale with thousands of transactions per second.
The cost to generate these proofs also now is,
we're talking significantly small fractions of a penny as well.
So from an operational cost perspective, the costs are significantly low.
You can just boot these things up now.
The thing on the privacy side is we're not actually
using ZK proofs for privacy within a Prometrium. It's really architectural how the privacy actually
comes about where the privacy comes because all the data and the infrastructure is held within a
bank or an institution's environment. They control the database itself. And what they're really
emitting outside is the ZK proof that hey everything I'm doing
is fully valid there's no double counting that the smart contracts are executing how they should
I actually have the assets that I am transacting with I actually have the
signing keys and I'm authorized to actually run and transact and run these execute transact
execute these transactions and the verifiability then is where you come in, where Ethereum comes in.
Everyone can verify the ZK proof that you are settling on Ethereum and verify that you're
doing everything correctly within your own permitting. And I think that's a key distinction
from our philosophy as well as the architectural underpinnings. And it really just comes down to,
you know, the trust assumptions.
Here, yes, you definitely trust the institution and the bank,
but there's additional layer of security as well and verifiability
that the ZK proof is giving that, yes, you can't see what they're doing
inside the Pravidium.
They're holding all the data.
Everything is running inside their environment.
But you can verify that what they're doing is fully correct.
And I think that's a key distinction that Providiums offer
that I think a lot are not.
And it also probably gets to one of the big misconceptions
about what zero-knowledge proof technology is.
I mean, obviously it has a relation to privacy,
relation to privacy, but it's primarily a scaling technique. Now, why hasn't this architecture
but it's primarily a scaling technique.
been tried before? I mean, you alluded to improvements in proof generation, reducing
costs. Is that primarily it or are there some other reasons why we're seeing this architecture
come up now? Yeah, I think it really does boil down to the efficiency gains that we've had in the technology.
Before, I mean, I've been now at Matterlouse for almost four years,
and I think when we first started off, generating one of these proofs was almost like a dollar's worth.
And so it was not practical for a lot of use cases, because it would be pretty expensive. Now we're talking about almost like a thousandth of a penny per transaction.
So from a practicalities perspective,
the technology is now ready for much larger scale adoption and use cases.
And then also just making it easy, I think is another key element here.
Making it easy, I think, is another key element here.
Making it easy from a deployment perspective and then also making it easy from an understanding of how it actually works
since we're not necessarily using ZKFood for privacy
and the transactions and everything is held within the bank.
It also makes it easy to digest in terms of how the privacy works
because it's very similar to how most compliance, and engineering teams currently build their systems, right? They
have role based access controls on their databases. They control who can access, who can permission
and who can transact. It's very much aligned with that line of thinking.
Okay, so let's drill down onto some of those use cases.
Also, to understand, does this enable new products or is it primarily about making existing
financial rails more efficient, which could benefit from the banks who are using it?
Maybe you can just sort of walk through what are some of the first use cases that you expect
to go live once Providium is up and running with Kari?
Yeah, so I would say it's both.
It's both new use cases as well as existing and gaining efficiencies, but it's really the sequencing of that that I think really matters.
What we're going to, at least within the ZK Sync world, what we will see is initially the efficiency gains.
I'm starting with intrabank settlement, money moving between just a bank itself, and then also
then interbank money moving between banks and being able to settle 24-7. Once that is done,
then you've actually built a new money layer, and you couple that with stable coins. And from there,
you can start building entirely new building blocks. You can start thinking a new money layer and you couple that with stablecoins. And from there, you can start building entirely new building blocks.
You can start thinking of new types of products, for example,
you know, programmable escrow contracts.
You can start thinking of, you know, much more programmable payment systems as well.
So yeah, I think it's initially, I think at least this year,
and especially if we talk about the car network, it will
be around 20% of money moving and the efficiency gains that gives you.
And then slowly but surely you'll start to expand on the different use cases.
I think there's already thinking of how do you then start leveraging since it is tightly
coupled with Ethereum, potential yield opportunities and other asset opportunities that already
exist on Ethereum and leveraging that.
Yeah, so I mean, part of the advantage here is within the ZK Sync ecosystem, you have
these elastic chains.
And how does that interact with the liquidity that's on these private chains to enable that composability
that you're alluding to?
Yeah, so I think there's two levels of composability.
There is the Pravidium-to-Pervidium private interop, and the composability there is also
that is where the ZK proofs essentially enable the composability where, you know,
Bank A on a Pravidium can send a transaction privately
to Bank B on a Pravidium.
