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FHEels Good Man: Bringing FHE everywhere with Arbitrum ✨
Recorded: March 31, 2025 Duration: 0:29:49Space Recording
Short Summary
Phoenix and OffChain Labs have formed a strategic partnership to advance Fully Homomorphic Encryption (FHE) technology in the Ethereum ecosystem. The collaboration aims to address privacy demands from institutions and drive innovation in blockchain privacy. Phoenix is also planning to launch a testnet for a new product within the Arbitrum ecosystem, highlighting ongoing project development and market integration.
Full Transcription
Thank you. Hey, good morning, y'all.
Guy, can you give me a mic check when you can, make sure everybody can hear each other. Hey, Mike. Good morning. Can you hear me okay?
Hey, good morning. Yeah, I can hear you.
Perfect.
Mic check one, two. Can you guys hear me? I can hear you.
Hey, Ira. Good morning, two. Can you guys hear me? I can hear you.
Good morning. Good morning.
Thanks for showing up a little early on time.
We'll just wait for the other guests before we get going.
On time is late, man. Got to do the mic check and get everything working. Right my old uh firefighting captain used to say 10
minutes early is on time there you go
so Thank you. I should probably have some waiting room music playing.
Y'all are just going to have to use your imagination.
What would you pick for music?
That's what I was just thinking of.
Do you have any good suggestions maybe for the next one?
What would be appropriate?
Maybe two chains, you know, because it's off-chain laps.
I'm actually curious to hear Ira's musical taste.
Oh, man, I was trying to come up with a clever answer,
but I got nothing.
I really like 2 Chainz,
and I'm sure I would love Mac's singing voice if he just wants to serenade us for a few minutes
while people joined.
I don't know if you ever met Mac face to face,
but he has a rock star kind of look on him.
You know, I probably shouldn't be announcing this publicly,
but I used to be a musician in a former life.
And one time after a show,
I had the mother of my bandmate approach me and say, hey, you should probably never do that again after I sang.
That's rough.
Yeah.
I did make a career change shortly thereafter.
I appreciate the good, honest feedback.
Okay.
We got everybody here.
I see Guy Z.
I'm just approving you Guy Z to speak.
And I'll approve off-chain labs to speak to just because they've requested.
I don't know if they'll get a chance to.
Okay.
We got everybody here.
Steven, how are you doing this morning? Oh, hey, my mic is off. Hey, I got everybody here. Steven, how you doing this morning?
Oh, hey, my mic is off. Hey, I'm good.
Good morning, GM, how are you?
Good morning, doing very well, thank you.
I just wanted to make sure that you're able to speak.
And Gai-Z, can we just get a quick mic check
from your end as well?
Hey, hey, how's everyone doing?
Really good.
Thank you for that. It sounds like everybody's able to speak.
I'd like to take care of that before we get started. So let's get into it.
Hey, everybody. Good morning. My name's Mac from Phoenix. I handle content and comms at Phoenix.
And I'm going to be just kind of hosting, facilitating this space this morning.
But really, I'm more interested in hearing from some of the illustrious guests we have with us today let's before we kind of
get into the meat of the topic let's just go around and have everybody
introduce themselves and that way I don't mispronounce any last names let's
start maybe with the Phoenix side of the house and then we'll go to the off-chain labs tandem. Can we start with Guy Ai?
For sure, yeah. I'm Guy Ai. I'm the CEO of Phoenix. I've been in the space.
Started Phoenix about a year and a half ago together with Guy Ziskin.
Very excited for this collaboration and the same thing specifically.
Awesome. Thank you, Guy. And now moving on to uh guy number two
that's you guys yeah i think you gotta get the other way around
i have the original lemon which means i'm the guy number one um no but seriously um uh yeah uh i've been in the space for quite a while. I've been actually working on privacy, you know, confidentiality in blockchains since like 2014.
So I've been around the block.
I started a secret network before, focused on TEs.
I did my PhD on MPC as a few other people on this call.
did my PhD on MPC as a few other people on this call.
And I think after venturing a lot of technologies,
kind of realized that FHE is really going to be
the winner takes all technology.
