Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
#21 Decentralised money transfer for all assets with Kima CEO Eitan
38 Plays7 months ago
Eitan is the CEO and co-founder of Kima, a decentralised money transfer protocol that aims to connect all of finance. Kima's vision is to create a transfer layer for all assets, including stocks, fiat and crypto.
The Birth of Kima and Its Mission
Eitan’s fascination with Satoshi Nakamoto's white paper on Bitcoin evolved into a pioneering project to develop the first Bitcoin cold wallet, addressing key security issues within digital currencies. This project laid the foundation for what would eventually become Kima. With a vision to eliminate financial intermediaries, Kima is creating a system that allows for the secure, direct management of funds across different blockchain ecosystems and beyond.
Understanding Kima: A Blockchain Relayer and Settlement Layer
At its core, Kima functions as both a relayer and a settlement layer within the blockchain sphere, facilitating secure transactions. Unlike traditional systems that depend heavily on intermediaries such as banks or payment platforms, Kima leverages blockchain technology to execute transactions directly within its network. This approach not only reduces transaction fees but also significantly enhances the security and speed of global money transfers.
Kima's Impact on Financial Transactions
Kima’s approach aims to address several critical pain points in the current financial system, including high fees, slow transfer speeds, and security vulnerabilities. By automating and decentralizing the transaction process, Kima allows users to move money across borders without the need for costly intermediaries like SWIFT or PayPal. This could revolutionize remittances and international business transactions, making them more accessible to a global audience.
Eitan also highlighted the platform’s unique approach to managing funds without traditional smart contracts, which are often susceptible to hacks. Instead, Kima relies on the blockchain itself or manage transactions.
The Road Ahead: Scalability and Future Plans
Looking to the future, Kima plans to expand its services to support a wider range of currencies and blockchain networks, enhancing interoperability in the financial sector. This includes adding support for fiat currencies, creating a bridge between traditional banking systems and modern blockchain technology. The ultimate goal is to make financial transactions as seamless and straightforward as sending an email.
As blockchain technology continues to mature, protocols like Kima offer that crucial infrastructure layer that developers can use to build a new generation of applications and services.
This podcast is fueled by Aesir, the smartest crypto trading bot platform on the market. Sign up and use code AESIRPOT20 at checkout for 20% OFF your subscription.
Recommended
Transcript
Unexpected Use Case Discovery
00:00:00
Speaker
They had a call with a potential customer from, again, a financial institution. And they came up with a use case that I said, wow, I haven't thought about. It's so valuable and it's so disruptive, but it's something that I never thought about.
Introduction to Proof of Talk Podcast
00:00:24
Speaker
Hello and welcome to Proof of Talk, the cryptocurrency podcast where we invite leaders and builders into the space to come on and talk about their experience in the industry, as well as the projects and products that they've been building. My name is Andre and I've been in the cryptocurrency space since 2017. I've also helped co-found algorithmic crypto trading platform ACIR that enables users to quickly and easily automate their trades while managing the risk.
Meet Eitan, CEO of KIMA
00:00:46
Speaker
I'm here today with Eitan, who is the CEO and co-founder of KIMA, who is a decentralized money transfer protocol.
00:00:54
Speaker
Now, really excited about this one. Thanks a lot for joining, Eitan. My pleasure. Thanks for having me, Andre. You know, we live in this increasingly interconnected world. So I feel like what you guys are doing at KEMA is really interesting. And there's also a lot of complexity there. I noticed some things that I was super interested in. So I wanted to explore your solution in a bit more detail. So thanks
Eitan's Journey into Crypto
00:01:20
Speaker
for the opportunity to do that.
00:01:21
Speaker
First, I just kind of wanted to ask you what is your kind of journey been like in crypto, how you kind of got into it and what made you, you know, continue in crypto and blockchain and be where you are today. So I will take you quite a long way back 11 years ago. Back in 2013, that was I remember this
00:01:51
Speaker
period. I was working for Hewlett-Packard for HP. I used to be a product manager and then dealing with innovation management for this huge corporate. In my background, I'm a software engineer. That's what I was trained and that's my passion technology. In 2013, I came across
00:02:21
Speaker
what we all know today as the Satoshi Nakamoto white paper. I heard about this beforehand, but I really took the time to read. It's not a long document. I think it's 18 pages. I was going to say like nine or 18 pages, something like that. Well, yeah, around 10 or between 10 and 20. I don't remember. Maybe
00:02:45
Speaker
Should reread it sometime. But the experience, so it doesn't take a long time to read. But the experience was really, to me, it was mind-blowing. Because it was an amazing nexus of three main vectors, financial one, social one, and the technological one. Now, the disruption in all three
00:03:15
Speaker
And in the combination of those, that was the mind-blowing experience because I understood that now there is a way to own your own funds, own form of money, and the implications that are on our society. Maybe that's
KIMA's Unique Blockchain Protocol
00:03:38
Speaker
a moonshot kind of technology. Yeah.
00:03:44
Speaker
It kind of stuck there. So I started I wanted to try it on. So what can you do with Bitcoin? You can buy you can sell and you can hold it. So I started buying really some fractions. It wasn't a financial investment. Maybe I should have invested in that back in 2013. Bitcoin crashed from one thousand dollars to two hundred dollars.
00:04:13
Speaker
And so I bought fractions, you know for $300 not full Bitcoin but just fractions just so I can hold them and sell them and experience the whole thing And I saw that it was very very frightening experience but it was amazing because I understood it now I'm the sole owner of of money and
00:04:43
Speaker
I don't have to store it somewhere else. I hold it on my phone and that's how I got started.
00:04:53
Speaker
Early on, I also understood the security problems or challenges of holding your own funds. Obviously, you can be the bank, but banks can get robbed. Sure. Though if you lose your access, that's it. It's gone. There's no customer service.