They generate a zero-knowledge proof that everything is valid.
They accept the transaction.
And then you essentially do a burn and mint between those two.
Then there's also the Layer 1 interoperability
that we have with Ethereum,
where you can essentially use Ethereum as,
think of it like an on-off ramp.
All the different on-off ramps that already exist on Ethereum,
whether you want to move money from a centralized exchange or a custodian,
you can do that directly through the Pervidium.
But then you can also access the DeFi applications.
So, for example, if you want to deposit onto Aave or Morpho
and start earning yield,
you can also do that very quickly from within your Pravidium as well.
So there's two layers of this interoperability.
And the Pravidium to Pravidium interoperability,
the composability for that is
enabled by the ZK proofs where
the transactions can be fully private and you're just
verifying that yes, what I am receiving from
my counterparty or transacting bank
is correct and valid
and I can go ahead and execute this transaction.
So that's interesting.
From a sort of a naive standpoint, you think of the issuance of the assets as mattering
in terms of the ultimate composability of them.
If you, in this case, obviously you have tokenized deposit of off-chain assets,
and they're coming from this private compliance-focused chain, the Providium,
and then moving into DeFi protocols on public Ethereum?
Yeah, you can, right?
So obviously, I don't think the tokenized deposit itself
would be moved out of an in-real bank's Pravidium.
But what you might have is it being, let's say,
cleared for a stablecoin.
And that stablecoin then being the cash side
that you're then using to deposit into,
let's say, a liquidity pool on the L1.
And you're still controlling that account
and its holdings and how it transacts on the L1. And you're still controlling that account and its holdings and how it transacts on
the L1 directly from Providium. We have a concept of what we call global addresses,
which essentially are L1 addresses that you can control from your account on the Providium.
And you can also create stealth accounts. So every time you want to transact with L1,
you can create a brand new account. This way, it breaks the linkage
between the Previdium and the L1,
which also creates another layer of privacy.
If you are moving to and from L1 liquidity to your Previdium.
Then the other thing you're also alluding to is the asset issuer.
Within our interop frameworks, the asset issuer would still be able to see and also control where their assets are moving, between which counterparties, etc.
So that's also getting built into the protocol too.
So I have the issue of, okay, how do you move a tokenized deposit from Bank A, Providium, to Bank B, Providium?
Because a bank's not going to be able to accept another bank's deposit token.
And this is where you're going to start seeing within the industry a lot of, I guess, clearinghouses.
Essentially, different clearinghouses are going to settle different tokenized deposits and different stablecoins.
Very similar to how we kind of have it today, but it's purely for digital money.
Right.
And, well, and of course, one of the big advantages of this architecture is actually having the
correctness being enforced at the protocol level so that you're essentially building
a shared infrastructure, but you don't have to trust any individual operator.
You can trust the math, the cryptography behind it.
Am I got that right?
Yeah, that is correct, right?
So there's obviously, there's going to be two layers of validation.
There's always going to be,
you're still going to have your trusted intermediary,
whether it's a bank or FMI.
Those roles don't necessarily change. They're still going to be required. They're still going to have your trusted intermediary, whether it's a bank or FMI. Those rules don't necessarily change.
They're still going to be required.
They're still going to be needed because you're still going to need someone to set some sort of rules around how transactions are processed,
who can process them, et cetera, and also identity in KYC, KYB, and all that stuff.
That does not necessarily change.
What does change is now you have an additional layer
that you can kind of trust.
You can trust that, yes, cryptographically,
I can verify that you actually have the funds,
you actually executed the smart contracts correctly,
and I can trust this transaction.
That is a key element that I think is relatively new
and that we think is pretty much what's going to be required if we are going to
build these large internet scale networks of many, many banks, institutions, and individuals and
companies moving on chain. Because otherwise, without that cryptographic verifiability,
you're essentially just rebuilding a very complex network of trust.
And we see that time and time again.
At times of stress, et cetera, it tends to start to break down.
And yes, you can assume that, yes, everyone is a trusted participant,
but that's not really a trusted, honest participant.
But we all know that that's not how the world works.
So essentially, you can still have Ethereum be the source of truth for finality and in
a sense constrain what is possible to what kinds of transactions are possible on the
private chain because of this state validation.
I mean, this is big for me because having interoperability beyond a consortium
is a real unlock.
