Stephen: This is your host Stephen Sargeant, talking to you Around The Coin podcast. Today, we're talking to Eitan Katz from Kima. He's the co founder and CEO, and we're talking about interoperability, how to bring together this chain and that chain, make them talk to each other, how to transfer value, you know, that's one of the biggest bottlenecks in the industry.

We talked a little bit about his early days, maybe touching AI a little too soon before it was even called AI and how we got into this scalability issue of interoperability. We talked about the alternatives. We talk about not using smart contract or oracles and how their technology might be the thing that is needed to avoid the vulnerabilities that traditional bridges, smart contracts and DeFi protocols face.

We even get into a little bit of a regulatory conversation and compliance because they're also bridging the networks of blockchains from TradFi to DeFi. This is a lot for anyone that's in traditional or in DeFi. This is a really good episode and to hear how they're, you know, using interoperability without smart contracts, chains, or bridges, or oracles is completely outstanding.

It blew my mind and I'm sure it'll blow yours. Let me know how you like this podcast.

Stephen: This is your host, Stephen Sargeant. We're back with another edition of the Around The Coin podcast. We have a special one with Eiten Katz, the CEO and co founder of Kima. Tell us a little bit about yourself, Eiten. What is Kima? And then we're going to go deep dive into your background and a little bit about how you got into this space because You know, with Bitcoin prices rising, I think today was at 92, 000, I'm not sure.

I think people just put prices up there, they don't even know how much it is. They just keep on throwing numbers to see how many views that they can get on their Twitter handle. But tell me exactly, you know, a little bit about yourself and then I'm going to go deep into the questions.

Eitan: Yeah, so hi, hi, Stephen. Pleasure to be here. So, yeah, if I have to go back, I guess we'll talk about my history, but throughout my own personal history, I got deep into technology early on. So that's my angle. I've been As an engineer and, and a product manager and did a bunch of roles in the software realm.

Kima is I think my most ambitious project so far. We've been working on it for the past three years with a very big mission and a very ambitious vision to really create or bring together. Financial ecosystems, and there's nothing better to do it other than a blockchain, so we are building a settlement layer, a universal settlement layer that can bring together any type of financial system, including blockchains and banks.

They can all live together and settle transactions in a seamless manner. So that's basically our mission.

Stephen: I love it, you worked at Hewlett Packard, HP for the young folks that listen to this podcast. One of the interesting things I saw you were into, you know, venture capitalism, BC startup that only focused or majority focused on the Ukraine as a high potential area to grow startups. Now with the Russian invasion on the Ukraine, with so many stories coming outta Ukraine, I didn't realize they're very technically savvy when it comes to it.

They probably have the, you know, maybe some of the best it outside of Israel. Per capita, and I could be wrong about that, but it just seems that a lot of their resources is based on the IT capabilities. What did you see in that region in 2017 that maybe a lot of people are starting to see now, now that a lot of these individuals are looking for work abroad because of what's happening there on their homeland?

Eitan: Yeah. So, you know, opportunities are where there's a, some kind of an asymmetry. And I, when I was with hp, I I established, I created a a new innovation framework for the corporate to nurture. Organic innovation. So back then, HP was a 300, 000 people enterprise, a huge corporate. And the, the internal organic innovation was something that nobody really tried to nurture.

So I built this machine, this systematic way to identify ideas and help them throughout this process within this red, this bureaucracy full organization, every large organization has a lot of red tape and try to nurture those ideas. And bring them up to the point where they can become features, products, sometimes even new business businesses altogether.

And when I left HP, I, came across the Ukraine. I, I, I visited there and I saw so many people working in large corporates. and very talented people. But innovation, entrepreneurship, the startup scene was very, very immature. And that's the asymmetry. So, so much talent. And so little entrepreneurship.

So what I try to do is to bring my knowledge and expertise from the innovation processes with HP to this undeveloped entrepreneurial ecosystem and try to get, tap into this talent and build something new. So, it, again, it was a, an ambitious, some, some would say even naive. A venture I met with governmental clerks and and officials.

