Episode Summary
Executive Summary: ETH Systems’ founders argue Ethereum needs privacy to become usable for institutions. They frame the opportunity as bridging public Ethereum’s liquidity and composability with compliance, confidentiality, and selective disclosure. The discussion emphasizes that much of the work is now engineering and productization, not pure research, and that open-source building blocks can generalize from bespoke institutional use cases into scalable systems.
Main Topics: Why Ethereum needs privacy: The founders say Ethereum lacks baked-in privacy, which prevents institutions from using public Ethereum while meeting business and compliance requirements. Cryptography is presented as the missing link. Institutional privacy vs. individual privacy: Oscar distinguishes institutional privacy needs from individual privacy, noting that institutions often prioritize confidentiality, compliance, and control even more strongly than retail users. ETH Systems’ origin and mandate: Mo and Oscar explain ETH Systems spun out of the Ethereum Foundation after a year of work mapping institutional privacy needs, doing workshops, publishing public goods, and exploring use cases. Bespoke use cases becoming reusable products: They argue the best path is to solve specific institutional problems first, then generalize those solutions into reusable open-source building blocks and scalable products. Institutional adoption and market demand: Demand is largely inbound, driven by institutions that see value in DeFi-like systems but need compliant, private rails. They expect a wave of institutional products over the next 24 months. Privacy without sacrificing auditability: They reject the notion that privacy must mean hiding everything. Instead, they advocate selective disclosure, allowing aggregate metrics and verifiability while keeping counterparties and trade details private. Open source, for-profit structure, and ecosystem bridge: ETH Systems is a for-profit entity to support long institutional sales cycles and procurement requirements, while also contributing open-source work that can benefit the broader ecosystem.
Key Arguments: Ethereum is strong as a credibility-neutral base layer, but institutions cannot use it at scale without privacy and cryptography. Institutional users need both business confidentiality and compliance; they will not adopt systems that expose sensitive trades, positions, or counterparties publicly. Much of the institutional privacy problem is now an engineering and product-design challenge rather than an unsolved research problem. Solving narrow, high-value institutional use cases can produce generalized components that later become reusable infrastructure for others. Privacy does not have to eliminate transparency; selective disclosure can preserve auditability, reporting, and trust. The main barrier is not lack of interest: many institutions are already inbound because they want DeFi-like functionality with compliance. A for-profit structure is necessary because institutional procurement often prefers commercial counterparties and because multi-year public-goods funding is difficult. Open-source work is strategically important because it hardens privacy solutions, attracts talent, and gives institutions confidence in the system.
Data Points: ETH Systems spin-out timing: about 1 month old - Mo and Oscar say ETH Systems recently spun out of the Ethereum Foundation. Institutional privacy task force work: about 1 year - They say the spin-out came after roughly a year of institutional privacy work, workshops, and publications. Mo Jalil traditional finance experience: about 5 years - Mo says he built algo trading systems at Goldman Sachs for around five years. Oscar Thorne privacy/protocol experience: about a decade - Oscar describes roughly ten years in Ethereum/crypto and privacy-focused protocol work. PSE history: about 7 years - Mo notes the Ethereum Foundation’s cryptographic privacy work has existed for seven years or so under PSE. Institutional sales cycle: 18 months minimum - Oscar says institutional engagements typically take at least 18 months from outreach to initial rollout. Follow-on product timeline: 24 months - David predicts new privacy/institutional businesses will emerge over the next 24 months due to long sales cycles. Alternative vendor costs: tens of millions to hundreds of millions USD annually - Mo cites inter-dealer compression services paid to trusted third parties by tier-one investment banks. Countrywide rollout scope: almost entire country - Mo describes a private payments use case intended to scale to nearly an entire nation. Payment actor model: 4 actors - The described national payment system requires sender, receiver, auditor, and government involvement. Research/community collaboration cadence: every 3-4 weeks - They say ETH Systems publishes public goods/write-ups on a recurring basis. Largest banks reviewing work: pretty large number - Mo says many banks look at their open-source repo, though no exact count is given. Audience demand status: mostly inbound - Oscar says most institutional interest comes inbound rather than from aggressive sales outreach.
Pivotal Quotes: "Ethereum is a great sort of technology and works great as a sort of credibility neutral base layer, but obviously it doesn't have privacy baked in." — Oscar Thorne: Explaining the core problem ETH Systems is addressing. "We want to be like cypherpunks in the boardroom." — Oscar Thorne / Mo Jalil: Describing ETH Systems’ role as a bridge between privacy-minded crypto builders and institutional decision-makers. "Privacy really is who can see what, when, and how." — Oscar Thorne: Clarifying that privacy should mean selective disclosure, not total opacity.
Implications: The conversation suggests Ethereum’s next major adoption wave may come from private, compliant institutional products built on shared infrastructure. Expect selective-disclosure systems, open-source primitives, and a split-then-converge path between institutional rails and core DeFi.