And even if you have these off-chain backed assets,
as you say, if you have some technique
like being able to have a stable coin then issued
to make the ledger ultimately usable
outside of a closed ecosystem,
for example, bringing it into ZK Sync era
or using those deposits as collateral, interacting with DeFi on other chains.
That's pretty significant.
Yeah.
You mentioned the regulator portion of this.
Curious, how comfortable are regulators with zero-knowledge proofs at this point?
with zero knowledge proofs at this point?
Yeah, I mean, we've been talking and educating folks
on ZK proofs and on Ethereum as a neutral,
fully decentralized settlement layer
for a number of years now.
I would say it used to be,
you had to actually explain how ZK proofs worked.
Now you're actually starting to see ZK being called out
in various different industry reports, actually.
We're seeing more and more sightings.
I mean, even like recently, I think DDCC had an interoperability report that they published.
Maybe it was even like last week.
And even in there, you have the use of ZK proofs and selling onto a neutral layer one
as a, you know an important property for validation
and trust in the network.
So it's definitely significantly leaped
far beyond where it was, I would say,
even just two years ago or even last year.
And now I think people are starting to much more understand
how this can be used from a validation standpoint and essentially
cryptographically verifying data. A good example would be, let's say we have this ability of
selective disclosures within a Providium. Now, selective disclosures normally, you know, you have
an entity essentially giving someone, an auditor or regulator or a counterparty their data and
saying, yeah, this is the data. Now, how do you verify that? I mean, historically, you've had to
have audits be done. Now, what you can do is you can also share cryptographic proof that the smart
contract that you're selecting disclosing data from has not been altered. So, you know, let's say
there's a tokenized deposit contract or an escrow contract, and you've agreed on
that this is a smart contract.
You can also then send to them along with the data,
the cryptographic proof, like, yes,
this is still the same smart contract that we agreed on.
So you can trust the data that I'm actually sending
without necessarily having to go through
large expensive manual audits.
Cool. You're working with about half a dozen banks on this at the moment.
What do you think needs to happen for this to scale to hundreds of institutions?
I mean, there are 4,000 banks in the US or something, right?
Yeah, there's a lot of banks.
I think one is you need to have proof points.
You need to demonstrate, yes, let's look at the Kari example. They're going to, they're producing lockdown now and starting their MVP with the aim to get to mainnet later this year.
yes, this technology works.
The guardrails have been set from a KYB, KYC,
all the compliance layers have been built and approved
by all the different stakeholders and it's operational.
Once that is live,
I think then you kind of are able to get over
to the next level, which is, hey, this works.
You should come and join
and start taking the advantages of 24 seven deposit
and stable coin movement.
So I think that is the biggest thing.
And I think a lot of, and you see that everywhere, right?
Everyone is still testing things out.
Things are moving to production.
But everyone still needs to see the proof points of how it's done, how it works,
what the benefits are, essentially what the playbooks are.
The playbooks are all getting completely rewritten as we speak.
Yeah. And I know there are a lot of pilots like these going on,
and there are other attempts to marry privacy
and permissionless public chains.
What do you, yeah, how do you sort of differentiate?
What do you sort of see as the edge
of Pervidium solution that you have?
I'd say the real edge is that we break down
the trade-offs that banks and institutions
previously had to do.
I think you alluded to this earlier in the call.
So for example, if you wanted privacy,
you lost out on interoperability and verifiability.
If you wanted interoperability and access to the broader market that was growing, you
had to build it on public chains and you pretty much lost privacy aspect.
The real edge for Privatiums is that we essentially merge the two.
And so there isn't really a trade-off now anymore.
You can have access, you can build on the public open standards and the public markets that's being built on Ethereum, but you still have fully control over your own environment
through the Previdium. You control your data, you control the permissioning and the access,
and it resides completely in your own environment. So that's really the edge there. And then
obviously then the ZK element comes into it where you have the cryptographic verifiability
that everything is fully correct.
And it's very high performance.
I mean, you can run very large scale applications
and operations on each of these.
And the other nice part is they're horizontally scalable
with the interops.
So if you're a significant large global bank,
you probably might actually run multiple
probadiums because you might want to break them out further and bifurcate them based on maybe geography and
region and different potential applications as well. So there's a lot of ability to design the system how you
want it, which is really a trade-off that you kind of had to do.
And the other thing is that it's EVM.
So it really builds on a lot of the open standards
that have been getting built over the past 10 plus years.
You don't, it's not a closed stack.