I went to the universities, I, I met with grassroots developers so I built this idea. Unfortunately I couldn't materialize it, but I still think that there's a lot, a lot of potential there. Not only for people to go work for the large multinational companies, but rather to build startups from the ground up.

Stephen: And, you know, what were some of the challenges that you think caused it not to materialize? One thing that comes to mind and, you know, we have a lot of entrepreneurs and builders on listening to this podcast is around is like talent is different than entrepreneurship, right? Like, you know, lawyers, you know, really great at making money, really good at billing.

Not so great at building businesses. Same thing with like doctors and dentists. It's like, they're really good in that like ladder of getting into a certain position, but they're not that great at building. And this is obviously a widespread of conversation of like, Hey, I'm making a generalist conversation.

Is that what you saw though? They, they definitely know how to do the work, but that entrepreneurship switch that has to kind of turn on. It just was really hard to teach. You can't, it's almost like you can't teach it. What are your thoughts?

Eitan: I think you can teach it, but back then people just told me, Hey we, we, we, we don't have the infrastructure to do it. So you need an ecosystem. So you need the, the venture capital, capital, you need the knowledge you need and you need the perception that it's possible. So what really fuels that culture of entrepreneurs is to see people succeed and that can fuel, that can create this flywheel. And there weren't too many. Success stories back then, because every success story, local success story, shows, demonstrates that it is possible. Someone managed to do it. I can do it too.

And the more success stories that happen on the ground in this region that will fuel those those startups. The, every, every successful entrepreneur. Back then, in order to be successful, you used to go to Europe or the US, and that really discouraged people to try and build things locally.

That was the path. If I want to be successful, I have to go elsewhere, and that's something I tried to change, and I still think it can and will be changed.

Stephen: I think we're seeing that more and more, right? Whether it's a, you know, small town in Oklahoma, whether it's a young girl in India, you know, starting on the beauty line, like we're seeing it more and more with the internet, social media, the TikTokification about the way the search engines work on a lot of these social media platforms.

So I think your concept was right, maybe a little too early. Another unique thing in 2017, You are building a Brainforest. io, which is a boutique consultancy that's focusing on leveraging things like blockchain, machine learning, AI. Kinda early for AI. Are you surprised about how quickly AI has evolved in the last two years, compared to maybe when you were tinkling with it back in 2017?

Eitan: Yes, as a matter of fact, yes. Back then I, I knew that AI, well, we, we had different names for it back then. We, it was mostly machine learning and deep learning. We didn't have these uh, LLM models as developed as they are today. So it was mostly about automation of things. Nothing like what we know from ChatGPT, and Claude, and these products.

So, I thought that with these models the machine learning and deep learning, there's so much that can be done for companies and increase the efficiency that why not train people to do, to develop these models? applications based on machine learning and deep learning, and provide this talent to companies that would want to you know, have this next level, next generation of products.

That was the idea back then, 2017 and it was partially successful. Again, it was slightly too early, I think. And yeah, and what we've seen in the past two years, and it only accelerates, right? It's going exponential. So, that is really amazing. And, and, you know, it's, it's something that I'm using every day.

I cannot even imagine. A day go by without consulting with these models, getting their help. It's like an amazing boost of productivity. Like I have people around me and I just keep giving them those tasks and they just do it. So that's really amazing.

Stephen: Yeah, it's like having a thinking partner. I think people think about how it's going to replace people. It's like, It can only do so much. You have to still input the right prompt, input the right question to get the result. So you're going to need better thinkers, if anything. So it's a great thinking partner, but let's talk about Kima.

You started in 2021, which is, you know, right, we're right in the high wave. Like we feel right now in 2024, Bitcoin prices are skyrocketing. But, you know, what was the core reason, A, why you, after working with these large organizations, jumped back into becoming the CEO, and, you know, what problem were you looking to solve when you created this business?

Eitan: So, yeah. So 20 back to 21. It was after several years that I've been, you know, doing stuff in this in the crypto space in the blockchain space. Started back in 2013. And I was involved in multiple projects in 2021 when we saw this massive price increase. One of the things that really bothered me, so the narrative there was that institutions are coming.