00:05:15
Speaker
has the story. Exactly. It's gone. And nobody to speak with. So my early on my first project, I have a friend who's a cryptographer, and he has a friend who was another cryptographer. And we decided to solve that pain point. So I was part of this open source project that was the first project actually that created an NPC
00:05:42
Speaker
solution for Bitcoin. So we split
Interoperability Across Ecosystems
00:05:45
Speaker
a private fee in two parts. So there were two parties. One was the application on the phone and the other party was a small hardware component, a chip that could store the key and communicated through NFC. So I think
00:06:09
Speaker
I never checked it, but that was the first cold wallet that was ever created. Oh, that's cool. But that's back in early 2014 and we got featured in multiple magazines and since then I'm in the space.
00:06:27
Speaker
That's an awesome story. Honestly, that's a great story. So the purpose of this cold wallet, like you call it, was it you've split the keys so that you can eventually recover them if you needed to? I'm guessing all you needed to have is the NFC chip and your app. So you could always recover it. You could recover it and you needed the chip to sign a withdrawal transaction. So nobody could steal your Bitcoin even if you lost your phone.
00:06:57
Speaker
Um, without the chip, there was no way to, to, uh, withdraw, uh, your Bitcoin. So, um, and we, we, uh, I remember I went to this, uh, studio of, uh, 3d printers. So I printed, uh, this type of, uh, bracelets with, uh, some room for this, uh, chip on it. And I, you know, carried it on me and actually it worked. It was a.
00:07:25
Speaker
And after that, those cryptographers, they incorporated support for Google phones. And so you could hold it on your phone, which already communicates with your phone, store it on the watch, on the smartwatch.
00:07:42
Speaker
So that was a smartwatch called wallet. That's very cool. What's the name? I'm going to look it up. It seems like a great story there. You can Google it. It was called Aegis, A-E-G-I-S, Aegis wallet, Bitcoin wallet. I think if you Google it, you will find the Bitcoin magazine feature on that, maybe even Coindesk
00:08:07
Speaker
So let's see, Aegis Bitcoin wallet. Yeah, there's Crunchbase. There's the GitHub repo. I can see it on there. That's very cool. Yeah, it's still there. Yeah. Yeah. That's fantastic. What a nice piece of history that is. That's great. So after that, the whole, it was also important for me to have
00:08:35
Speaker
a very straightforward user experience because being a tech savvy myself using those wallets, I was always frightened. Am I pressing the right button? What will I do? And we just did this send receive buttons and it was what today it seems obvious for us, but back then it was a big simplification of the experience.
00:08:57
Speaker
Yeah. Well, I can see the last commit was that nine years ago. So that was, that was quite a while ago. I wouldn't try it. I wouldn't use it today. Uh, today we, uh, other options, but back then it was a pioneering project. That's very cool. And 100% Java, I see. Nice. Have you, have you stuck with Java for Kima then?
00:09:21
Speaker
No, no, no, no, no. So I wasn't the coder for this project. And now KEMA today, it's being developed in Go. We were on top of the Cosmos ecosystem, so completely different technology.
00:09:40
Speaker
No, a hundred percent. I get that. And I did, I did read that you're into, like you're built, you've built the Kima chain using Cosmos SDK. So that's really interesting. But first do you want to maybe give a high level overview of what Kima is, what it's trying to solve and how it's trying to do that?
00:09:57
Speaker
Yeah, sure. You can categorize it in the Interprobability Protocols category. We're building a blockchain that the blockchain itself functions as a relayer and a settlement layer.
00:10:19
Speaker
So instead of relying on sporadic relayers that relay messages between ecosystems, we have the blockchain, the key of blockchain that relays messages and also does on-chain settlement of financial transactions. Now,
Eliminating Intermediaries in Money Transfer
00:10:38
Speaker
early on when we started the project about two and a half years ago,
00:10:44
Speaker
Obviously, we saw that there are solutions. There are interoperability solutions. We know that there are bridges between blockchains. Back then, we had wormhole and some others.
00:10:57
Speaker
later came AxlR, layer 0, and we now have CCIP. So all of these solutions, they are great solutions, but they solve a certain part of the problem the way we defined the problem. So we wanted to provide a solution mostly to move around money.
00:11:24
Speaker
This is why we call it the money transfer protocol. And money is not only blockchain money, it is also bank currencies, what we call fields. It is also CBDCs.
00:11:40
Speaker
that we will see in the future. Money is also assets. Assets is also a form of money because you can store value in real estate, which can get tokenized. So we have all these forms of money. Money is also debt and loans, right? That's also bonds. Yeah, of course. So money is many things and we thought that
00:12:05
Speaker
just focusing on moving one token from one chain to the other chain is great, but the world needs something that is bigger, something that really obstructs all the fragmentation between asset classes and ecosystems.
00:12:23
Speaker
and that includes banks, that includes any type of asset classes, it includes public chains, EVM and non EVMs, it includes Bitcoin and it includes private chains that banks and enterprises use. So the challenge
00:12:40
Speaker
was way more ambitious, way bigger. And today, the only solution to glue together these disparate ecosystems is by putting an intermediary in between. So if you want to transfer money from one
00:13:03
Speaker
country to the other, you have Swift as an intermediary with the corresponding banks. If you want to transfer, if I want to send you money, I will use PayPal or transfer wise. But there's always an intermediary.
00:13:22
Speaker
in between that you have to become their customer and you have to pay them the taxes, the transfer taxes, the fees, which they can leverage as much as they want. If you want to send money from Europe to Africa, you would pay up to 10% for this type of a transaction. Now, the whole
00:13:46
Speaker
mission, the whole narrative of a blockchain was to remove the intermediaries. So now we built all these hundreds of blockchains and we now need an intermediary to bridge between those blockchains and the traditional financial system. So the narrative of Kyma is let's use the attributes of a blockchain to remove the intermediary also
00:14:15
Speaker
as the bridge between those ecosystems. So that's what it is all about. Chema is a generic asset agnostic solution that connects those disparate ecosystems, regardless of their underlying technology.
