This episode explores Arcium's evolution from Elusive, revealing how Privacy 2.0 enables encrypted shared state computations on Solana, unlocking new possibilities for both DeFi and AI.
Elusive's Origins and Transition to Arcium
- Yanik, from Arcium, recounts the team's journey into Solana, driven by a desire to build with novel cryptography and a focus on privacy. He explains that the team was drawn to Solana's fast network and vibrant ecosystem, starting with Elusive about three years ago.
- Yanik mentions meeting Anatoly and Austin at hacker houses, highlighting the early support from Solana's founders.
- "Totally right from the get-go supported us... he was our first investor."
- Elusive initially focused on transactional privacy using zero-knowledge proofs.
- The limitations of this "Privacy 1.0" approach, especially for complex operations like private swaps, led to the development of Arcium.
- The team realized the potential of confidential computing (using MPC) to enable broader privacy applications, leading to the "Privacy 2.0" concept.
Challenges of Transactional Privacy and Solana's Evolution
- Yanik acknowledges the initial challenges of building transactional privacy on Solana, citing the immaturity of zk-proof technology and the platform itself.
- He notes significant advancements since then, including new syscalls and progress in zk-proof primitives from projects like Risk Zero and Anagram's Bonzai.
- Token 22's confidential transfers are mentioned as a native token extension feature that simplifies basic transactional privacy.
- Arcium aims to abstract away cryptographic complexities, allowing developers to simply specify what should be public or private within their programs.
- "The developer should within their program just be able to specify this should be private this should be public..."
Privacy 2.0: Enabling New Use Cases
- For Retail Users: Arcium enables access to features like dark pools, allowing fully private trading on Solana.
- Yanik draws a parallel to the traditional stock market, where 60% of daily US spot volume occurs in dark pools.
- Privacy 2.0 also offers protection against wallet doxing and potential theft.
- For Developers: Arcium unlocks the power of encrypted shared state, enabling applications beyond simple transactional privacy.
- Yanik highlights the ability to train machine learning models on encrypted healthcare data without compromising individual privacy.
- "Everything in between from having fully private trading up towards end to trend encrypted AI gets enabled..."
- The core technology behind this is secure multi-party computation (MPC) with semi-homomorphic encryption.
- Semi-homomorphic encryption: Allows computations on encrypted data without decryption, crucial for maintaining privacy while enabling complex operations.
How Arcium Matches Encrypted Orders
- Yanik provides a simplified explanation of how Arcium matches encrypted orders in a dark pool scenario.
- He uses the analogy of calculating the average wealth of three parties without revealing individual wealth.
- The process involves generating random numbers (secret shares) that, when combined, reveal the secret (wealth).
- These shares are distributed, computations are performed locally, and the results are combined to reveal the average without exposing individual values.
- Arcium extends this concept to a network, where nodes transform encrypted data into secret shares and perform computations.
- A custom Rust compiler simplifies the process for developers, allowing them to write standard Rust programs and specify privacy requirements.
Latency Considerations and Arcium's Architecture
- Yanik addresses the potential latency introduced by Arcium's cryptographic operations.
- He emphasizes the importance of speed and developer/user experience for privacy to be practical.
- MPC is chosen over fully homomorphic encryption (FHE) due to its superior speed, achieved through pre-processing and correlated randomness.
- Oblivious data structures are used to efficiently access encrypted data without revealing access patterns, enabling larger computations.
- "With MPC we're actually able to make use of so-called oblivious data structures..."
- The primary source of latency currently is Solana transaction processing.
End-to-End Architecture and Interaction with Solana
- Yanik clarifies the overall architecture and how Arcium interacts with Solana.
- Arcium can be called via CPI (Cross-Program Invocation) from a Solana smart contract.
- Developers specify a callback function to be executed after the private computation is completed.
- Arcium's smart contract inserts the computation into an on-chain mempool, which is picked up by the Arcium network.
- The network processes the computation and settles it back to Solana, triggering the callback.
- There's also a direct communication flow with the Arcium network, but all computations involve Solana.
Arcium Network Structure and Node Specialization
- Yanik describes the Arcium network as a stateless computing network, functioning as a network extension for Solana.
- It's a set of nodes that anyone can run, partitioned into computation clusters.
- Clusters have a "dishonest majority" trust assumption, requiring only one honest participant for privacy.
- Developers specify which cluster should process their computations.
- Solana serves as a coordination layer and state layer for Arcium.
- Nodes can specialize in different types of computations (e.g., AI-focused nodes with CUDA capabilities).
Concrete Example: Trading and Privacy Preservation
- Yanik walks through a concrete example of a user trading USDC on a hypothetical Arcium-powered application.
- The user's holdings are encrypted upon entering the application.
- Arcium's computations allow specifying access control, ensuring only the user can see the results of their trades.
- "...you can specify that this is the public key of merge who performed the trade so please give him access to the information..."
- The user can then exit the application, moving their remaining funds publicly to a wallet.
- All state remains on Solana; Arcium only processes encrypted data.
Censorship Resistance and Additional Use Cases
- Yanik highlights Arcium's censorship resistance mechanism and explores use cases beyond dark pools.
- A censorship resistance protocol cryptographically pinpoints misbehaving nodes, allowing for punishment.
- Privacy 2.0 enables more powerful features and applications, not just financial privacy.
- Examples include encrypted document signing (like DocuSign on Solana) and decentralized AI model training on sensitive data.
- "...we've been pursuing some some big web 2 um yeah decentralized AI use case..."
Arcium Token and its Utility
- Yanik discusses the upcoming Arcium token sale and the token's role in the network.
- The token sale starts on the 24th (5 years after the Solana CoinList sale).
- Nodes unlock their hardware by staking the token.
- Staking requirements depend on compute capacity and network dependence.
- Misbehaving nodes are slashed.
- Computations are paid for in SOL, not the Arcium token, for better user experience.
- The Arcium token has a dynamic supply and demand mechanism, with burning and buyback based on network demand.
Philosophical Discussion on Privacy and Future Outlook
- Yanik shares his philosophical perspective on privacy and its importance in crypto.
- He believes privacy is essential to prevent a dystopian future of surveillance.
- Privacy should be baked into transparent blockchains like Solana, not forced on everything.
- Privacy 2.0 enables more accountability and transparency through computations on encrypted state.
- Privacy should be a logical business decision, enabling more powerful and secure applications.
- "...privacy enables security and more powerful applications..."
Final Question: Monero or Zcash?
- Yanik chooses Zcash over Monero, citing recent news about Monero's ring signatures.
Reflective and Strategic Conclusion:
Arcium's "Privacy 2.0" fundamentally shifts how encrypted data is handled on Solana, enabling secure, shared-state computations. Crypto AI investors and researchers should prioritize understanding MPC and its applications, as Arcium unlocks new possibilities in DeFi, AI, and beyond, demanding immediate strategic adaptation.