Well, to some extent they did, but they didn't really do it as they do it today. The, the scale is completely different, but family offices and hedge funds started investing their clients money in mostly Bitcoin. And One of the things that I was bothered, being a veteran of multiple cycles before that, I knew that after this bull run, a fall will come.

So I started asking around, hey, what do you do to protect your customers money? What would you do when Bitcoin will drop 70, 80%? How would you go about it and explain it to your customers?

Stephen: And then they kicked you out of the boardroom.

Eitan: And, and, and funnily enough, they didn't have too good to, to, they didn't have answers. I, I even spoke to some of the entities that went bust. I won't name names, but everyone knows the names and they assured me that they have the best Wall Street traders. Hedging their investments. So my idea was to automate the hedging part.

So I created automatic hedging strategies for Bitcoin and for some other tokens so people don't have to think about it. It will be done automatically. They will lose some of the upside, but they will definitely be able to sleep well at night because downside will be protected. That was the idea.

So, that was in early 21. We developed the product for a few months. We rolled out the first version and Bitcoin went from $30, 000 to $69, 000.

Stephen: Yeah, and you look like a complete lunatic, right? Obviously, everyone's like, oh, and you made an interesting point. When the price goes up, nobody asks questions, and that's how we always get in trouble. When FTX is giving away money, nobody's asking questions when they're sitting, you know, in the box seats at Miami Arena, especially the pension funds.

Like, everyone's like, oh my god, the Ontario, I'm in Canada. So, they're The Ontario Pension Fund, like, well, somebody brokered that deal, and that person was at a lot of basketball games, I'm assuming, because nobody's asking questions, everyone's just holding out their bucket, wondering how they can catch the money that's dropping down.

Where you're like, hey, there's a, there's, these buckets eventually are going to get too heavy, and the bottom's going to come out, what happens then? And nobody wants to talk about that, so I love, and that's why, you know, to the, To the, you get the spoils when you're able to kind of think like that where everyone's just trying to catch the money.

Nobody's wondering what happens when the bottom comes out of the basket.

Eitan: So that was 21 that was before Kima. And so two things happened. One we saw that if it's up only, nobody cares about the downside. Right. So, if you go out and try to validate your idea and everyone tells you that it's not interesting, then you have to come to a conclusion that you need to do something else.

However, we learned something, another thing. One of the potential customers asked us, Hey, I have some money in Solana. Can you hedge that? Now, back then, in 21 there weren't too many derivatives available on any other ecosystem other than Ethereum. So, actually, we had two sources of derivative assets.

One was centralized exchanges like Deribit, and the other was Ethereum with DYDX and protocols like that. And none of those has anything to do with Solana. So how do you utilize assets and, and protocols and, and instruments on Solana if they live somewhere else? So we looked at the available solutions.

And we were not happy about them from, for various reasons. And we started thinking, why won't we do it? And let's design a solution that would make this whole thing seamless. So let's create an interoperability, a settlement layer that can connect any type of ecosystem, regardless of whether it's centralized or decentralized.

But let's do it in a trustless manner. Let's use the blockchain to broker or settle these transactions. That was the idea that really we understood that nobody has tried to do it. There's an unmet need. We had this need ourselves. Let's do it. And that's how Kima was born at the end of 2021.

Stephen: What were your thoughts? I know at this time when you're building, maybe not as many companies building, but even on this podcast, we've had AppChain, SideChains, L2, you know, like Interoperably layers the settlement layers, you know, people actually be building settlement layers. We've had Solana on, you know, Ethereum virtual machines.

We've had Ethereum on Solana virtual. You've had every combination to make interoperability more scalable. What has been your competitive advantage or what maybe you're doing similar to those companies and what you're doing different than those companies that make customers want to work with you?

Eitan: Yeah, so, indeed there are, there's more than one blockchain, you need interoperability. Because at the end of the day you know, applications will be built on one blockchain, but at some point, There's a good chance they will need to get data or assets on another blockchain or just invoke functionality on another blockchain.