00:14:34
Speaker
regardless of the asset class, regardless of... We have no dependency whatsoever. That's one major guideline in the design of the solution. The second guideline, which is connected, is security. If you put intermediaries, they're susceptible to hacks. If you use smart contracts to manage funds,
00:15:01
Speaker
smart contracts as we know, they get hacked from time to time and actually almost on a daily basis, we read about unfortunate hacks. That's what cross-chain bridges are for the most part. It's this
00:15:18
Speaker
contract on this side and that contract on the other side. And if you could theoretically fool the receiving contract that the tokens on this chain were burned, it will just take a word for it and release those assets. Exactly. Exactly. And this is why at day one,
00:15:36
Speaker
Our major guideline was, what if we remove the smart contracts? So there are no smart contracts that manage funds, manage money. We have the blockchain that will directly manage the money. That's the innovation here. And we filed a patent for that. So Kyma is the only blockchain in the world
00:16:04
Speaker
that can directly manage money without any intermediary, without
Integration and Regulatory Challenges
00:16:12
Speaker
smart contracts. The only exception, obviously, is that fiat. There's no way to directly manage fiat. We have to manage a bank account.
00:16:23
Speaker
that holds a field, that's the exception. So when you say that the blockchain itself manages the funds, does that mean that there is some kind of mechanism or logic in place or kind of code but not in the smart contract kind of way that is aware of all of these pools and asset classes?
00:16:49
Speaker
Exactly. Yeah. So the blockchain itself, every node in the blockchain can monitor and attest transactions, so verify transactions. So let's take a very simple example. Let's assume that we want to move 100, we want to offer 100 USDC from Ethereum to a bank account.
00:17:18
Speaker
Now, the validators, they all have connectors to the ecosystems that they control funds on. So that's one component. The other component are the accounts themselves. So we have a liquidity pool or a liquidity account.
00:17:39
Speaker
on Ethereum, on every chain that we support. And we also work with service providers that give us access to bank accounts. And they are from a regulatory perspective, they take care of compliance as well. So they give us an API key and compliance. So a Kyma transaction basically has two operations. One is a deposit on one end,
00:18:08
Speaker
Um, so 100 used to see gets deposited by the user at the source, which is the theorem to the, uh, um, Kima managed account, the validators, they attest, they vote, they wait for finality. And then they vote that money was indeed deposited. So we are now certain that there's no way for double spending.
00:18:38
Speaker
because money was indeed removed from the user's premises to the account. And then the second operation is withdrawing the same amount from the KEMA account at the destination to its destination wallet or bank account. So in this example, we do off-ramp without an exchange in the middle. Again, we remove the intermediary. There's no need for an exchange. Today, there is no other way to
00:19:08
Speaker
do on-ramp and off-ramp without an exchange. No such way. We don't need the exchange because the blockchain settles the transaction without an intermediary.
00:19:23
Speaker
Well, that's fascinating. And it's fascinating that you can facilitate a transaction from crypto to fiat. That just opens up in my head. Like I have a lot of questions right now about this because I was reading your white paper and obviously you use Cosmos SDK. You use light clients as well to facilitate like interchain communication. So I'm guessing you also use the
00:19:50
Speaker
where you use the IBC protocol for that, the inter-blockchain communication protocol? We don't need to. We don't need IBC,
KIMA as an Infrastructure Layer
00:19:56
Speaker
actually, because we have a light client for every chain that we support. And key functions as a replacement in a way to IBC because we are already connected to every supported ecosystem. So we don't need IBC, basically.
00:20:15
Speaker
The use of Cosmos is mostly on the consensus level and what used to be called a Tandemint. Yeah, exactly. So we took that as the basis for the consensus of the validator.
00:20:33
Speaker
Oh, I see. So you've rolled out your own Lite clients, like your own custom Lite clients. Why did you see a need to do that instead of using, say, IBC, which is already available to plug and play? Because it is not available for every...
00:20:50
Speaker
chain. It is not available for Solana, we've added the Tron, we're now adding Bitcoin, so we did not really want to rely on that. There are some solutions that take IBC to EVM, but we do non EVMs as well, so we have zero dependency on
00:21:17
Speaker
Right. Okay. Because I was going to ask, obviously you support, you said you support Solana, you support other networks. I was just going to ask, how do you manage to do that with using the Cosmos SDK? So you've rolled out your own. So I thought that using Lite clients means that the blockchain itself needs to be compatible with the Lite client that you're looking to deploy on it.
00:21:40
Speaker
Have you worked with Solana Foundation for them to kind of integrate this? Not directly. We just used a Lite client that was available. I'm not sure if they developed it or someone else, but yeah. So typically, in order to add a new blockchain, it helps us a lot. It accelerates the process if there's a Lite client available already.
00:22:08
Speaker
Right, yeah, that makes total sense. So I was also going to ask you about this crypto to fiat settlement and transaction. So obviously crypto to crypto, different chains, you use a live client, a live client to be able to tell, okay, the transaction is taking place, everything's fine, go ahead, send the money, and then you receive, you get the receipt. How does it work from crypto to a bank? How does that settlement process and receipt take place?
00:22:35
Speaker
So you should think of the architecture as light clients basically are connectors. It's a way to query and control the state of a remote blockchain.
00:22:53
Speaker
In the banking system, obviously there are no light clients, but we're building connectors and we work with service providers. So there are two, actually three problems. One is a regulatory problem or challenge.
00:23:12
Speaker
There's a KYC involved there. A bank won't provide an API key to just anyone. You need to go through KYB so the bank knows who you are and get approval. So there's the license, there's the API part, and then there's the connection to the blockchain. So we work with service providers.
