Hi Fintech Architects,
In this episode, Lex chats with Alex Gluchowski — Cofounder and CEO of Matter Labs, about the transformative impact of zero-knowledge proofs (ZK proofs) on blockchain scalability and privacy. They discuss Matter Labs’ evolution, the development of zkSync, and how ZK proofs enable secure, private, and efficient blockchain transactions.
The conversation explores enterprise adoption, regulatory shifts, and the potential for blockchain to revolutionize global finance by enabling privacy-preserving, interoperable networks anchored to Ethereum, ultimately highlighting the growing role of cryptography in advancing financial sovereignty and innovation.
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Thanks for your time and attention,
Matt & Lex 🙌
Key notable takeaways:
Incorruptibility is Blockchain’s Core Value—Not Consensus
Consensus mechanisms solve network liveness without central operators, but the guarantee that your assets can’t be spent without your permission comes from verification. Bitcoin’s “don’t trust, verify” mantra is literal: every node re-executes every transaction. Zero knowledge proofs achieve the same incorruptibility without requiring universal visibility—enabling both scale and privacy.
The Regulatory Shift Has Unlocked an Entirely New Market
The post-Trump regulatory environment represents a “great divide” for crypto. Banks and enterprises that previously couldn’t engage are now actively piloting blockchain infrastructure. Matter Labs is working with Deutsche Bank, UBS, and 35+ global financial institutions through initiatives like Presidio Breakthrough. The focus has shifted from building systems to withstand regulatory hostility to integrating crypto into real business processes.
Private Enterprise Chains Settling on Ethereum is the Institutional Path
Banks experimented with consortium blockchains (Hyperledger, Corda, R3) for years but failed due to privacy concerns—participants could see each other’s transactions. Zero knowledge proofs solve this by enabling private chains that interoperate trustlessly through Ethereum as a shared settlement layer. Each institution maintains sovereignty over its operations while gaining cryptographic guarantees when transacting with counterparties.
Background
Alex Gluchowski was born in Soviet Ukraine and came of age during the 1990s collapse—a period marked by hyperinflation, institutional distrust, and societal instability. These formative experiences shaped his conviction that freedom, applied at every scale of society, produces better outcomes.
He later moved to Germany, where he completed his master’s degree and worked across several startups. In 2014, he attempted to build a company around Bitcoin but found the user experience too primitive for mainstream adoption—handling seed phrases and navigating technical complexity was simply too demanding for ordinary users.
After the first Bitcoin winter, he shifted focus to Ethereum, seeing its programmable smart contracts as a more refined foundation for building open financial infrastructure. This led him to found Matter Labs around 2017, with a mission to scale Ethereum using zero knowledge proofs while preserving its core properties of incorruptibility and permissionlessness.
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Topics:
Matter Labs, zkSync, Ethereum, Consensys, Hyperledger, Arbitrum, Optimism, fintech, blockchain, zero-knowledge proofs, ZK proofs, privacy, institutional adoption, scalability, cryptography, interoperability
Timestamps
1’14: The Incorruptibility Problem: Why Zero Knowledge Proofs Are the Only Path to Private, Scalable Finance
5’19: From Soviet Ukraine to Zero Knowledge: How Hyperinflation and a Hunger for Freedom Built a Crypto Visionary
14’07: Freedom Has a Cost: Squaring Crypto's Libertarian Promise With a Decade of Market Abuse
17’11: The Post-Trump Paradigm Shift: Why Stablecoins Are the Shipping Container Moment for Global Finance
25’19: ZK Rollups Demystified: How a Few Kilobytes of Cryptographic Proof Inherit the Full Security of Ethereum
31’38: The Bank Stack of Ethereum: How Zero Knowledge Proofs Finally Solve the Problem Hyperledger and Corda Never Could
37’11: Ethereum as the World's Chronometer: Why Trustless Interoperability Lives or Dies Within a Single Settlement Layer
39’46: The channels used to connect with Alex & learn more about Matter Labs
Illustrated Transcript
Lex Sokolin:
Hi everybody, and welcome to today's conversation. We are very lucky to have with us Alex Gluchowski, who is the co-founder and CEO of Matter Labs. Matter Labs is one of the most important companies in pioneering zero knowledge proofs in the world, which are now integrated into lots of different places on chain and support privacy and financial sovereignty. And so, I'm really excited to talk about what this stuff is and then also try to understand where we go from here in 2026 with the crypto markets. Alex, welcome to the conversation.