So, and we've seen this you know, I've been, you see by my gray hair, I've been around for a while, even before the days of the blockchain. So I've seen the PC and I've seen the internet and I've seen mobile. I saw all these generations of technology. And you know what? It happens every single time.

Every time there's a new technology, there are companies that are building those silos, those islands, and then there's a need to connect them. So, we have that with blockchains, but we had it with enterprise systems. We had it with, we, we have this till this very day. If you They are trying to send money from the United States to Europe or from, I don't know, from Argentina to, to, to South Africa.

It doesn't really matter. These are two disparate systems built by two different central banks and they don't talk with each other. So then this is why we have SWIFT. This is why we have intermediaries.

Stephen: Correct.

Eitan: And didn't we build the blockchain just to get rid of intermediaries? So now we're introducing another type of intermediary and that is something that we wanted to solve.

So The other thing, and I kind of implied earlier that we were not happy with the solutions that we saw. One of the problems was trust and security. So the typical bridging solution is a mint and burn or lock and mint type of a solution. Someone writes a smart contract that locks an asset on chain A and mints.

a synthetic representation of that asset on chain B. It's like I will send you a fax with an image of a hundred dollars bill and you should be expected to go to the grocery store and buy with it something. Would the grocery So, trust this, and I can, I can vow, I can say, I can even take a video of me putting a 100 bill in a safe and say, I'm not going to touch it, it's locked, but still, there's a matter of trust.

So, you have to trust the smart contract developers, and you have to trust the way they manage the keys for the smart contracts. And guess what? Almost on a weekly basis, We see those various protocols get hacked either because there were bugs in the smart contract or someone lost or, or, or compromised the keys of the smart contract so the code could be changed.

So smart contract..

Stephen: And I think that's backed up by the fact that, hey, you're not using smart contractor bridges, which seems like a wild idea when you're talking about interoperability, but, you know, I work closely with a company called Chainalysis. And they had a report that said almost $3 billion worth of hacks. Most of it in the DeFi sector, based on exactly what you're talking about.

We know that one of the biggest hacks with the Ronin bridge, 600 million, I believe, they didn't find out about it for seven days. And I think to your point, that's how can people trust those, you know, those smart contracts and systems, if they don't even know that they're losing money until seven days later.

In a world of transparency and blockchain, where you almost have to hope that Twitter is going to be able to figure it out before your own internal operations teams.

Eitan: Absolutely, and, and don't, don't get me wrong, smart contract is a great, innovative. Amazing technology. The problem is when they have to be the, the, the keepers of your funds. That's where the problem starts. So you have to trust the team, you have to trust their security practices and guess what?

Sometimes they fail. So early on when we designed Kima, we said no smart contracts. Let's see if we can build an interoperability protocol that doesn't use any smart contracts to keep the funds. So they're get great for building applications, but not for keeping money. And, and that that's basically one of the unique Kima.

And there's When you do that, something new happens because you remove the, the dependency, the technical dependency on smart contracts. So now you can settle Bitcoin because Bitcoin doesn't have smart contracts. So yes, we can settle Bitcoin transactions. You can also settle fiat transactions. If we build a connector to a bank account and the Kima blockchain, the validators, can agree that money was deposited or signed a withdrawal transaction from a bank account, that's yet another connector.

So Kima is a versatile, the most versatile protocol. If you build a connector to an SAP ERP system, the blockchain can also invoke transactions there. So we're completely agnostic to the backend system. We can work with banks. We can work in blockchains. We can work with private chains. We're completely agnostic and that's a unique architecture.

Stephen: Very unique, but you know, smart contracts also leverage data feeds and data service providers through oracles like Chainlink I can't remember the other one, it's Flare Labs, other oracles, Pyth Network. If you're not using smart contracts, does that mean you're not using oracles as well? And if you're not using oracles, How do you get things like price feeds and things that a lot of these transactions heavily rely on?