00:23:41
Speaker
Because those service providers, they provide us the regulatory umbrella to operate or work with those banks. So they are already, they have the license. Those are virtual asset service providers. They're licensed in their jurisdiction. And they already have the relationships with banks. So they can open an account which functions as a kima pool.
00:24:11
Speaker
a dedicated account. And so it's a segregated account for that purpose only. And they provide us the API. So then we build connectors for these service providers that function as light clients. So it's the same concept as a light client. So the node can communicate, every node can communicate with that service provider.
00:24:39
Speaker
That's very cool. And what banks do you support currently? So we're launching it one by one. That service is not launched yet. We're starting in Europe because Europe is
00:25:01
Speaker
relatively easier because all the regulation is the same for all European countries. And if you have a beachhead to one European bank, basically you have SEPA access to every bank in Europe. So we start in Spain with a service provider that is a partner of ours and that gives us access to euros.
00:25:30
Speaker
in Europe. And we're going to replicate that process in every jurisdiction based on demand.
00:25:40
Speaker
That's very cool. Have you come across any banks or any, well, any banks that just are not very crypto-friendly? Just to kind of give you an idea, for instance, in the UK, we've seen more and more banks refuse transactions in crypto. You couldn't, for instance, you can't even deposit on centralized exchanges from a lot of the banks and seems like as time goes by,
00:26:04
Speaker
banks that were very crypto friendly are becoming crypto cautious, at least in the UK. Like a while ago, Monzo used to be the app that everyone would use to kind of send fiat crypto, but they've kind of gone like, we don't want to deal with that. So they stopped people from depositing to like Binance or other exchanges.
00:26:26
Speaker
Yeah, so, um, definitely, uh, so we obviously work with service providers and they work with, uh, crypto friendly banks. Um, the, the transaction, uh, um, so the, the Kima managed account, uh, is resides in a, has to reside in a, in a crypto friendly bank. But, uh, um, then, uh,
00:26:56
Speaker
money gets transferred to the user's bank account. Now, I'm sure that this is something that is yet to be seen. I'm sure that some banks will say although the withdrawal or the transfer is originated from a European bank,
00:27:16
Speaker
they would want to understand what's the entire flow of funds, where the money is originated from, and if it's crypto, they may not be willing to accept it. So that's obviously something that we cannot solve. But at the same time, we see more and more openness in some jurisdictions.
00:27:44
Speaker
As long as you comply with the requirements. So that is the KYC part. So it's clear who's sending the funds. And there's the KYT.
00:28:02
Speaker
or AML, it's to know your customer and know your transaction. So it's not about who's sending, but what is exactly the transaction. Now that is another unique feature that Kyma has. We've built into our protocol KYT checks. So that's a parameter in the Kyma transaction, which you can just
00:28:28
Speaker
turn on. And if you do, we will check the source and the destination addresses. And if one of these addresses is we're using a third party, a partner company named Explores, they do these checks
00:28:50
Speaker
on an ongoing basis and they're fantastic in identifying suspicious wallets. So if a wallet just five minutes ago was part of a HEC and it received HEC funds,
00:29:09
Speaker
And you want Kyma to block it. So when you facilitate, when you invoke the Kyma transaction, you just turn on this, you flip on this parameter. We will do the check and we will just block the transaction because it's sourced from a wallet that is suspicious of being part of some illicit activities.
00:29:33
Speaker
Right. That's very cool. And I'm guessing all that information lives with your third party provider. So it remembers the history of the wallet and it always, it'll keep that in mind. That's very cool. Does that work the same way for KYC? Does KIMA support KYC out of the box? And do you store the status of the wallet somewhere so that it can be reused?
00:29:54
Speaker
So we do not store the information, definitely not private information. So KYC, therefore, we do not handle KYC. The application that calls the Kyma transaction, the API,
00:30:16
Speaker
usually takes care of the KYC, and if there's fiat involved, our service providers, they also do their own KYC checks. So they want to make sure that they have the trail of who's depositing funds in those fiat accounts. So we provide the infrastructure layer, then there's a service provider that does KYC checks, and potentially the apps do the same as well.
00:30:43
Speaker
Right. And I think that's an important distinction to mention that you're an infrastructure layer in that Kyma is in my head aimed towards maybe small, medium businesses or institutions or maybe Web2 companies that want to have something to do with like a Web3 component in their app, but it's essentially
00:31:05
Speaker
aimed at developers and aimed at people or teams that can use your infrastructure, development infrastructure.
00:31:14
Speaker
Correct, 100% correct. We're an infrastructure. Our mission is to... We want to be this infrastructure that nobody heard about, but everyone is using them. That's a very good way of putting it, 100%. Some of the strongest infrastructure companies out there operate on that basis, on the basis that you don't see them because they're so ubiquitous, they're in everything.
00:31:41
Speaker
Exactly, exactly. So you just look through them, they're everywhere. But yeah, we're not after the consumer recognition, but we want to be, as you said, ubiquitous. We want to be the de facto stand out for moving
00:32:02
Speaker
assets, moving money, regardless of the technology and just be completely agnostic and stand out. It's a big mission. It's a huge mission and it sounds honestly genuinely exciting. I'd love to keep up to date with it because it's really cool. When did you start Kima? I didn't ask.
00:32:24
Speaker
We started KEMA back in almost two and a half years ago. It was November 21.
Liquidity Management with Machine Learning
00:32:35
Speaker
Okay. Good time for a startup. Just as the bull market finishes and the hype's gone and people are just focused on building rather than the price and stuff. Good timing there. Actually, it's a funny story. I'll make it short. Now we have time.