Alex Gluchowski:
Thank you Alex. Excited to be here.
Lex Sokolin:
So maybe we can just start off the conversation by describing what is Matter Labs and what does it do.
Alex Gluchowski:
We are the company best known as the creators of ZkSync. We started seven years ago on a mission to help crypto scale and reach mass adoption and advance freedom this way for the world. But while preserving the core value proposition of crypto technologies. And we realized very early that zero knowledge proofs are going to be indispensable for this mission. Seven years ago, they were not as mature as today, and we helped make them more mature. But I still believe in this, and I think they are going to become even more important as we go into the future, and they really will be powering a lot of things, if not most of the world's finance.
Lex Sokolin:
Maybe we start from the use case, like why does it even matter, right? Like if I'm using bitcoin and I send it from here to there. Yeah, you can see it on the ledger, but it's pretty anonymous. Or you know on Ethereum it's the same thing. Like what pulled you into building out the technology. And what about the technology is meaningful.
Alex Gluchowski:
So, let's start with considering Bitcoin and Ethereum and asking ourselves what's so special about them? Why do we trust these systems? While it's much harder to trust traditional institutions and you know, they have a lot of controls and supervision. Blockchain systems don't have any of that. No authorities, no supervisors. And yet we can trust them. And the answer to this is one word incorruptibility. Those systems are created and designed in such a way that they cannot fail. They cannot execute invalid code. They cannot spend your balance of your Bitcoin, your Ethereum violate the smart contract logic. Whatever. Break the commitments, break the promises that are made to you. And this is really the core of the value proposition of blockchains. The incorruptibility. Now with Bitcoin and Ethereum, incorruptibility is achieved in a pretty naive way, meaning everyone on the network has to execute everything else and we verify transactions of everyone else. So, you have to do like all of the computations that are happening on the network. And this unfortunately does not scale.
It does not scale for two reasons one. Physically, you won't be able to verify all of the transactions that are happening in the world every second. There are millions of transactions, financial transactions. Non-financial transactions, even just financial. There are thousands. Hundreds of thousands of payments, settlements, trades, all various kinds of financial activity that is being produced in the world. And in peak times, it goes well into millions. Right? So that's just physically not possible. But the second reason it's difficult to scale is because you cannot expect the entire world to see everything else that's happening. You cannot give everyone access to everyone else. The privacy is a absolute necessity for personal lives and for businesses and for regulated entities. You cannot apply the same naive way to establish incorruptibility if you want to preserve privacy. So, you need something else. And zero knowledge proofs are the only technology we have today that enables incorruptibility combined with privacy.
Lex Sokolin:
Do you think crypto economics are a naive solution in general, like consensus and crypto economics and sort of this like game theory? This obsession with game theory and 51% attacks, like, is that entire approach kind of, first generation approach that we're going to look at and say, oh, man, that was just the wrong path.
Alex Gluchowski:
No, no, it's very valid and important part of the crypto technology, but it just does not solve incorruptibility. The consensus has nothing to do with the fact that your Bitcoin cannot be spent by anyone but by you. Consensus is solving a different problem. It solves the problem of having a network that does not have any central operator, and it ensures liveness of this network despite having a central operator. But the fact that your transactions are correct is only enforced by verification. You know in Bitcoin. We heard this for a long time. This mantra of don't trust verify. And this is really what what's it all about.
Lex Sokolin:
Interesting. Yeah. Because I think part of my mental model is, you know, at some point far in the future, ZK proofs may replace the core consensus mechanism. And I think Ethereum is starting to move in that direction in some ways. But maybe before we get there, let's talk about sort of your background in terms of how you started to build matter labs, like what was the world like when you were just starting to build it, and what were you inspired by, and then what were some of the early breakthroughs and products you worked on?