Eitan: Right. So the, the, the, when we created the, the most fundamental mission for Kima, we said that we do not want to be an exchange. We want to be this Conduit of value. So the price feed is, is something that at least at this point, we're not handling. So if you want to move 10 USDC from chain A to PYUSD on chain B, we can do it because it's the same value.

So, you know, What we're doing basically is we're creating, we're aggregating the liquidity of the same asset class, whether it's fiat or stable, dollar pegged stable coin, and then you can move that value across the network.

Stephen: How do you ensure that, you know, transferring this value? I think when you think about transferring value, how do you ensure that trust and safety? Because I think whether you're transferring value, whether you're not locking the funds, you're still kind of that conduit.

How do you ensure that trust and safety? You know, just like smart contracts, there are vulnerabilities in any kind of design. How do you ensure now, basically you're saying, Hey, smart contracts are risky. We're not as risky. How do you now ensure that trust and safety amongst your customers?

Eitan: So the Kima ecosystem is comprised of several components. One, obviously, is the blockchain. That's the ledger, with the validators, The other component is a network of accounts. These accounts, these, you can think of, those are basically EOAs. You can think of them as wallets, but they are secured by the blockchain and not a smart contract.

Okay, so just as you can put money in your MetaMask wallet. It's an EOA, it has an address, it's not a smart contract, and you hold the private key. Now, what we did is we built a network of quote unquote wallets, but the key is being broken down and it's shared among the validators. And we are, we're using cryptographic algorithms.

that ensure that the only way to sign a transaction is by having two thirds of the validators sign that transaction. So it's, it's called TSS Threshold Signature Scheme and we've implemented that to secure those those withdrawals. So now if. We have the vaults and the blockchain in the middle.

We have connectors to every ecosystem. So we use light, light nodes for blockchains. We use connectors to other types of backend systems. And, and if you want to move money from point A to point B, what needs to be done is a deposit on at the source. The money gets locked not by a smart contract, it gets locked in an EOA, in an account.

And the only way to take money out of it is by having the two thirds signing a withdrawal transaction. So the validators, they attest, they verify, they wait for finality on the chain. They attest that money was indeed deposited. And then, and only then, they will combine this this key signature to withdraw money at the destination.

Stephen: How does that impact speed then? Because what you're saying makes a lot of sense. Does that make it faster than the traditional way? Does it make it a little bit slower? But, you know, some people are willing to give up some of that speed because they can confirm that they're going to get and receive certain amounts versus worrying about, you know, if the protocol that they're using is going to be hacked and, you know, all the funds are gone.

Eitan: Yeah, so actually since we're not using smart contracts the and Kima is an independent blockchain, so you're, you're not dependent on network congestion. Now suddenly everyone is doing, mim coins or, or or I dunno, NFTs and that slows down the network. So that might impact the, the leg the local leg.

So when money gets sent to the vault, that's something we have no control. But the Kima settlement part is extremely quick because we don't run a smart contract. Those are the validators running the node. So everything runs locally and, and, and so the overhead that Kima adds is, is really marginal compared to the processing time of the chains themselves.

Stephen: And what are the biggest use cases? Like, what are your customers banging down the door to use this technology for? Obviously, interoperability is a huge, huge challenge in the industry. But what are some of the more common use cases that you're seeing Kima be used for?

Eitan: So, we all know that stablecoins have become the killer feature of, you know, our industry. So, customers, they want a way to obstruct the fragmentation that we see in stablecoins. So, think of stablecoins everything is let's use dollar stablecoins are pegged to the dollar, but it's like a matrix with two axes.

You have the chains. So, and you have the type of the stable coin. So you have UDC on multiple chains, but also you have also UDT, you have P-Y-U-S-D, you have USDG. And almost on, on a weekly basis, I read about yet another stable coin. So we have this huge metrics. Widths of stable coins and what we see is islands of liquidity.

So you can think of Kima as a stable coin gateway. If you're a developer and you don't want to mess with liquidity, availability and access to these chains, Because you want as many customers as possible. You want people with USDT on Tron to be able to purchase your product. You want people with USDC on Solana, and you want people with PYUSD on Ethereum, right?