00:32:55
Speaker
The same team started back in early 21. We started a completely different project. We identified the need for automatic risk management algorithms for crypto. We thought that
00:33:12
Speaker
you know, hedge funds and everyone was talking about institutions that are coming. And so they are used to risk management practices, right? So we thought that there's not enough risk management in crypto. So we built an MVP, we launched it in May of 21.
00:33:37
Speaker
And I went out to speak to hedge funds and asset managers and institutions and very well-known crypto projects that some of them are no longer with us. I won't name names, but everyone knows those names.
00:33:56
Speaker
And I spoke to these guys and that was in the time between May of 21 and November 21. And if you look at the Bitcoin chart between these two dates, Bitcoin went from approximately 30,000 to $69,000. That was just the all-time high of November. And when Bitcoin went up like this, no one,
00:34:25
Speaker
but really no one was interested in risk management. I get it. You made money doing everything. You'd make money just blindfolding, throwing darts at a screen like, it doesn't matter. It's all profit anyway. That's why a lot of them went under later on. That's why we had so many bankruptcies because unsustainable business models where everyone would just print money.
00:34:47
Speaker
Yeah, exactly. So it was up only for everyone. Everyone was excited. And, you know, I spoke to several of those funds and they told me, hey, we have the best. It's funny. Some of those that fail because they didn't do proper risk management. I spoke to them and they told me we have the best risk management people in Wall Street working for us. And then
00:35:16
Speaker
you know, we know what happened. But along this time, we spoke to a Solana based project and they actually a DeFi project and they actually liked what we're doing and they wanted to use
00:35:34
Speaker
We were branded, we weren't branded chemo, we were branded diversified. They wanted to use this solution. So we said, okay, and how do you do risk management? You use derivatives, you use options to manage the volatility and the risk. We built a Bitcoin
00:35:54
Speaker
a structured product that used options from Deribit and DyDX. And these are completely different ecosystems. Deribit is a centralized exchange, DyDX is an Ethereum ecosystem, and there was no way to use those in the Solana ecosystem.
00:36:16
Speaker
So we started thinking about, okay, how do we connect this world? We need assets from centralized ecosystem and from Ethereum, but we want to protect Solana investments. And that got us to start thinking about the central probability part. So in November, just before everyone went out to their vacations of December, we decided to take the time when it's quiet and there's nobody to speak with.
00:36:46
Speaker
to design a solution for that. And that actually was how Kima was born. We designed a solution with the guidelines that I spoke about earlier, no smart contracts, the most secure solution out there, completely agnostic. And when everyone went back,
00:37:08
Speaker
To work in January after Christmas, we decided to go all in and make that as our day job. And that's how Kima was born. That's a very cool story. So you started with a risk management where you'd basically hedge against some crypto assets with other asset classes. Exactly. Options and shorts and
00:37:37
Speaker
Yeah, exactly. Right, right. And while you're doing that, then you realize that, okay, now we need to bridge all these different asset classes into like one app. And how do we do that? And that's very cool. I love that story. I think it's, it's a very nice kind of, um, inception story for, for a startup. And, uh, it definitely speaks to kind of.
00:38:00
Speaker
you and your team's ability to find problems that are real in this space and then come up with an elegant solution for it. Yeah, we try to solve our own problem. That's the best way to start the business if you have that problem and paying for it.
00:38:24
Speaker
Yeah, well, I've seen that a couple of times and it's always interesting. I was speaking to the co-founder of Horizon.io, Michael Sanders, and they're working on creating a set of tools that allows developers to use Web3 data in their games. So they have a Unity SDK and they're connected with Unreal Engine.
00:38:47
Speaker
So you can just easily query on chain data and using your game create like, you know, Web3 gaming experiences. But the way they've started it is they were working on, did they call it sequence? They were working on a game. Then they realized that they need all of this infrastructure in order to build this game. So while building the game, they're like, hey, this is a great product that we should probably be putting out there because it's exactly what other people need. So that's kind of how Horizon was born, how the sequence engine was born.
00:39:17
Speaker
Nice, nice.
00:39:19
Speaker
Yeah, there's a lot of that in crypto. I feel people are genuinely
Security and Validator Requirements
00:39:23
Speaker
passionate about the tech and then they just start building solutions out of that passion and understanding of the technology. It's a great creative and emerging space that I kind of love to explore. So that's a big part of why I love having these conversations because everyone's got like a different story or a different solution or like they've thought about, you know, oh, it's this idea that I wanted to, you know, and then you get the story and it's wonderful.
00:39:49
Speaker
I just want to move back to Kima for a minute because you've mentioned something a while ago that I was going to ask you about and then I just got sidetracked by the things. So you said that the blockchain itself manages liquidity and I was reading through the white paper that you're using some kind of, correct me if I'm wrong, but some kind of AI driven solution to manage liquidity. Do you want to talk a little bit about that? Yeah, definitely.
00:40:16
Speaker
So we again this is a part of the solution so it's not just a technical part of let's
00:40:25
Speaker
move a message between one side to the other, because if you want to move money and you don't want to create synthetic assets, which was a big no-no for us, we didn't want to use the lock and mint or mint and burn practice, we wanted to stick to native assets to make it more secure.
00:40:50
Speaker
Obviously, if you do not meant a synthetic token, you need liquidity to withdraw. So a transaction is a deposit and withdraw. So these accounts, these schema accounts basically function as the liquidity pools. And we built this
00:41:16
Speaker
basically liquidity cloud. It's a network of liquidity pools that you can plug into and that will facilitate those transactions. Now, the problem is with that, and by the way, by bundling the messaging part and the liquidity part, that's a whole solution. This is a money transfer protocol. So just doing messaging,
00:41:45
Speaker
for solving the money problem is not enough. You must also solve the liquidity problem. Now, if you're managing a network of liquidity pools, so it could be that at some point the pools will be imbalanced. It's not that they need to have the same level, but they need to be optimized for the demand.