Alex Gluchowski:
Sure. I can start even earlier. I was, you know, like, I have a long story of coming to crypto and growing the mindset and convictions that brought me into this space. I was born in Soviet Ukraine, grew up during the 1990s throughout the period of collapse, hyperinflation, lack of trust in society, collapsing civilization. So, to say. Then I moved to Germany, made my masters there, worked in a number of startups. The more I learned about the world, the more I appreciated the idea of freedom. That if you apply it at every scale of human society, from a small team to a company to a nation, the more freedom you have on average, the better is going to be your outcomes. For this group, it's freedom. Is something that's extremely hard to move politically. The societies have inertia and you have given political system. And it's just very slow and hard to change. Through navigating all of the political forces and Bitcoin, when it appeared, it felt like a technology that is going to advance freedom much faster through the product incentives that are built into it.
Very similar to the internet. You know, the world after internet is a lot. Having a lot more freedom than the world before. Internet and Bitcoin was the promise to do the same thing for the financial system. And it felt very interesting. But I quickly realized that, you know, I tried to build a startup around Bitcoin around 2014. I realized that it's going to be an extreme uphill battle, and we're probably very early and it's just not going to work because the user experience around using Bitcoin for actual payments was just terrible. You could not expect normal people to handle secret phrases in a secure way to understand all of these complexities. It was just way too far. And I felt like, well, and then the first Bitcoin winter kicked in, I felt like, well, maybe we're not going to survive that. But we did survive. And then Ethereum came along and it offered a much more refined way to address those problems. With this general-purpose smart contract platforms where we could have programmability at a much, much better way than what was possible with Bitcoin.
And I felt this is the right time to just shift my full energy, full focus on onto this thing. And I told myself, if my bet is correct, that Ethereum is going to exploit all these forces of freedom, unlock innovation, and build something completely unimaginable, that just like internet, it was unimaginable to people before it where you only had phones and newspapers and television. Ethereum will unlock the same degree of Cambrian explosion of innovation for the financial system. And so is this. This is my bet. If this bet is correct, then I have to figure out how to scale it without losing these properties of incorruptibility. Permissionless and a couple of others that are very easy to lose. You know, we had the Mount Gox explode around that time, and it was clear that people will revert to centralized practices because they are more convenient, they offer better user experience, and they will ultimately come with a set of tail risks that will eventually explode. And so it was a really interesting challenge. Like, can we actually solve this problem? Can we preserve this all of its properties at large scale.
And there were a number of ideas. We were researchers working on this. There were things like lightning network, plasma payment channels floating around. And I looked at all of them and they felt elegant from the engineering perspective. They felt like, something does not match. It won't really fly. And then I stumbled upon zero knowledge proofs, and it just completely blew my mind because I felt like, wow, like this. This feels impossible. This feels like indeed this magic moon math. How can it even be possible? How can we prove all of the all of the transactions that are like everything that's happening in the world, and verify that in under one second on a mobile phone. And yet this was possible. This is not magic. This is just some very advanced math. If you break it down in smaller steps, you can understand it. It's not something out world, you know, it's just a really cool technology. And so we started working on this.
Lex Sokolin:
I think it would help to describe what the technology itself is. But since you've brought it up already, you've brought up a very principle telling of the point of cryptography and the internet and freedom and a large part of me like feels for this vision. You know, I immigrated from Moscow after the wall fell to New York. So, I watched hyperinflation kind of ravage a centrally planned economy. I've also gone through the 2008 Lehman Brothers collapse from the inside, and watched what a centrally managed currency that's poorly kind of manipulated can result in through the underwriting of the mortgages and then the sort of repackaging and derivatives through the banks. And as a millennial, I also have this like naive, not in your sense of naive, but like literally naive belief that technology is good. And this was sort of in the era of pre-Cambridge Analytica and sort of political implication that we're now seeing much more obviously, as well as the price that we're paying for being inside of the algorithmic panopticon. Right. So, like, I share a lot of these DNA pieces, and it's no surprise I also ended up going into Ethereum and Consensys and so on.
And the question I have now, though is like, after all we've seen, where do we need the freedom and how does it persist? Right. Because I think as a crypto industry, we gave freedom to people to transact, to be self-sovereign in their money. Lots of millions of new types of people can hold dollars and they never could have. They can build businesses; they can get credit. All of these things are amazing. And at the same time, you know, we continue to create probably the most compromised capital markets environment that the world has ever seen. You know, so you mentioned Mount Gox, but the sort of like continued echo of market abuse and pretty bad outcomes for investors across the world in a lot of long tail assets. I guess number one is how do you keep optimistic? And then number two is how do you square this? Sort of like if we give the world financial freedom. This almost like libertarian ideal of if we give the world financial freedom, it will be good and empowering with some of the evidence of what has happened over the last decade.
