Privacy Comes First, Always

Recorded at EthCC, Cannes.

Hodl Up: Hello, hello guys, and welcome back to another episode of Hodl Up. Today we have SethForPrivacy from Cake Wallet with us. Thank you, Seth, for joining us today.

Seth: Thank you all so much for having me. I was looking forward to it.

Hodl Up: Before we get into anything really serious, I'd love to know your origin story. Why did you join crypto? What attracted you to this industry, this godforsaken industry?

Seth: Unfortunately, I joined for the same reasons as most people. Initially I didn't see any value in the human freedom side of cryptocurrency. Honestly, I was early in my career, working in cybersecurity, and had more money than I'd had before. I saw Bitcoin as basically a penny stock: something I could buy. Oh, and there are all these other cryptocurrencies, and I can buy more units of those. I fell down the usual rabbit holes of thinking it was just a get-rich-quick scheme. But thankfully I lost a lot of money very quickly, as most of us did. I came in around 2017-2018, at the height, and then went through the crash, and that was actually so beneficial to me, because it forced me to dig deeper and figure out whether there was actually something more here, or whether I'd just seen the crash of the next Beanie Babies, here and then gone. I quickly realized there was actually something useful. I've always been a technologist and an enthusiast. I love trying new things and digging very deep into whatever I get my hands on. I did that with Bitcoin first, and it seemed interesting, but I wasn't fully sold that it would fix a serious problem or meet a critical need. It felt like, okay, maybe this is really good for savings. The digital gold narrative was taking over then, and it kind of clicked, but I kept digging and found Monero, a privacy-centric cryptocurrency. It started in 2014 and has a lot of the same kind of origin story as Bitcoin. And again, just to make money, I wanted to mine it. It used GPU mining at the time, so you could build a GPU mining rig with six graphics cards. It was fun to build from a hobby perspective. I built it and got into the community, and honestly, they took me under their wing and woke me up to the idea that not only does privacy matter, which I hadn't been thinking about seriously, despite the surname, you'd think I would have, but also that this stuff is only really useful if you have privacy while using it. Bitcoin's early promises were around anonymity and privacy, and Monero was solving for privacy. But there was a much deeper purpose: there are people around the world who desperately need these things right now. From my Western perspective, it's not just a nice-to-have, a 401(k) addition, ETFs and all that. There's critical human freedom at stake, and financial privacy and financial freedom are the foundation. If you lose those, you lose all your other rights. If you have them, you can defend your other rights. So I quickly went from degen day trader deep down the rabbit hole and became the privacy guy. I started a podcast and a blog, and started working in the space a few years after that. It was a quick rabbit hole for me.

Hodl Up: You can tell we're drifting away from the original ethos of crypto. I understand that sensible regulation is needed to protect users, but at times it feels like some of these authorities are blind not just to the possibilities, but to what this was supposed to be in the first place. I'm not a huge fan of crypto becoming over-institutionalized. I wanted to ask what led you to join Cake Wallet and build what you've been building. I understand you were initially more Monero-focused, but now you cover different chains too. Talk to us, man.

Seth: Vik, our CEO and the founder of Cake, I've known since 2019. He started Cake Wallet in 2018, and the vision at the beginning was really simple: "I have a need. I like Monero, and no one has published an iOS wallet for Monero at all." There was a complete gap, and he thought, I'll step in and fill it. He very quickly realized that one of the biggest missing pieces in Monero was the user experience. The cryptography and technology were really good, but the user experience was just abysmal. I was using it back then, and it wasn't enjoyable. A lot of people had to use the CLI wallet; for many users there wasn't even a graphical interface. There was a mediocre desktop wallet at the time. So the big breakthrough was that pairing really good privacy with a good user experience unlocked something for people that most builders aren't building around. I think there's a misconception that people don't want privacy, the "I have nothing to hide" argument that gets floated around. When you talk to real people, that's just blatantly false. That's not how people think. Everyone wants privacy. If I said, "Okay, hand over your bank statements," no one would do it. You do want privacy. But in our modern age, we've been so stripped of privacy, and the tools to reclaim it have seemed so foreign and so nerdy, for lack of a better term, so difficult and complex, full of terms people don't understand, that people have just said, "I've lost my privacy. I want it, but I have no clue how to get it." So pairing user experience with privacy was the piece that unlocked things for us at Cake Wallet. I joined about 18 months ago, but long before that the Cake Wallet team first shipped Monero support and became by far the go-to Monero wallet in the space. Then they realized no one was doing privacy on Bitcoin in the same way. A few others were building it, but most were again too technical, the built-by-nerds-for-nerds problem, and Vik wanted to take the same idea and apply it to Bitcoin. So we shipped unique privacy tools there. And one of the reasons we're here at EthCC is that there's a gap in the Ethereum space. There are some privacy tools, but they all have their own trade-offs and issues, and most wallets in the space aren't even thinking about privacy. It's not top of mind. So our goal is to solve that as well. The vision is very similar to why I stayed in the space: there's a problem, and someone needs to fix it. We have the resources, the desire and the ethos. Let's blend the best of privacy, but not just by nerds for nerds. Let's make it very user-friendly, beautiful and a joy to use. Let's make it something we want our parents to use, not just us. That's a lot of the vision.