You don't care where they're coming from. You just want them to be able to pay. And so we provide a single API that facilitates the transaction. You don't care about the source. And everything will be handled in the most secure way, in the fastest way. And as a developer, you just call and one API call, you call a Kima transaction, we take care of all this fragmentation and complexity and you will get your money.

So that is one killer use case that we offer.

Stephen: What is the biggest challenge? You know, I know you're trying to bridge a little bit. You mentioned fiat currency, traditional bank accounts. You're trying to obviously bridge these companies to be able to enter into the DeFi space and more Web3. What are the biggest challenges that you see from maybe both sides?

Like I'm assuming the institutional companies have a little bit of, you know, concerns around compliance and KYC and who they're interacting with as part of these liquidity partners. What are some challenges that you're seeing on both sides?

Eitan: Yeah a great, great point here. And, you know, the more things change, the more they stay the same, right? So, I see the the, the, there's a big debate now in the among the institutions. Should they go with a public chain or should they have their own private chain? It, it, it's, it's, it's a real debate and there are pros and cons, but those of you who are old enough to remember the old internet days, we had the same debates among corporates.

Should we use the public internet, or should we use local versions of the internet? They used to call it intranet. So, corporates used to have their own internal internet, and guess

Stephen: That nobody wanted to use because they couldn't Google something.

Eitan: Exactly. So, you couldn't Google it, you couldn't connect to your partner that used another network, and then came the intermediaries that tried to connect those intranets. And eventually, the internet prevailed, right? Everyone is using the internet. They've put other measures of security. The major concern was security, so There were other ways to solve the security problem.

And so we still see this debate. Some enterprises want their own chain, their own version of the chain. And Kima is all about understanding and sufficing the needs of our customers. So if you want to use your own chain and you want to be interoperable with other chains for money transfer purposes, for instance, You can do it.

We will, we will have a connector to the Kima chain, to your own private chain, and then you can get money, you can settle transactions with other chains. So, We try to fit to every customer's needs within, obviously the features that we provide. This is our philosophy. We say, you continue to work the way you want to work, and Let the network fit to your needs and not the other way around.

Stephen: Yeah, and that probably helps with onboarding too, right? If they can kind of work in the same workflow, they don't feel like there's much change. You're just kinda adding in the operability for them. What are you seeing from a, I don't know if you're measuring this, I'm assuming that overall you see the trends.

What are some trends? You see a lot of money being put pushed over to Solana because of the meme, coin culture, and you know the uptick, or is it Bitcoin? They're getting defied Bitcoin, so you see a lot of money going back that way now. Especially with the price pumping. Do you see any specific flow trends that you're like, Oh, this is kind of interesting.

And has that changed since the election?

Eitan: so obviously not all the data is available on chain. So we, we do, we have to, you know, compose the picture from multiple pieces. So we see the inflows or outflows to the ETFs. That's kind of, the reaction of, of the market. And that's mostly Bitcoin, so that's a good way to see, okay, people want a piece of this new type of thing that everyone is talking about.

And it's now easy, right? You can, from your 401k, you can buy one of those ETFs and you're exposed to the price of Bitcoin. We do see when we look uh, on, on on chain data. I think the majority of volume is in DeFi. But we're starting to see some interesting trends around real world assets, and the reason is that this is big money, right?

We're talking about BlackRock. We're talking about the big folks of Wall Street coming into the tokenization space. And right now they're just experimenting with some billions of dollars that those are the peanuts. If that works well, we're talking about trillions. So if you look at on chain data, you can see money funds money market funds being tokenized.

And you see the uptick of, of, you know, the volumes. Of the TVLs, if you will, in the Digin's term. So that's the big money coming into the DeFi space. Tokenizing real world assets in the trillions in just a few years.

Stephen: Yeah. And we've seen already like one of the biggest ETF funds launch period, right? Not just in crypto, in all assets. Talk to me, you know, when I hear value transfer, my compliance ears perk up talk to me about what are the regulatory Requirements you have, what are your thoughts on things like MECA, where they're building this comprehensive regulatory, which is probably going to be mimicked by many jurisdictions around the world.