00:42:13
Speaker
Okay. So if you were, you, we, we have a, uh, uh, ZKVM for instance, and we have Ethereum, uh, two completely different chains. I mean, they're both EVMs, but in terms of usage, ZKVM is a relatively small. If you, if you check not just the TVL, but actually the number of transactions and the size of actions is you cannot compare it to Ethereum.
00:42:39
Speaker
So why on earth would you need the same amount of liquidity on ZKVM and in Ethereum? The demand is not the same. So we came up with this algorithm that automatically monitors the supply and demand. And wherever there is demand, it needs to incentivize liquidity providers to put more liquidity. So we need more supply.
00:43:09
Speaker
How do we do it? So, um, actually, uh, very, very similar to how Uber works. Uh, Uber in, in the central of London on New
Innovative Applications and Future Plans
00:43:25
Speaker
Year's Eve, everyone needs the cabs and there are not enough cabs. So how does Uber, uh, um, incentivize more cab drivers from
00:43:38
Speaker
the vicinity from other, from the suburbs to come to central London and stand up with these traffic jams. They pay them more. How do they pay them more? The users pay more. This is the search fee that Uber has. So they're using financial incentives to balance the momentary supply and demand.
00:44:05
Speaker
So we are applying a similar concept across all the liquidity pools. So we have a universal view of supply and demand across all the networks. And we have this machine learning model that based on usage can predict the supply and demand and adjust
00:44:31
Speaker
the incentives for liquidity providers. So if it predicts that on Ethereum at, I don't know, on Friday noon, because many people, they start withdrawing money from Ethereum towards the weekend, then the incentives will go up. So that's the idea also in liquidity management and applying AI or machine learning more specifically,
00:45:01
Speaker
to manage this liquidity in an optimal manner.
00:45:05
Speaker
Right. Well, that's kind of why I was just dancing around the term AI. I didn't want to say AI right out the gate, because there's a lot of hype around. Everyone's using AI for everything. You've got a toaster that's got AI, and you've got a vinyl player that has AI. So I feel like machine learning is a lot more accurate, more apt to how you guys are using it and what it is. Yeah. You're correct. I originally used machine learning, but people ask me, OK, what does that mean?
00:45:37
Speaker
Let's be honest, AI is everything and nothing. In computer science, you have deep learning, you have NLP, you have machine learning, you have neural networks, you have multiple
00:45:56
Speaker
AI practices and AI is like an all encompassing term that layman's understand it's specifically machine learning. Yeah, that's the more accurate.
00:46:11
Speaker
Yeah, so it's statistics based on what it's known and continuously updates those statistics based on what it sees. That's cool. So your liquidity pools, you have liquidity, I'm guessing you must have liquidity pools in every network that you support, every chain that you support, and also liquidity, like fiat liquidity with the banks that you support, I guess, as well.
00:46:34
Speaker
Correct. And the liquidity is provided by users with yield farming or with giving the rewards for providing liquidity. Is that the main? I'm trying to understand how your network would, how your system would scale up.
00:46:50
Speaker
Because if it scales with users providing liquidity, then it's easy for you to adopt a new network. If you incentivize users, hey, there's a new pool there that needs to be filled. Here's some nice rewards for you, rather than you having to provide your own liquidity. That would be a vertical scaling of the network. Absolutely. So in our tokenomics, we've built this flywheel. So the system, let's
00:47:17
Speaker
the system with this machine learning models
00:47:24
Speaker
always strives to get back to some equilibrium on all the liquidity pools. So it changes the fees that users pay. The fees are being paid to liquidity providers. They bring in more liquidity. They get the rewards. And then the
Mainnet Launch and Features
00:47:42
Speaker
rewards start going down back to their normal because we have enough liquidity. So the system always gets back to equilibrium. Now, what changes the equilibrium?
00:47:53
Speaker
It's either there's more demand or either demand changes or supply changes. Right. How does demand change when we add more applications or if applications get more popular? So when we add more applications, it changes. Now there are more users that need liquidity. They take out liquidity. So again,
00:48:21
Speaker
It incentivizes more liquidity providers to put their liquidity in to get the system back to equilibrium. So it's a very nice system that takes care of itself with mathematical models and financial incentives. Now, this is the ecosystem that we're building. So the ecosystem is comprised of
00:48:46
Speaker
the node operator, the validators that operated the nodes and protected the blockchain, they get rewarded also with part of the fees. So if you drop it, the validators, do they need a specific hardware to be able to validate? I think I read something in the white paper. Okay. What is it? It's like a special kind of device.
00:49:12
Speaker
So basically it's a standard Intel server with a Xeon processor. The reason we need Xeon is because we use an Intel technology that is deployed on the Intel chip.
00:49:31
Speaker
that can encrypt data that's a trusted execution environment. It's a technology that Intel calls SGX. Now we're using that for further protection. So the validators, they hold secret shares. So the keys of the pools are being divided
00:49:52
Speaker
among the validators. So there's no single entity that has the key for the pools. The shards of the key, every shard is being stored in an encrypted way on this chip.
00:50:09
Speaker
So this is an Intel architecture and this is why we need servers, node operators or validators who run servers with the Xeon Intel server. This is why we have it in our specification. That makes sense. And where can people get the validator from and what is the cost of a validator?