Hodl Up: As Dren said earlier, we've been drifting away from the crypto ideals that Satoshi, let's say, set for us in the white paper. Not only Ethereum: I think most cryptocurrencies right now don't really care about decentralization, let alone privacy. But if there's a way to achieve it, we should, because Satoshi, not in the white paper but in one of his emails I think, mentioned that Bitcoin should become private in the future. I know there are attempts at making Bitcoin private, but how do you convince 51% of the miners to change the code, with all the implications that come with that? And what do you think about the recent attack on Monero? I don't know if it was just speculation, because I'm not technical enough to check for myself. I saw some tweets and did some digging, but couldn't find anything really credible. I know you started with Monero and like its ethos. If the attack last year was real, did it matter? Did it change your view of Monero? Do you think it puts the whole privacy movement under attack, because someone at least tried to take our privacy away?

Seth: For clarity, there was an attack. There's this strange alternative cryptocurrency called Qubic, and the founder is a little insane. He basically said, "I can print my own cryptocurrency, and I'll use it to pay Monero miners more than they'd get mining purely Monero," incentivizing them with a currency he can just create, and trying to drive up the price and the marketing, all that fun stuff. Essentially, he paid miners to mine on his pool instead, and then used that to attack the Monero network. At worst, for users, it just meant transactions took longer to confirm, because he was trying to maximize his profit, which looks like mining empty blocks in secret and then publishing a chain longer than the one real miners had published. So it didn't actually affect privacy. It did harm the user experience a little. But one of the fascinating things about being in Monero for a long time is that Monero has been under attack from day one. There are obviously reasons for compliance and regulation, I understand that, but in this industry there's often an aggressive over-compliance, where people build things in a way that doesn't provide much freedom, just in case someone at some point says it's not allowed. Monero hasn't done that. They also haven't done anything illegal. They've built completely open-source code and an open-source protocol, but from a very privacy-first ethos and focus, and that has meant Monero has been under attack from day one. Usually, any attack Bitcoin has seen, Monero saw first. We've seen malicious nodes trying to spy on what users are doing; the same entity did it to Monero first, then to Bitcoin. We've seen these mining attacks. It's been a broad set of attacks, from regulatory bodies, governments and private entities like Qubic. So it's nothing new. One real benefit of being attacked frequently is that, first, you don't freak out, and second, when an attack succeeds, depending on whether you consider the Qubic attack successful, but something detrimental happened to the network, the Monero community steps up and asks: how do we solve this? What's the solution going forward? How can we fix it without harming decentralization or privacy? There's always this feedback loop: when privacy tools get better, necessarily, unfortunately, though it shouldn't be this way, nation-states, regulators, governments and bad actors also ramp up their efforts. As privacy tools get stronger, the attacks get stronger, and at some point something has to break. We're still in that loop. We've seen it with regulatory attacks: Roman Storm being prosecuted by the DOJ for building Tornado Cash, and the Samourai Wallet developers now going to jail as well. As you build powerful privacy tools, there will be more pushback. But the goal is to empower the individual and build out freedom tech, and ultimately that pushes back on tyranny and authoritarianism, and it helps in the end.