Alex Gluchowski:
Those are fantastic questions and I am on the same side of values. I also feel that technology is a positive force in the world. I agree with Neval who says that technology is just knowledge and as such it's neutral, right? You can apply it for good things. You can apply it for bad things. But on aggregate technology, proliferation of knowledge, creation of knowledge leads to progress. And progress is what led humanity to prosperity that we experience now in the Western world. That is a direct result of this systematic creation and application of knowledge. And so I am very optimistic here. And I am extremely, extremely a deep believer in freedom. I think that freedom is similarly neutral. It leads to the ability of people to do things, and good people will do good things, but people will create manipulation and scams, and not so smart people will fall for these scams, but it also leads to the like. It creates this large experiment that and competition of ideas and different things, and eventually good things crystallize and gain more traction than the bad things.
And people who fall for scams just, you know, they go out of the market and the market continues with, with better participants. And is it better to have this, this freedom despite the scams? Would it be better not to have this financial open border that crypto created? You know, like people would be falling for scams no matter what happens, and they will be falling for any manipulation. I'm just coming from the largest network school in Malaysia, and the place where the network school is located has really interesting surroundings, with a huge ghost town with a lot of skyscrapers, with only 1% of residents in them because they were. There was a massive bubble in real estate driven by Chinese investors. And then the rules have changed. And now, like no one is using it and it's all like all of this capital is allocated and gone. Maybe it would have been better if those people had access to crypto back in the day, and they could diversify there. And, you know, some of them would fall for scams, but maybe some others would just invest in stablecoins and tokenize stocks and have a better result overall because they have these options.
So, I strongly believe that freedom will eventually lead to better outcomes, even if they are not going to be uniformly good.
Lex Sokolin:
Fair enough. Okay. You had taken us up to the founding of the company, and kind of the intent of what you wanted to improve about change and financial infrastructure. Can you talk to us about what are the different products that Matter Labs has worked on and launched and talk us through also the mechanics of getting those out into the wilds.
Alex Gluchowski:
Sure. We've iterated on essentially the same product. It shapeshifted over many years. We're building the scaling engine for blockchains, for Ethereum specifically. So, technology kind of was continually evolving. The product focus was shifting based on the market conditions. Right now, after the change in the US administration and massive interest that's opened with all the financial institutions and enterprises that are looking at crypto and they understand that crypto is just a better rails for any type of finance. We realize that no one is better positioned to serve this niche, and we started working on this already several years ago, and now we're building the enterprise blockchain technology that enables enterprises, banks, financial institutions to connect to common chain, to connect to public markets, to connect to Ethereum and its capital markets, while preserving privacy and sovereignty of their operations.
This we basically call it the bank stack of Ethereum. So that's our absolutely main focus right now. And we have a massive, massive interest and traction. We will be announcing some really interesting partnerships in Q1 this year. We've worked with a number of banks starting with Deutsche Bank. We've done the pilot with UBS. We've worked with a number of financial institutions. Yeah, we've done a really big pilot and a series of workshops in industry initiative called the Prividium Breakthrough. You can look it up on X with over 35 global financial institutions participating. It's all about this central use case of private enterprise chains.
Lex Sokolin:
If I kind of rewind back to the beginning, I mean, Matter Labs and ZkSync were pioneers in trying to bring zero knowledge to chains. And a big kind of value proposition was that, like you said, you can verify events without having to run them through the virtual machines in every single node. And it was sort of much more efficient as a way to add information or anchor transactions to chains.
And at the same time, it also was private, so you weren't flashing every transaction, but you could still validate that these transactions had happened. Since then, we've had a whole bunch of kind of layer twos that were built on top of ETH and other networks as well that are using zero knowledge. We've had a whole bunch of, at least in the AI space, kind of attempts to use zero knowledge to validate AI inference. So, people have taken this technology and run with it. But it sounds like what you're describing is, is almost going back full circle to the earlier value propositions of like going back to financial companies and being a layer two or a way for them to use the public chain while retaining their privacy. Can you talk through sort of like the full journey in terms of the different attempts that come to market, like who were the original target customers and how that went?