And yeah, I've been working on Phoenix
for the last year and a half
and have been working very closely
with the off-chain lab scene for like the last,
I'd say almost as since the minute Phoenix started.
It was more hush-hush in the beginning,
but thankfully now it's becoming public.
Awesome, thank you, Guy.
Okay, moving on to the Tandem slash OffChain Labs
side of the house.
Ira, would you mind just giving a brief intro on yourself?
Sure, hi everyone, Ira Auerbach.
I'm the head of Tandem,
which is OffChain Labs investment arm. I've been in the
crypto space since mid-2017, spending most of that time at the Gemini Exchange. And just before
joining Off-Chain Labs, I spent two years running the NASDAQ digital asset program. And prior to
that, I was in traditional finance on the trading side and spent a few years at Palantir.
Hey, I'm Stephen. I'm co-founder and CEO of Offchain Labs.
And I also actually have a background in cryptography. I did a lot of work in MPC as well.
And I've always been super interested from an academic perspective in Fography. I did a lot of work in MPC as well. And I've always been super interested
from an academic perspective in FHE. And one of the coolest things I think that we're doing here
today and why I'm so excited about this partnership is we're bringing technology to market that
really I never thought we'd see anywhere near as soon as we are. So super, super excited to be here today.
You know, we at Offchain Labs are so happy to support
and the team at Phoenix is unquestionably the right ones
to bring this to market.
We're happy to play a role in that.
Thank you so much, Steven.
And I'd love to hear a little bit more
on your thoughts on that, but that was a great intro. To to kick this off I think I'd like to start with guy I
guy I do you mind just giving the listeners an overview of this
announcement in this partnership and also your your taking your thoughts on
you know why we're so excited about this and what you think it means for
encryption on arbitral andrum and Ethereum more generally? Yeah, of course.
So the first time I personally met the blockchain lab team
was about a year and a half ago.
We were at ETH CC in Paris, and we
met some of the engineering team over lunch.
And I remember even then that I was quite amazed
with the level of technical knowledge that they have and specifically their ability while having lunch
to actually solve one of the key problems that we were facing at this point, which was
how to do broad groups over encrypted data. That's actually started the ball rolling.
Later on, we met Steven and the rest of the team. And we definitely saw that there
is a perfect alignment here. We're talking here about the team that will one of the better projects
in the crypto space, very technically savvy, understands cryptography, appreciate the value
of confidentiality towards the overall growth of Ethereum in the long run. And for us at Phoenix, we believe that in order to make FHE a capability which will be everywhere
in the ecosystem, we need to find these type of teams, teams that can help us research
FHE, mature it even further, and help us together build a very strong go-to market that can take it,
not just into the Arbitrum ecosystem, that one I think makes sense, but also a pathway towards
getting FHE across the board and make it a cubic with this. And that is really the goal of this
partnership is to help drive FHE to the broader Ethereum ecosystem.
Amazing. Thank you for that, Guy. I'd love to hear from Ira. Ira from Tandem, again,
is the venture capital arm of Offchain Labs. Ira, my understanding is that this partnership is a
little bit unique. So I'd just love to hear your perspective on what it
means and why you're excited about it. Yeah, we are incredibly excited about the partnership here.
And I think when you typically look at partnerships like this, you're focused on
two main categories in the quality of the founding team and the product market fit of what the team
is building. And as for the quality and experience of the team, you just heard the resumes of the founding team and the product market fit of what the team is building.
And as for the quality and experience of the team, you just heard the resumes of the Phoenix crew and that's just the founders.
You and the team absolutely fill the subject matter experts that have a true understanding
of what it takes to bring FHE out of the academic setting and put it into developers' hands.
FHE out of the academic setting and put it into developers' hands. And then, you know, to add on
to the uniqueness as in terms of product market fit and what developers will be using this
technology, the possibilities are absolutely endless. Off-chain labs has a unique vantage
point in that we're investors, but we also help to build and maintain the arbitrage ecosystem.
And confidential compute is something,
a request that we hear from both current members of the community and also as a potential unlock for institutions looking to enter the space.
And the use cases really vary from financial transactions
to healthcare systems to anything having to do with online identity.