Hodl Up: When we talk about privacy as we know it in crypto right now, if the authorities don't like how we're practicing it, what if we used ZK tech to stay private while making sure nothing illicit can happen? Do you know what I'm trying to say? The question is almost too technical for me to ask, so I hope you get my point.

Seth: I think so. The best thing we can do for privacy in crypto, and I say this as someone building an app, is not to rely on app developers to build, implement and run the privacy tech themselves, but to build it in at the consensus level. One of the most powerful things about Monero, and what makes the privacy it provides legal in almost every jurisdiction, is this. A couple of nation-states have outlawed Monero completely, but the protocol itself keeps operating; they can't stop that. What makes it unique is that no person is running infrastructure to make the privacy possible. No person is deciding, "I'll provide privacy to this entity and not that one." Even miners don't have a choice. They don't have visibility into transactions, and they can't censor them because they don't know what's going on. There's a lot of regulatory freedom in doing it that way, because an open network of individuals freely running an open protocol that provides privacy can't really be prosecuted under any humane, just regulatory framework, in any reasonably free country. You're doing things that simply don't fit the definition of money laundering or fall under AML/KYC laws. So the best case is always when we can do it at the protocol level, when anyone who uses the tool gets privacy by default, rather than having to use something like Samourai Wallet in the Bitcoin space and rely on someone else's infrastructure, a separate entity that's much easier to prosecute and go after. Doing it the Monero way or the Zcash way makes it drastically more resilient. So I think that has to be the goal. It's very hard, though. Like you mentioned, Bitcoin especially has ossified a lot, in the sense that people aren't willing to make changes. As institutions come in and you step away from the smaller, more cypherpunk roots, those changes get harder, because Bitcoin is honestly becoming white-market money instead of the black-market money it was originally. Not that either is necessarily better or worse, but it started out as this secret, private internet money, kind of sketchy, something no one understood. Now it's become this institutional thing: banks are adding it to their balance sheets, companies are building treasuries around it, a lot of that insanity is happening. And as you move toward institutionalism, it gets harder to agree that we actually want to ship privacy, because privacy for the individual usually harms the nation-state or the corporation, as it should, because it shifts the balance of power back to the individual. They have a choice. They're not forced into monopolies or forced to live under an authoritarian regime. They have freedom.

Hodl Up: But they don't apply the same level of enforcement to cash as to privacy coins, even though cash offers the same utility, because in some ways it's anonymous.

Seth: Better in terms of privacy, yes.

Hodl Up: I can't help thinking that privacy coins today are what crypto used to be back in the day. We've seen the aggressive delisting of privacy coins like Monero, which is exactly the approach banks took toward crypto, even Bitcoin, at the very beginning. Is it unrealistic to think we'll ever see a society that consistently uses privacy coins, with a shift of power toward retail, instead of relying on what governments decide for us?

Seth: It gets very philosophical quickly, because it comes down to how willing people are to take personal responsibility and do something that benefits them and their families, but that is initially difficult or takes some courage. It's hard to say how many people would actually be willing to do that. But something you consistently see, in that cycle I talked about where privacy tools get better and the attacks get stronger, is the Streisand effect: when something comes under attack or gets pushed back on, a lot of people start thinking, "Oh, maybe I should check that out." That's happened with Monero, with other privacy coins and with Bitcoin as well. When something gets delisted or banned, people ask, why is that being delisted and nothing else? Why are these specific things what they're so worried about? Some people will write it off: "Oh, criminals were using it, so clearly they should have banned it." But I think we've seen, especially through COVID and beyond, a lot of people step back and say, okay, I need to think deeply about my choices and consider taking personal responsibility. As those attacks happen, they drive users to want that more. Will we ever have a society where everyone in your country, or every merchant you talk to, uses Monero or something similar? Honestly, probably not, because I don't think most people are ready for that step toward personal responsibility. But one of the most powerful things about Bitcoin and Monero is that as long as the protocol is functioning well and you can opt in, you can unlock markets you never could have, and build societies and communities you couldn't otherwise, even if most people around you don't make that choice. You still have the tools to build your own communities, and they can be international. That's another advantage of Monero over physical cash: I can pay someone across the world in Monero with very good privacy. Not as good as physical cash, but I could never do that with physical cash. So it'll be interesting to see how many people get pushed into it. As governments try to take away cash, and a lot of societies are trying to go cashless, people don't want that. America is a good example: I think they'd love to go cashless, but the vast majority of Americans still use cash every day and rely on it completely. As governments say, "Cash is a bit dangerous for us because it has good privacy, we don't control it and we can't surveil it as much, so we want to push it out," they necessarily wake people up. People ask, "Why are they trying to take this? I rely on it every day. I have to find an alternative." Those are the situations where people wake up and say, "Okay, there's an alternative. Sweet, I'm ready," and jump in.