Alex Gluchowski:
Look, we have this paradigm shift, the great divide that happened with the change of US administration. This time. We have the pre-Trump era and the post Trump era. In the pre-Trump era, regulators were essentially hostile to crypto. And all the systems that we were building were designed to withstand those attacks. With post-Trump, now you can just do business. So, we can actually integrate crypto in real world business processes, and we can upgrade them to this new infrastructure. And this opens a market that is many orders of magnitude larger that than what was possible in this kind of constrained environment from the regulatory standpoint. What crypto enables for traditional businesses, traditional enterprises are well, as the founder of stripe has put it. Stablecoins are a room temperature superconductor for finance. It's the Internet of Value truly materializing now, where every piece of value, every asset on every ledger is going to be tokenized, and they're going to put together on a single composable platform, which I believe is going to be Ethereum as the ultimate settlement layer. And we'll have real tools, we'll have private chains, public chains, all plain, all interoperable, all within the same zone of fungibility.
Things are going to get just a lot more efficient. So, the one thing is that we get rid of borders. We let people from everywhere in the world have access to these financial services that were previously reserved only to the citizens of the Western world, but to for the enterprises. It's the analogy I have in mind is when the shipping containers were invented, this single invention boosted the GDP of the world by something like 10%, because it made all of the global logistics just a little bit more efficient. I mean, a little bit in the context of the supply chain, but like the actual act of shipping became 100 times more efficient. The same thing is happening here. Finance has massive overheads. The delays that you experience when you send money and the settlement is happening with infamous T plus one, t plus two, t plus five days actually translate into trillions of dollars’ worth of cost because the cost of idle capital can be quantified very precisely. And it's a lot like just one day of idle treasury is you can just take the annual yield, multiply by, you know, the fraction of the year that you're missing and you get the cost quantified, and all of that is going away.
Everything is going to be connected, talking to each other and settling instantly with two plus zero within seconds. This is the promise of blockchain. So, it's just like as a very basic foundation, we're just going to make the world more efficient, more connected. And then on top of that, we're going to make it more open and free. And then we will use all the power of innovation that's possible on blockchains, because now we're not just making things more efficient. We're also enabling new use cases which were not possible before, because now different types of assets can coexist in the same smart contract. You can create new workflows, you can automate things, you can do automation alone. Doing passive ETFs is now a job that can be performed by a smart contract. You don't need a management company for this. Who's going to charge you a passive management fee and so on and so forth. So like endless possibilities That are now entering the market because the regulation is opened with the Genius act and soon, hopefully to be passed with clarity.
Lex Sokolin:
Let's dive into the details a little bit. Right. So ZkSync had at $1 billion plus market cap token right, in 2024. And, you know, the launch of the token followed a long development process. The company has been around since the late 20 tens. What exactly does ZkSync do in terms of what information does it take. What does it anchor on chain and has that changed over time?
Alex Gluchowski:
ZkSync is a network of chains. It's a framework that is used to build chains on top of Ethereum. You can launch your own layer two, and you can connect and transact with other tools. And you can have operations within your chain or initially the key thing started as a single chain used only for payments, because in the early days, that's the only thing we could do with their knowledge proofs. They were not ready. Then we built the very first SDK VM, where you could put Ethereum smart contracts and wrap them in Zk rollup. And then this became the first chain in this network. And then we expanded it and enabled others to launch their own chains.
Lex Sokolin:
So when you're making a Zk payment, you know literally what does that mean? What is being known and how is it transaction enhanced by going through your software? We've heard the term zk EVM. But I would also like to understand sort of how is that implemented. Right and how does it work.
Alex Gluchowski:
So how does a normal blockchain work. Imagine that you have a blockchain like Ethereum. What happens when you submit a transaction is you propagate it through the network. The validators received this transaction. The validator who is responsible for the next block will include it in the block, along with transactions from many other participants. They will seal the block and they will say like, here's a new block and they will send it out to everyone in the network. And this block will link to the previous block, and that block will link to the previous block. And so, you have the chain of blocks forming, which is why it's called the blockchain.