There are very few things that
can't be aided by confidential compute and what FHE can bring to this ecosystem. So I think from
a uniqueness standpoint, it's really those two factors, the founding team, the vast,
vast product market fit in what sets Phoenix apart and why we're so excited to jump into this partnership.
Amazing. And I think that's a great segue. I'd love to hear more from Stephen. Stephen,
you've been in this space. You're definitely an OG. You helped to create the optimistic
rollups that are scaling Ethereum. I'd just love to hear a little bit more. You kind of
touched on it earlier, but I'd love to just double click on, you know, what are you looking forward
to with FHE and why do you think this is a big unlock for Arbitrum and Ethereum?
Yeah. So besides for, you know, just my general interest from an academic and just, you know,
technical innovation perspective, I think from an ecosystem perspective,
what we're seeing now across the board
is institutions and institutional users.
So that could just mean banks and their customers
beginning to onboard to blockchain platforms
and use DeFi and the merger of financial
and non-financial applications,
and even broader applications than financial applications,
them coming on chain using the blockchain. And the good thing is, there are a
ton of incredible benefits that this technology can and will bring people. But the bad thing is
that there's a certain expectation that people have a privacy that's just not really guaranteed
and not built in by these systems today. And those that are using the blockchain for more of the
crypto native applications understand this. And we have fantastic use cases that don't require
privacy or aren't blocked and not having privacy at least, even if they'd be benefited by it.
But as we move into more mainstream applications, there's just going to be an expectation of banking
privacy. Some of it will be legal, some of it will just be social and expectations. And we need really technology to fill that gap. And the timing really couldn't be, I think,
more perfect than it is now. And there have been so many projects in the past that have tried.
There's a graveyard of projects that were too early to their time trying to build privacy
solutions to teams, to markets that didn't really need them yet. But the market needs it today.
And the combination with FHE being the silver bullet in privacy, so it's the right technology
at the right time. And the third leg of this trifecta is it's the right team to bring it
to market. So I'm super bullish on privacy in blockchain transactions. I'm super bullish on
now being the time that we need it. And I'm super bullish on privacy and in blockchain transactions. I'm super bullish on now being the time that we need it.
And I'm super bullish on both FHE being the solution and the Phoenix team being the team that's going to be successful in bringing this to market.
And that's why we at Off-Chain Labs are partnering closely and saying, hey, we want to be a part of this.
We want to accelerate it, right?
Because we have deep expertise on the optimistic rollout blockchain arbitrage side.
And if you combine our experiences with the Phoenix team, really, we have something that's
just unmatched in terms of our capabilities to bring this incredible technologies to users
that can actually benefit from it today.
Amazing.
Yeah, it does seem to be that the stars are really aligning here timing wise.
That's actually a great segue to Guy Z and some of the developments in FHE.
But before we go there, I want to give Guy a chance because I feel like he might have
something to say about the institutional side, about the fact that for some of these
institutions, privacy, confidentiality, whatever you want to call it,
is a must-have, not a need to have.
I feel like you might have something to say there, Guy.
Do you have anything to add on that point before we move on?
Yeah, you're spot on.
We already started seeing that interest early last year
where we partnered with JPMorgan Chase,
and that was part of their requirement in building the next level of their platform,
which was heavily regulated and required privacy.
And they were the one that actually insisted on adding FPG as a core component.
is a core component. So our overall story is we believe that confidentiality, privacy
is a missing piece. It's a key component and it's just logically makes sense and required.
Institutional requirement is out there and it will just grow as we progress in time.
And out of everything that we have,
looking at the different technologies, TEs, MPCs,
FHEs, we feel that FHE, and that's why we started Phoenix,
is really the winning horse here.
And now we're starting to see that demand coming from not
just institutionals, but definitely
from institutionals as well.
Yeah, it is interesting how the stars seem to be aligning institutionals but definitely from institutionals as well
yeah it is it is interesting how the the stars seem to be aligning and everything you know timing so important speaking of
which um i'd love to hear from somebody who is
probably the foremost expert or not foremost but one of the people just
deeply embedded in the fhe space who can speak to why now is the prime time for FHE.
Mr. Guy Ziskin, guy number one, apparently, as he corrected me.