Hodl Up: First, what I like about privacy ecosystems and privacy coins is that they don't see each other as competitors. They see themselves as united, as part of the resistance, basically. They see their true competitors as the non-private L1s, because those very seamless UX apps onboard most of the normies and hide the fact that your data isn't private at all, and most normies don't fully understand what's at stake. What I do like about DePIN projects, for example, is that a lot of them let you opt in to sharing information, like a specific location, in exchange for benefits, tokens or whatever they reward you with. It's still optional; users can opt in and out whenever they want. But the trend right now is that you'll never have that option again. Yesterday a guy tried to onboard me to an app, and the very first thing that popped up was a request to verify my identity. Off the top of my head I thought, this isn't how you're supposed to onboard me.

Hodl Up: But you got a point or something if you verified.

Hodl Up: Good, I'll never use that point.

Seth: Speaking to that, something that's often misunderstood is that privacy and anonymity are the same thing. They're really not. Privacy is about you having a choice. If you don't have a choice about whether someone surveils your location, you don't have location privacy. Ultimately, you should be able to choose. If I want to reveal information to someone, I should be able to. But the usual default, where I reveal information to everyone and only occasionally choose not to, is really harmful, and that's what we're trying to get away from. Location data is a great example. There are people you really want to share your location with. I'd love for my wife to know where I am, so she can help me if I need it or know when I'll be home. There are advantages to that. But I don't want to share my location with the world in order to share it with my wife. It's the same scenario here: ultimately, privacy is about giving choice back to the individual. You don't have to be the creepy dude with a beard who lives in the woods and no one knows where he came from. That's not the vision. It's just about having a choice.

Hodl Up: Now I want to pivot to Cake Wallet, because I really want to know what new features you're building. As we mentioned at the beginning, you're rolling into new chains and ecosystems. How does that work while staying true to the Monero-style privacy?

Seth: It's always a balancing act for us, because we don't want to be so hardcore that we can't build a product normies want to use. We're trying to find the blend: user-friendly, very straightforward, with support for the token you love, but also good privacy options. On EVM chains, unfortunately, privacy is often very limited. One thing people don't think about much is that most of these communities silo themselves. Bitcoiners love their Bitcoin-only thing, build Bitcoin-only wallets and hate on any wallet that isn't Bitcoin-only. That's really a terrible ideology, because you drive away people who would love to use Bitcoin but also want to use Ethereum, for instance. The vast majority of the world loves stablecoins, and many of them would also like to use Bitcoin, but Bitcoin wallets totally miss that side. And the EVM space hates Bitcoin, so they don't implement it. What we're trying to do is funnel users from the more centralized, controlled, surveilled chains to places where they have more censorship resistance and more privacy, like Monero, and give them all that in one place, so they can seamlessly have their Monero for private spending, their Bitcoin as digital gold and their Tether for paying the merchant down the street, in one app that preserves their privacy as much as possible. That's a lot of the vision behind adding these other EVM chains and L2s: meeting people where they are. If they're using USDT on Tron... Do I hate Tron? Yes. It's completely centralized and controlled. But this isn't about Tron specifically; it's about meeting people where they are. Something that blew me away, as I've gotten more connected with the human rights side of crypto, through the Human Rights Foundation, is that when I talked to the activists they work with, literally not one was using Bitcoin, not one was using Monero, not one was using Zcash. They were all using USDT on Tron.

Hodl Up: Come on.