Right. So, this is the vanilla blockchain. Now a layer two blockchain is different from the like a normal blockchain in that every block that you produce has also a commitment on some settlement layer. So if it's an L2 on Ethereum for every block that you create with maybe thousands of transactions, you will create a single transaction on Ethereum where you would only send the hash of this blog so that on Ethereum, which is much more decentralized probably than your chain and much more secure, much more censorship resistant, you have an immutable track record of like, okay, here's the next block, and you treat Ethereum as a source of truth of what's actually happening on this layer two blockchain, so that if you construct the design properly, the operators of this layer two chain cannot really do anything wrong. This is with the caveat that you construct it properly. Right. And like we've seen people doing this correctly and we've seen people faking being L2, just creating a side chain that, that they can completely control and manipulate and call it an L2.
But that's the difference there. Like we're talking about the proper definition of an L2, proper definition of an L2. It's a blockchain that derives Inherits the security from its underlying parent chain. Now, zero knowledge proofs are the mechanism that actually enforces this inheritance of security or derivation of security from Ethereum. So, what happens for each block that you produce in your Zk EVM layer two you will submit this block. You will submit a transaction on Ethereum committing this block. But you will also submit a zero-knowledge proof, a small cryptographic piece of data from a few kilobytes to some hundreds of kilobytes. It depends on the proof that the Ethereum smart contract will verify, and only if the proof is valid. And the proof attests that all the transactions in your block are valid. If this proof is valid, then Ethereum will accept this to this transaction. Accept the next block of your L2 and Advance the chain to this next block. So, this guarantees that you will never be able to create a block and commit it and kind of like make it the official canonical next block which is invalid, which contains corrupt transactions.
So that's the security mechanism. Now an interesting thing you can of course do here is you don't need to publish all of the data of your layer to blockchain. You can only publish this one single transaction with a hash on Ethereum. And then you can selectively disclose parts of the state to your users or to whoever you want to disclose it. And they will have a guarantee that, sure, I see this amount on my account and I know that if this was correctly applied there. I know that this smart contract was correctly executed and so on. So yeah, that's really it.
Lex Sokolin:
Simple as pie. Okay. When you look at, as you said, the sort of next phase of the market and the change in financial companies being willing to tokenize instruments and going into the market venues and so on. That's definitely a boom. And I'm really interested to hear about what kind of demand they have from their counterparts. You know, we know that other layer too as a service framework. I mean, that's not a fair way to position anybody.
But, you know, in the old world you'd call them private label platforms. You know, somebody like Optimism powering Base protocol for Coinbase or Arbitrum focusing to work with Robinhood. We know that this stuff is interesting and it works. But those are not zero knowledge networks whereas you guys are focused on this privacy direction. So, I am really curious about what kind of financial instruments you see the industry starting to move on chain. Where are they comfortable and what kind of activity can we expect?
Alex Gluchowski:
So, we yeah, we have to differentiate between this public general purpose optimistical tools and what we're doing. The rollup centric roadmap that Ethereum was pursuing. Up till now is kind of in somewhat the crisis mode, because people have realized that there is no need for that large a number of general-purpose chains that are all doing the same thing. And if you want to have a large number of general-purpose chains, then that means that you want to scale layer one or maybe add uniform shards to it.
But having these branded public tools that are basically not differentiated at all, it just doesn't make sense. So, you have like 1 or 2 that everyone uses and that's it. And this is what Vitalik wrote about, I think, yesterday in a tweet about the deltas and change of paradigm. And this is something we anticipated for a long for a long period. Now with as you can think, we realized that that doesn't make sense. And we need to differentiate. We need to find a product space that is that no one else is serving. And for us it's privacy. So, I cannot really speak about the public chains. I don't know what they're going to be doing. They are going to go for some soul searching. For us, the amount is very clear. The customers who we work in now with large financial institutions, banks, enterprises, also startups who are working with enterprises and financial institutions, they have very hard requirements. A bank cannot disclose all of its internal operational details to the rest of the world.
They simply can't. This is not even a question. They just come to you with a long list, with a long questionnaire of things and how you handle the data. Can you put the data in certain jurisdictions? Can how you handle it, how you treat various aspects of your operations and so on. For them, it was never an option. They were experimenting with private chains for a long time. You're familiar with names like Hyperledger, Basil Corda, Arweave and so on and they are in production. Banks, actually, a lot of banks have internal blockchain systems because blockchains are just a better way to manage internal accounting, even for the banks, even if it's just between like moving money between different subsidiaries of the bank. It's still better than on the blockchain. It's not a huge addition on top of database, you know, like not a massive step function, but it's still much better because it's you have an accountable track record. You have full auditability. You have immutability.