Maybe just walk us through the compliance adventure that you have to go through.

Eitan: Yeah, so, we're, we're, we're building a technology layer. So, but we're not trying to, you know, disconnect ourselves from those compliance regulatory trends. And, and Europe is a great a great place to look at because they're so advanced in terms of removing this obscurity and making things written and thought about and clear.

So you know what it means to be Mika compliant. You don't have to guess anything. You don't have to wait for the SEC to knock on your door and say, Hey, you just violated this and this clause. So that's the way to do business, right? And this is, I think, part of the reason that people are so bullish about this space, because hopefully in the United States, we will start seeing more clarity as well, which is great for entrepreneurs.

So we're building this technology. But early on we thought that, yes, DeFi is decentralized, or quote unquote decentralized, and everyone is so happy about anonymity, but We were all human beings, we live in countries, and countries have laws, and you have to abide the law. Whether you like it or not, you can go to another country with a different set of laws, but So, what we did early on was to embed inside the Kima SDK those KYT checks.

KYT stands for Know Your Transaction. So we're not doing the KYC because we're dealing with wallets. We don't know who's the customer. That's the application part. The application needs to own both customers. They need to know who they are and comply with the regulation, but We are settling transactions.

So we need to know who, which, or what is this transaction? Where is it coming from? And where is it going? Not in terms of the personality of the people, but rather what's the history of the wallet that sends the money? What's the history of the wallet that accepts the money? And so we embedded these checks.

We use a third party. That has, provides an API. So, we give this option to applications, and all they have to do is to switch on this, this switch and say, yes, I want these checks to take place, and we will block, at the protocol level, we will block a transaction if it's coming from or going to a wallet that was marked in any way.

Stephen: So, Mark, just to give the, you know, so if it has a list of exposure, if it's a sanctioned Russian exchange that'll be, you know, attributed by the company, and if you can see that that's where the transaction's heading, then you wouldn't process the transaction. I actually like that. I like to be able to flip on compliance, because some companies don't need it if they're just dealing in the Web3 space, but as you're, you know, bringing in some institutional dollars and there's a fiat component, There are clients that are going to need to know when they touch DeFi, they're at least going to have to mitigate their risk and take a risk based approach.

Can you talk to me about maybe some of your fiat customers though? How are they entering the space? Because I know KYC actually knowing who your customers is, is a little bit more vital. How are they approaching the space? Whether they're, you know, involved in it or if they're looking at it and saying, hey, we'll have a separate division that just deals with the blockchain based transaction.

Eitan: Yeah, so that really depends. And I think we're starting to see enterprises, corporates that are trying to incorporate the efficiencies that stable coins and digital currencies would provide. So if you're a multinational organization and you have partners, you have suppliers, you have employees all around the world, Sending money out from your country is a pain.

Even today, 2024, banks are all digital. It's a pain. It's five days a week. And, and you have to pay hefty fees. So..

Stephen: For terrible service.

FTC, FTP is for terrible service. Some of the banks are a little better. You can do the wire transfer. You don't have to walk into the bank anymore. You can do a wire transfer from online banking, but then they have limits. And then if you don't put in certain information even for me, just to send from Canada to the U.S.

is a complete nightmare considering they have so many applications around Venmo and PayPal. It's quite extraordinary that we haven't solved the payment problem, but that's probably for another podcast.

Eitan: Yes, exactly. And, you know, these organizations, they, they realize that when you send a digital currency, you don't need a bank. And settlement is instant, because once the chain said, yes, money was sent, it's sent. Because the other guy the other person on the other end, if, if they took your money, the other person gets the money.

That's, that's the nature of the transaction, right? There's a from and to. It's not just from and then you just wait. So it's an atomic transaction. It's fast. It's seven days a week. And costs are, are potentially marginal. So, nobody can argue that blockchain technology, digital currencies are useless because they're very, very efficient.

This is a real life scenario. This is a real life use case that we see more and more companies adopting that. However, there is this last mile. So in most countries, you cannot go and purchase goods with the stablecoin. So the off ramp and the on ramp are still painful. And as we know, painful equals hefty fees.