Seth: It's painful. But you realize that in a lot of these scenarios, they're not worried about their government surveilling or stopping what they're doing; they just need a way to move value in and out of the country, so they need something widely accepted, and they use USDT on Tron. As painful as it is, I want to provide that and say, "Hey, you can have a fantastic USDT-on-Tron wallet here, but it's self-custodial," which most of the others are not. And we'll let you shift easily. Need some money for savings? Shift it into Bitcoin with a tap. Need to spend privately? Shift it into Monero with a tap. Give them those tools in one app, and stop forcing them to have seven apps to cover their different crypto use cases.

Hodl Up: Now that you mention it, I've noticed that even in my country, people tend to go to Tron, using USDT on Tron. We have quite a lot of OTC exchanges where you give cash and they give you crypto, and they always ask for a Tron wallet for some reason, which I don't understand. At first I thought it had something to do with privacy, not paying taxes and so on, but when you think about it, it literally doesn't. We all know about Justin Sun.

Seth: It's just low fees. It's pretty normal: when you need something to live, you're not thinking about the most hardcore way to do it. You're thinking about the easiest way. In many places where people use something like USDT, they don't have money to spare. If Ethereum gas fees go up to $10, that could be a day's wages. They can't do that. So a lot of that volume shifted from Ethereum to something like Tron, because traditionally it has had lower fees. That comes and goes, but again, you have to meet people where they are, and it's painful, because even Ethereum would be much better than Tron for that. There are some privacy tools they could use Tether with there. But they'll look for what's easiest, and we need to meet that, then inform, educate and draw them in: "Hey, maybe there's another solution that pairs well with this, not just USDT on Tron."

Hodl Up: Efficiency, price, the cheap chain: those make the UX better for normies. How are you approaching that at Cake Wallet? I think that's the main thing when it comes to onboarding normies. It's hard to find people on the street who actually care about privacy.

Hodl Up: At least they'll say they do.

Seth: At least they'll say it. For us, as I said, it started when we first launched Monero support and realized people just needed a user-friendly wallet. The vision is very much to have something as user-friendly and simple as possible, that also lets you grow with it. It won't be something where you only get basic functionality and can never do anything more advanced in the app. We have very advanced features across Bitcoin and Monero, with EVM ones coming soon, and we want to enable those while meeting people where they are and keeping things very user-friendly. That also applies to onboarding. A lot of people are really scared away by self-custody: the seed words. What are these words? Why do I have to save them? What happens if I lose them? Those are things we really have to solve. A lot of the hardcore privacy-centric wallets, the few that exist, focus on going even more hardcore and making things even more private. That's great, and we're working on that too. But if you make it so hardcore that no one knows about it, or no one can use it because it's so complex, it doesn't help anybody. You have to find the balance between a good user experience and privacy. Something we're working on right now is moving away from 12- or 24-word seeds and using passkeys instead. Passkeys are a standard that's becoming the norm across the internet, and everybody's phone supports them in one way or another. We want onboarding to a self-custodial wallet, again, not a custodian, you don't have an account with us or anything, to be just as easy as setting up an Amazon account. It had to get there at some point, and the passkey standards are finally good enough. It's one of those shifts that just has to happen, and we'll push on it, because that's where a lot of people get lost. They say, "Okay, I'd love to use crypto, it seems interesting," and then you start onboarding them: "Write down these 12 seed words, and if you ever lose them, you've lost everything." They lose them so quickly, or they lose their money and get mad at you. We can solve that. We have the technology and the tools. So that will be a continued focus. We think the best pairing is very good privacy tools, built with an understanding of real people's needs, meeting in the middle with really good UX. That's why much of our focus over the last year has been redoing our UI from scratch. We have a fantastic design team doing great work on exactly that: How do we make this flow quicker? How do we make it faster? Users don't understand this, so how do we explain it very succinctly? We very much are a design-first company, trying to make sure what we build is enjoyable and easy.

Hodl Up: People tend to think that if you make something very simple and seamless, you're trading something else off, but with hard work it's actually possible to achieve both. Now I'm going to go down the rabbit hole with a question, and of course you can opt out of it and stay private. A few weeks ago I was arguing why CBDCs are really bad for us, and a guy asked me why current stablecoins are any different from CBDCs. He made a very good point, when you think about it: with the Crypto-Asset Reporting Framework and taxation, every single transaction you make will automatically go to the tax authorities, and so on. Add to that people's very short attention spans today, because of shorts, reels and all the brain rot, and crypto moving away from retail and becoming more institutional. Do you think all of this has been systematically designed to make it harder to educate people on why privacy, and not being surveilled, matters to them? I went all the way down the rabbit hole there.