![What Are Banks Doing with Blockchain Technology? [Infographic]](https://substackcdn.com/image/fetch/$s_!B3fJ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff4b4890a-3736-47f9-b08f-16e52c9a923e_1289x1010.jpeg "What Are Banks Doing with Blockchain Technology? [Infographic]")
You have cryptographic integrity of everything that's happening on this chain. And then you have developer experience of Ethereum smart contracts, which are already, well, battle tested on the public infrastructure exposed to the hackers from all over the world. And so we know that those systems are having a relatively good degree of security. So banks are using them for their internal operations. But of course, they don't want to confine themselves to internal operations. It's not very interesting. They want to talk to each other and interoperate with the rest of the world. And this was not possible until. Until recently, they have experimented with a number of consortium models, where multiple banks would come together and try to build a shared blockchain infrastructure so that they can talk to each other. And all those efforts effectively failed. They could not agree on the shared standards for political reasons, for business reasons, but also which includes privacy, because in such a shared system, all of the participants would still see all of the data that has been circulated and all of the transactions that happened between and banks, and not just like between Bank A and Bank B, and this were this did not go anywhere.
Now, with zero knowledge proofs, we finally have a chance to build the systems properly. And this is now happening. And the customers we're talking to, and they have a very long sales cycle. I have to admit, like some of them, we started talking two years ago and it took like over a year to just get to the first pilots, and then it progresses very slowly. It will take time for the critical mass to form and for everyone to jump on chain. But it will happen slowly at first and then everyone at once. Because the interest, not even the interest, the FOMO is there. But yeah, with zero knowledge proofs, you can connect them. You can give each bank their own system or each enterprise its own system, and then you can give them the ways to natively connect to each other and have, cooperation where they don't have to trust the operators of the counterparty systems.
Lex Sokolin:
The net result of that would be, you know, seeing a lot of hashes being written on Ethereum or transactions going up, like, how would we see the evidence if this works?
Alex Gluchowski:
Yeah. Well, you would not see it unless you know where to look. But yes, there will be the chains on Ethereum. Ethereum will serve as the global settlement layer as this synchronizing machine for the world. It's not so much the world computer is the world thinker chronometer, I don't know. It's the thing that connects everyone and synchronizes on the same frequency. So, we all know that this event happened or did not happen. It's really hard to do interoperability between these disparate blockchains, between Ethereum and Solana. You cannot do it in a trustless way. There is a level of subjectivity that you can only bridge this gap with some trusted third party that will attest transactions attest that, okay, this this happens on Ethereum, but ultimately, it's just a multisig. So, you're just trusting all of the funds that you bridge from, from this one ecosystem to another to some number of end participants who hold the multisig. This is really what's happening under the hood. This is real counterparty risks that you're dealing with. But if you do it within Ethereum, if both chains are on Ethereum, you can have true trustless interoperability where you only trust open-source code and math and cryptography behind it.
And of course, you can have bugs in all of those layers. But then you're not only trusting them, you also trust people. You still have your crypto economic or game theoretical mechanisms, and you have your, you know, if those are regulated institutions, you have the oversight and so on and so forth. So, you have like multiple layers of security. We're always thinking in terms of different defence in depth. Like any mission critical system, you don't want to rely on a single mechanism. So, we have these multiple mechanisms, but we do have them as opposed to just blindly trusting and private keys on hot servers, which are going to be eaten alive by AI in the next couple of years.
Lex Sokolin:
Absolutely. Well, I am excited to hear you talk about this. I hope it happens. I think we pretty desperately need a revitalization of the crypto markets with kind of real activity, and this is definitely a path that's super exciting for me. If our listeners want to learn more about you or about Matter Labs or ZkSync in general, where should they go?
Alex Gluchowski:
The source of truth for all news is X-Com. You can find me on there @GLUK64 and ZkSync under @zksync.
Lex Sokolin:
Fantastic. Alex, wonderful to have you join us.
Alex Gluchowski:
Thank you. I really enjoyed the conversation.
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