00:50:31
Speaker
No, so basically, we have some validator. We're just, we're whitelisting validators, not anyone become a validator. The validators, they can get these servers with the Intel processor, they can get it in Microsoft Azure on cloud, or they can just buy a Xeon server based,
00:50:57
Speaker
Xeon-based server and store it within their data center. Actually, it's a pretty standard Intel server CPU. Okay. Yeah. Xeon is the baseline for a server CPU. Any Xeon, probably recent generation,
00:51:22
Speaker
The recent ones, yes, we have a list of the models and the numbers. So it's not a tremendously expensive server. It's pretty affordable. But again, it's not that we did not open up the node operation to anyone. We whitelist the
00:51:49
Speaker
Uh, operators, at least at the beginning, this is, uh, uh, we were going to stick to that. That's what sometimes called the proof of authority. So you need to know who's running, uh, um, uh, the, uh, the, uh, the node, uh, because, uh,
00:52:08
Speaker
With young proof-of-stake networks, and that's true for every POS network, not just KEMA, there's always the risk of collusion, of validators. Now, you don't know who the validators are,
00:52:27
Speaker
what stops an illicit entity. And initially those networks, they don't have thousands of validators. Okay, let's assume you have a hundred validators that install the software and they now validate. And now the validators, I can run 200 validators and take over your network.
00:52:54
Speaker
And if it's proof of stake, then everyone has to stake tokens. And if the price of the token is not high enough from a financial perspective, it's very easy to take over the network and do whatever you want with it. So we need to protect the network. This is why we initially start with the permissioned set of validators.
00:53:20
Speaker
Yeah, but I think that makes sense because the network is at its most vulnerable when it's in the starting phase. It's not decentralized enough. It's not big enough. And like you've just pointed out, you could easily hijack the network by running several hundred nodes, which you could deploy on AWS or Azure or something like that quite easily if you really wanted to. So yeah, that's a good point. So I'm guessing in the future, the plan is to decentralize more and more the protocol and the network and everything.
00:53:49
Speaker
Um, we, so we plan to reach in phase one up to 60 validators. Um, we, we have ideas of, uh, further decentralization, but, uh, the moment this is not, uh, I think with the 60 validators, uh, we're, that's a good balance between, uh, safety and, uh,
00:54:13
Speaker
It's not really fully decentralized, but it's distributed enough to make sure that collusion is very difficult to achieve. Right. So is the application open for anyone or do you mainly work with, let's say companies or institutions that are building something on Kyma or are using Kyma for something?
00:54:39
Speaker
Actually, we look at some added value that validators can contribute. For instance, we were partnered with MasterCard's Innovation Lab and they're running a validator. We were part of our mission
00:55:08
Speaker
is to provide functionality for financial institutions. So we're inviting institutions and credible entities, corporates to take part, not own, not control, but to take part, contribute to this mission by running a node. So we're talking with several
00:55:33
Speaker
very high profile entities to run a node as well. We will have some private people. We have some professional node operators and validators in the Cosmos ecosystem. So we're trying to mix and match a variety of people, individuals, corporates.
00:55:56
Speaker
That's very cool. And what are some cool applications that you've seen using Kyma? I'm really interested to see what people have built. And I guess that's what, you're in a very interesting position of being able to see everyone using your infrastructure. I was talking to the guys at Dynamic that built the Web3 Wallet application.
00:56:22
Speaker
And they were saying like, it's one of the best part of the job, just being able, you know, as an infrastructure provider to go there and see what people are building. And they're building crazy things I haven't even thought about. Absolutely. And I'm, every day I speak with potential, you know, customers, users, and the use cases that they bring
00:56:46
Speaker
I always think that I thought about everything, every potential use case, and then there's another one. Just before this call, I had a call with a potential customer from, again, a financial institution, and they came up with this
00:57:05
Speaker
I cannot speak about it because it's too early, but they came up with a use case that I said, wow, I haven't thought about. It's so valuable and it's so disruptive, but it's something that I never thought about. So just a few examples. Some things that we already announced.
00:57:24
Speaker
We work with a company called Monobit in Colombia. Monobit is they're issuing a prepaid MasterCard card for people on an app. So they have a physical card and a virtual card. And the idea is to connect, to be able to top up the card with crypto. Oh, nice.
00:57:51
Speaker
You can hold USDT on Ethereum and use that to top up the card. And then you can go to the store and buy with Mastercard. So the merchant, he already works with Mastercard, right? So the POS system accepts that card. But at the back end, the top up took place from a crypto wallet. And the KEMA is this link
00:58:21
Speaker
that enables people from any chain that we support to be able to top up those cards from Ethereum and Solana and Tron and Polygon and whatever. So it now becomes seamless. They can hold their stablecoins, they can hold their currencies on every type of wallet.
00:58:45
Speaker
and they can top up as much as they want, when they want, and that creates this seamless transition from crypto to the real world. So that's one example. We're speaking with exchanges.
00:59:06
Speaker
small and medium exchanges that do not have all the pairs in the world. So if you go to a small exchange, so you have Bitcoin and USDT.
00:59:18
Speaker
But what if you use DC? What if you have used dollars? So, Kimo now provides this abstraction layer. So, yes, they can offer Bitcoin use DC, but now their customers can seamlessly use the USDT and send an order to this Bitcoin use DC or USDT order book, although they have a different type of asset. Right.
00:59:45
Speaker
So, and that increases liquidity that creates, you know, value. We're talking with real world asset platforms about enabling
01:00:01
Speaker
what they call DVP, Deliver versus Payment, which is basically a nice term for paying for a tokenized asset. And we create this seamless process where you can pay with any type of asset.
01:00:18
Speaker
and get the token or the tokenized asset in one atomic swap. So, you know, provides this atomic swap. The token and the money exchange hands peer to peer in one transaction, which is... That's very cool. You know, it's atomic swap for real world assets. That's something, again, that is unique. So, this is just a few examples of things that are beyond the
01:00:48
Speaker
to additional, OK, let's move USDC from polygon to Ethereum and put it in the landing protocol. Or obviously, these are things that we can support. But we're interested in the real life use cases that we can uniquely support.