Seth: No, I think it's a fantastic point, and I think about it a lot, because we support Tether on Tron, like I mentioned. It essentially is a CBDC with slightly less government control. The US government doesn't directly control Tether, but it can tell Tether, the entity, "Freeze this account," and they'll do it. Self-custody doesn't matter as much with something like Tether, because it can be unilaterally frozen and censored by the issuer, the company. So stablecoins do have a lot of the characteristics of a CBDC. The main thing that's better compared to what a central bank digital currency could be is that your identity isn't attached. You have at least some pseudonymity, fragile pseudonymity, with Tether that you wouldn't have with a CBDC dollar tied to your bank account, where they know everything about you, your entire history, and now all your on-chain transactions too. That's why a lot of our focus this year is how to still provide stablecoins while giving people good privacy tools, essentially ways to keep using them and gain privacy. But I think we very much have to treat stablecoins as something that works and is useful right now, but won't work forever or remain a good tool forever. Right now, weirdly, they offer the most freedom, which is a horrifying thing for me to say, because obviously they're centrally controlled. They're not what Bitcoin or Monero is. But they provide a lot of freedom today, and I think we need to accept that while also pushing people: "Hey, your Tether could be frozen." Venezuela, I think, had around $180 million in Tether frozen when Trump went crazy. It can just happen like that. And those events are catalysts that show people: "Okay, Tether was working really well, but oh my goodness, my friend just had all their Tether seized because they got it from somebody with a bad reputation. I need something where that can't happen." Then they think, okay, maybe Bitcoin is the solution, or maybe Monero is. Being able to move quickly out of the centrally controlled thing into something decentralized is really vital, and I think that will happen over time. It necessarily will.

Hodl Up: I might be completely wrong here, but the stablecoin DAI: is it only decentralized, or also private?

Seth: It's only decentralized. It's censorship-resistant, so as long as Ethereum validators don't work together to stop it, it's not controlled in the same way Tether is. There are a few like that; Duro is a very similar premise. But there's no privacy at the moment unless you use it through something like Railgun or Aztec in the Ethereum space.

Hodl Up: Okay. To wrap it up, Seth: what are the plans for Cake Wallet? And will you launch a token, by any chance?

Seth: Will I launch what?

Hodl Up: A token.

Seth: A token? Oh god, no. No tokens. The biggest plans for us this year, honestly, are around desktop wallets. We've always had desktop wallets, but they've been second-class citizens; they haven't been fantastic. Like I said, we just redid all of our UI on mobile and shipped it, and people are absolutely loving it. We want to bring the same focus and effort to desktop, because we know a lot of people feel much more comfortable using a laptop or desktop than a phone to manage their money, especially if it's their life savings or they're older. So we want feature parity with Cake on mobile, but there are also a lot of things, especially more advanced privacy tools, that benefit from a platform that can always be online, with more compute and more internet access. So there are some really fun things we'll be able to do on desktop as well. That's going to be a really big focus for us. Beyond that, talking about stablecoins, we've been working on letting people move stablecoins freely between chains, so you'll be able to bridge your Tether or USDC to other chains for free. We want people to be able to move around very easily with those. The last one is that we're focusing very heavily on swaps. We've used centralized exchanges for swaps for a very long time, and they've been fantastic. We have great partners that work very well and are very privacy-preserving. But again, we don't know how long that model will work. We want to shift more toward decentralized exchanges, but cross-chain has been really hard. Swapping Bitcoin for Tether, for example, has been very difficult, but the user experience is finally getting there. So we've been pushing really hard on decentralized exchanges over the last three or four months, and that will be a continued focus throughout the year, so that even if all the centralized exchange providers went up in flames overnight, you'd still be able to swap easily and intuitively, without going to some weird third-party website, natively in the app, really straightforward.

Hodl Up: It looks like 2026 is the year of the Cake. Seth, thank you again for joining us. We look forward to maybe some online episodes and everything.

Seth: Absolutely. Thank you guys so much for having me.