Right.
Now, if we imagine a world
in which there are many more Providian deployments,
what is the, what's your business model look like? Right. Now, if we imagine a world in which there are many more Providian deployments,
what is the, what's your business model look like? Is there, you know, because you obviously have to be able to make the case that this is more efficient and yet, yeah, presumably there's
there's also some way for Matterlabs to make money out of all this.
Yeah, so there's a couple layers to that. One is obviously Providium is like a SaaS-like product. So there's that out.
Then there is the protocol fees,
which are obviously also very tiny.
But as the network grows, this starts to accumulate.
And then as you start connecting these Providiums,
there's room for plenty of different services
that get built up.
For example, I mentioned clearing.
Our goal is as this network grows
and as there's more nodes,
or nodes being individual probitiums,
connecting them all through different services
that they all will need.
For example, being able to send tokenized
a file from bank A to bank B. There's
going to have to be clearing identity services.
And those can also come from different third parties
that will join and create those applications.
But then connecting them is really where a lot of the value accrual can potentially come from.
Do you anticipate that users will even know anything about the backend that they're using?
Will this actually reach end users or is it basically just something to interface with
the institutions that you're working with? They will.
Not yet, I would say, but as the technology improves and it gets miniaturized,
there's definitely going to be opportunities
to turn this on for individual consumers
and especially like AI agents as well.
My view, I've been here for a couple of years now,
it's a 10x improvement every year,
which means a 10x opportunity to miniaturize
the Providium itself.
I think probably maybe even like two years,
you might be able to just run one off your cell phone
and think of it almost like a private omnibus account
that's connected to a much larger network of applications,
both on Ethereum as well as
as well as on the different Providiums themselves.
on the different Providiums themselves.
I saw Alex Glukowski at the stablecoin summit in DC the other day and yeah, it was one of
the things he was asked about was how stablecoins will coexist with tokenized deposits.
I know some people are still a bit skeptical of the idea,
but this to me does seem like an important thing
to kind of break this log jam that we have
between the crypto industry and the banking lobby.
You know, the idea of marrying the best of both worlds
in a sense to create this incorruptible financial infrastructure,
which is how Alex put it.
Yeah, I'm curious what you think looking forward
to out a year, like what are you anticipating
your success to look like, to materialize?
Yeah, I mean, we're already in discussions
on how do you actually pair tokenized deposits
inside a bank's ledger system with the need to also accept and send out stablecoins.
So, not even next year, I would say like this year, you'll probably see, I mean, we're already
starting to think through and work with some design partners on how do you merge tokenized
deposits and stablecoins? And I think that's going to be a really interesting area
because effectively what we will probably see
is banks being able to accept and send out stablecoins
whenever money needs to move in and out.
And that will greatly increase their potential addressable market
because then they can tap into the growing blockchain crypto ecosystem,
especially through stablecoins. But then when it tap into the growing blockchain crypto ecosystem, especially through stablecoins.
But then when it moves into their environment,
it can just get auto-converted into a tokenized deposit.
So they can have both sides.
They can kind of have their cake and eat it too with this type of setup
where you're sending and receiving stablecoins,
but on the inside, it just auto converts to a deposit account.
Right.
That is, I think, and you're seeing a lot of companies start to come out to essentially do that, right?
I mean, you've got a number of different, let's say, clearinghouses that are starting to get built up
specifically for this type of conversion and clearing.
For example, like Ubix is one that I think a lot of people
are now familiar with as well.
And regional banks alone have something like
eight trillion in assets, I think I saw thrown around.
So, you know, anything that can bring some of that money
on chain is also going to be interesting
for the DeFi protocols that are being built.
Yeah, it allows a lot of the regional community banks that don't have the same,
the larger banks have been building for quite some time.
They've got very large budgets.
They've got very large digital assets teams.
This technology and Kari being one of the leaders on this
enables them to actually start taking part in the on-chain economy.
Ideally, they'd be able to accept payments in stable coins or payout in stable coins, but then keep everything in as a deposit account ledger.
All right, Omar.
Well, thank you very much for educating me on this subject.
And thanks to everybody who's tuning into this X space.
If you are interested in where this is all going next,
whether it's tokenized deposits
or on-chain finance more broadly,
BlockWorks is gonna be digging into this
in a much bigger way at our Digital Asset Summit
in New York starting next Tuesday.
So I hope to see you there or on the live stream.
Thank you very much. Thanks.
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Blockworks
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