Guy, can you tell us a little bit about why now is the time for FHE?
Like, what developments are we seeing that make this the time?
So, I think very briefly, it's the basic, let's say algorithms underpinning, like the
basic cryptography underpinning FHE has kind of been solidified in place.
And that's always something you want, like to kind of be in a place where you know that
the technology
is mature enough to actually go to market.
So we are definitely there yet now after like 15 years of FHE being, let's say, developed
on the research side.
The other part of it is really that in the last, let's say, five years, people have actually
realized that FHE has been solidified on an algorithmic
base layer.
So they've been working on making it really, really fast and really, really practical,
more from a cryptographic perspective, not necessarily from an implementation perspective.
And what we're seeing now, you know, the things that we do and other companies in the space
and outside of the space do, and also in even big companies, is that people have now been focusing on engineering it the right way.
And that's what really delivers the like 1000x speed up unlock that you need.
And that is a pretty big effort, as many people on this like space will tell you and outside of it but
it's doable and it has like a concrete timeline to success and that timeline could be ranged from
like a few months to like maybe one to two years and that's exactly when you want to kind of hit
the ground running which is what we're doing yeah real quickly I'd like to maybe bring a metaphor to bear on the progress made in
the FHE space.
And I'd like to compare it to AI.
I think all of us, you know, AI is trending, everybody's talking about AI.
But the reality is this research that's gone into AI has been going on for a long time,
right?
Like since the 80s, if not earlier.
And it's only recently that we've sort of seen the fruits of all this labor.
So I wonder if there's just a parallel there with FHE.
I think there's a lot of things that have been going
on the scenes, behind the scenes.
And eventually, people don't really realize
until there's something that you can actually see
and it sort of hits this shelling point.
But I wonder if we're getting sort of close to that point.
Yeah, this is sorry.
No, I think we're definitely at the stepping point.
The progression that guys described both on the cryptography side
that makes it significantly better and more mature.
The ability to now have a FHG in a way that can be used by developers
very, very easily without the need
to be cryptographers. I think we always talk about performance, but we also need to understand that
there's a level of complexity that has been significantly resolved, making it very, very easy
to use. And there is, of course, the last piece, which is just the ability to run it faster and
faster and the projection for the next 12 months, which goes more than the cryptography, but also the tie into specific hardware that's
going to come and just make it extremely fast. So when you start looking at all these data points,
definitely feel that the next 12 months are going to be a major breakthrough for FHE.
We're talking a lot about the cryptography.
We also feel that there is a significant value
in the business opportunity here and the use
cases associated with which we're going to work very closely
with the off-chain lab team and going
to make a couple of really exciting announcements
in the next couple of weeks as well.
Yeah.
Anything to add there, Gai Zezy, before we pick up that thread?
No, I think that's spot on.
I'll only add that I think people are going to be very surprised at how fast this is going
to...
Like, it would kind of be, with your AI analogy, it would kind of be like a chat GPT moment
where people who are very close to this actually expected it and knew that it's going to
happen like two years before everyone else but to everyone else it seemed like an overnight thing
that just popped up and magically appeared so I very much believe that in like the next year or
two like that's what people are gonna see here happening okay that's exactly what I was kind of
trying to get at is like obviously if you've been working in AI for the last decade, you knew that this stuff was coming.
But for the rest of us, you know, just didn't have any idea.
So, yeah, Guy Z, I kind of consider you like a canary in the coal mine for this kind of stuff.
And so, yeah, interesting to hear an insider's perspective that you think we're close to this kind of tipping point.
Okay, so Guy, I'm kicking it back to you.
You kind of mentioned, you know, working closely with off-chain labs to bring FHE to Arbitrum.
I wonder if there's anything else you can speak on and sort of what that entails.
I know we don't want to, you know, give too much away, but do you want to just talk a little bit about what is the plan to bring fhe to the arbitrum ecosystem um yeah and i'll
talk it you know very briefly but there are three components into that specific uh partnership that
we talk uh one is uh research um even though we've made significant progress on there are still uh ample locations where we should
improve fhe and make it even more mature uh with the level of knowledge that the off-chain lab team
uh provides their ability to build a platform which deals with load and it's very very stable
i think that part on research um makes a lot of sense for us to start leading with.