01:01:07
Speaker
Yeah. And I think that's where it kind of becomes like magic is when you use it for something that's completely out of the ordinary, like, yeah, exchanging from this chain to that chain is something that will happen. People will build this kind of, you know, exchanges for people to use with the nice interfaces and everything. But what happens if you integrate it into
01:01:25
Speaker
real life, what happens if you integrate into an app like Uber and you can pay with your crypto or you can be a driver that earns tokens or mechanisms that kind of all integrate within each other. And I think we're just going to see more and more of that. I think it's companies like yours that allow the next stage of development in crypto and technology to happen.
01:01:51
Speaker
It's that infrastructure layer, that hardcore, lower level, kind of nitty gritty, here are tools for you guys to build the next generation of applications. And without applications, without infrastructure layer like Kima, you wouldn't be able to get to that level. So it's incredibly important to see infrastructure in crypto. And I think you guys are doing a fantastic job with Kima. Thank you. Thank you so much.
01:02:17
Speaker
No, no, my pleasure. I was going to ask you, what do you have in store for your roadmap for this year and next year? Is there anything that you'd like to announce? Is there anything exciting coming to KIMA? Anything at all?
01:02:31
Speaker
Yeah, so actually we're just about to go through some exciting, really exciting milestones. So obviously the major one is our mainnet launch, which is planned for June. That's right around the corner. And that's a huge milestone. That's really the manifestation of hard work of almost three years.
01:03:01
Speaker
uh two and
Community Engagement and Future Updates
01:03:03
Speaker
a half years and that's really exciting obviously in order to launch mainnet there must be a token that's because we're a proof of stake network so we're launching the token as part of this process
01:03:23
Speaker
In our roadmap, so we will have some major announcements. We're talking to some companies that are going to provide real, as I mentioned, it's all about making it real life, value and sustainable. So we're going to, in the coming months, we're going to announce
01:03:48
Speaker
several projects and POCs that we're doing with these companies, so everyone stay tuned because those announcements will be pretty unique. The other major
01:04:08
Speaker
milestone would be later this year when we launched the fiat support. So that will essentially create a unique ability to onramp and offramp without an exchange in the middle and very attractive.
01:04:26
Speaker
fees lower than anything that is available today and that's huge because there's huge demand for on-ramp and off-ramp and secure fast and cheaper services to do that.
01:04:41
Speaker
We are going to also announce once it's available not too far the Bitcoin support and that will create a new level of utility for Bitcoin holders because we will create this seamless transfer of Bitcoin into the Ethereum ecosystem through WBTC. You will be able with a seamless user experience to
01:05:11
Speaker
For instance, take a loan in Aave with your Bitcoin. That's cool. So, you know, in one click, I just approve.
01:05:24
Speaker
the transaction on Bitcoin, and you're getting USDC as a loan in Aave, just as an example. So it's not just connecting traditional finance and DeFi, it's connecting also Bitcoin, which as everyone knows, an immense TVL.
01:05:43
Speaker
in it, but very low utility because it's completely isolated from the rest of the innovation. So connecting Bitcoin to Ethereum, connecting Bitcoin to Solana with a click of a button and the seamless experience and the secure one is something that we want to bring to this industry and contribute with that. So that's also coming. These are just a few nuggets. We have so many other ideas.
01:06:13
Speaker
But I think that that by itself is quite a lot. Oh, it's huge. It's huge. I mean, the mainnet launch coming up in June and then all these incredible things and features that people are going to be using. It's incredibly exciting. What are some of the places where people can go and keep up to date with all of this with your releases and roadmap? So we're very active in LinkedIn, in Telegram.
01:06:43
Speaker
We have a group in Telegram. We have a channel where we do the announcements. We have a Discord, so that's also very active. We have a developers channel, the developers group on Telegram. So we invite developers to be part of the ecosystem to contribute ideas
01:07:11
Speaker
and share the needs and the pain points that can be solved. And we feed that feedback into our plans, our product plans and the backlog. So I'm reading comments there. This is something that we just started. So it's up and coming. Not too much there yet, but we were going to put a lot of effort
01:07:38
Speaker
in building the developers community. So I invite people to join and contribute because
01:07:46
Speaker
This is how we will foster. This is how we will progress by getting people's pain points in the context of interoperability. So that's very important. We're very active on Twitter. So yeah, the typical stuff, but I invite everyone to participate.
01:08:11
Speaker
Awesome. Well, it is great to see companies and just people, you know, actually connecting over the tech and kind of providing useful feedback or their own thoughts, you know, like we were talking to people a lot, like we've started an algorithmic trading platform a few years ago. We've been working for a few years. We've released it in May last year.
01:08:36
Speaker
And, you know, being a startup, you get to talk to the people, you get to talk to the users that use your product and listen to their feedback to the good things and the bad things. And I just say it's a great position for everyone to be and, you know, to be able to have that first like that two way communication. So it's great to see that you're doing that. And
01:08:58
Speaker
Yeah, I encourage everyone that's interested in interoperability to go check it out. Maybe, you know, go hang out in the telegram on the Discord.
01:09:08
Speaker
Absolutely. Listen, this has been an amazing conversation. Thanks a lot for taking the time. I wish you guys all the best on your mainnet launch. I will keep an eye out to get the news and to see that it's all run smoothly. I'm sure that it will. And I'd love to maybe connect, I don't know, next year or something to kind of see what the progress is and what are some of the things that people have built on, on Kima. It'd be fantastic. Absolutely. I take the invitation. So.
01:09:34
Speaker
And we'll be more than happy to update you and your audience on our progress. And I'm sure there will be many changes compared to what I just said. That's natural. And I hope it will change because that means that we listen to the market and that's the way to move forward. So thank you very much for giving me the opportunity to present Kima and this very nice conversation. I really enjoyed it.
01:10:02
Speaker
Me too. Now it's been great. Thank you, Eitan. Thank you, everybody. Thank you very much. Bye now.