The other component is working with the team to unlock the use cases
and figure out the opportunities to start with towards getting FHE into projects.
This is a very interesting segue. I know we've talked a lot about in the past about building Phoenix as a layer 2.
We have a testnet coming up of another product that we're announcing very,
very shortly which will tap very nicely into the Arbitrum ecosystem.
That would be a big focus of what we're planning to run in the next couple of months.
Awesome. Yeah, stay tuned for that. Well, guys, I think we touched on the talking points. I think
we wanted to discuss. Does anybody have anything to add before we close this out?
Can we close this out?
I just want to say that we're, of course, extremely excited.
And Steven, I want to make sure, Steven and Ira,
that we all feel this is a very beneficial partnership for both sides.
Yeah, we're excited as well. I think this is really a scenario where one plus
one equals, you know, maybe seven instead of two, you know, so putting our two technologies or two
teams or thoughts or research together. And, you know, making that product available to the
community, I think is going to unlock use cases that we don't even anticipate
right now. And I think that's one of the most exciting parts for me.
Yeah, I want to echo that as well. And I think the sentiment earlier on, which is like,
we've known about this for a long time. It was 2009 where the academic breakthrough
from Craig Gentry around FHE occurred.
And many of us on this call have been slowly following it since.
And so it might seem like a long time.
It actually doesn't.
As these things go, it's still incredibly fast-paced.
But the idea is that we've been tracking this technology for years and years.
But it will be like a zero-to-one moment for users
where there's just you know, just this
expectation of, you know, what you can and can't do what you can and can't expect to be private
blockchains today, these limitations that some people believe are just fundamental, which we're
going to just, you know, break down together and break down in a way that, you know, it's not like,
okay, if you do these like crazy things, you cannot, you know, you'll be able to access some
privacy, but you'll be actually be able to do it integrated with your favorite ecosystems as well.
So really excited for this partnership.
Despite this being a public call today, I think this is a lot of alpha here
just because people are not going to expect what's going to come on the timeline
that it's going to come in terms of the ability to ship real privacy transactions,
private smart contracts to users. Couldn't be a better time, couldn't be a better team to do it
with. And yeah, if you're on the call listening today, then you'll expect it. But the rest of the
market certainly, the rest of the ecosystem certainly is not going to expect privacy technology
on the level that we intend to ship it as soon as we intend to ship it together. So get ready. It's going to be amazing. And it's going to really just increase the capacity
of the types of applications that we're able to build on the blockchain in a way that
I think no one really expects to happen anytime soon.
Amazing. I'm feeling bullish. Guy, anything you want to say before we either of the guys guy one
or two i feel like i'm i'll let guys do it no look i'm good i'll only say one thing like you
know this for people who've been in the space for a long time, like this last year was very, very strange.
It's kind of been, I've heard it being called like the barbell market here, where you have some stuff that gets people excited.
Mostly on the crypto casino side or Bitcoin, but then a lot of the stuff with value is kind of like not picking up.
lot of the stuff with value is kind of like not picking up. And to me, like, quite frankly,
even as like an OG in the space, like this is a breath of a fresh air where I think you
have two teams who are actually in this to bring real value and real use cases with the
right technology. And I think that says a lot, not just about us,
but it also brings good things to the space more generally.
At least that's my take.
And hopefully other people find becoming maybe a bit more
bullish by that as well.
Amazing.
Gai, any parting words? No, I think we've done the easy part,
which is getting the partnership signed and locked,
and now starts the fun part of really
start to getting the mutual benefit.
We're going to do a lot of exciting things,
going to share a couple of really exciting news
in the next couple of of weeks so just stay tuned
Awesome
Well guys, I want to thank everybody for joining us and listening in today
I want to thank the two guys guy I guys II. Thank you so much
But especially a huge shout out to Steven from off chain labs and to Ira from tandem
Thank you guys so much for joining us. Really enjoyed this conversation
and feeling very bullish and very optimistic.
Looking forward to what these two teams can do together.
Thanks Mac.
Likewise.
Thanks Mac.
Have a great day everyone.
Bye.
Bye everybody.
Ciao.