And Slope. So, this is where we see another set of intermediaries specializing in on ramp or off ramp. And Kima's approach is we don't care if it's fiat, if it's digital currencies. Same API. Your customer wants fiat, they will get fiat, your customer wants digital currencies, they will get it, and it will be an instant settlement still.

So, this last mile is extremely important. Extremely difficult. However, that's where you touch the regulations. There's no way to touch fiat without KYC. So yes you will still get this pop up. You will still need to identify yourself, take a photo with your passport. Sometimes even talk while you do it writes the, the date or whatever.

Yes. All these rituals we , we, we cannot manage to, to rid of them. However, we see some innovation around k we c with global identity that you can share among these entities. So if you do it once, your identity

Stephen: You don't have do it time, right? Which doesn't leave all your information in the hands of 15 different exchanges. And I think to your point, I'm not a strategic advisor by any means, but to your point of, you know, your origins of starting in this kind of hedging process and automation, where I think that works well is like, hey, if you're, you know, subscribing, if you're investigating a Bitcoin ETF, Friday at 5 o'clock, that's when you stop.

But Bitcoin is trading over the weekend and you're not able to get in there until Monday morning, so I can see companies and organizations and crypto hedge funds using your tool, that you can kind of bridge that gap on the weekends for them, maybe giving them a hedge. They won't make the full amount, but they also won't lose a certain amount, so they can participate in the market.

While their competitors unfortunately cannot. So that's the, that when you talked about that was the first thing that came to my, my mind. Any thoughts? Do I have that completely wrong or what are your thoughts on that?

Eitan: I think you're, you're 100 % right. I think it's a matter of a few years until when we will remember the days where we had to do it five days a week. And within certain business hours we will just laugh how..

I don't

Stephen: know where you're based. I, I have a couple gray hairs myself, but do you remember when the stores weren't open on Sunday? And you can only shop Monday to Saturday. And I think people, a lot of listeners probably do not remember that. But I remember that you literally couldn't go shopping on Sunday.

All the stores were closed. For better or for worse, right? now we shop 24/7. A couple quick questions before we end off here. You built an entire blockchain infrastructure, but you've also been helping and mentoring lots of startups in the U. S. Israel and around the world. Is there any solutions that you're building now that you could believe like, Oh, that would have helped them so much years ago when I was mentoring them or could still help them now as they're still continuing to scale up in their startup?

Eitan: yeah, I think that the progress that we've seen with blockchains in the past few years, so if we go back to back even to 21 or beforehand, we had Bitcoin, we had Ethereum so the whole perception of transaction per second so people needed to, to really think of, okay, so is it scalable?

Will it withstand if there's adoption? So I think these days these problems are solved or about to be solved with all those layer twos. I and you know, the, the problem that we're trying to solve, the payment problem, that's, that's a huge problem for everyone building. A blockchain application because they really want customers to come from all over the place, not just their own ecosystem.

So we can build on a very small blockchain for whatever reason and still get the liquidity, the demand, even from people with just credit cards. Abstract this, this complexity. So the payment, and, and I'm not talking only about Kea, you know, the, the, the, the, the way that a user experience changed for, for wallets and, and the applications that we see today.

Some of them are completely obstructing the use of a blockchain. This is, this is amazing. So, if I compare it to projects that and the problems we had to. Deal with three, four, five years ago we now have a completely different set of problems, but many of them are about to be solved if, if, if they were not solved.

Stephen: When you think about the future of, you know, the way we think about interoperability, obviously, you know, there's modular blockchains like Celestia, you have Chainlink that's built a whole ecosystem around oracles pretty much, and their own interoperability protocol. We have things like Kima, we have the old fashioned way with bridges.

What do you think the future is going to be look like? Are we going to have a little bit of everything like what we have right now? Or now we're gonna have to build interoperability for the interoperability protocols. What are your thoughts about the future?

Eitan: Yeah so I, I think that for applications the good news is that They will just have to choose one API or the other. So it's it's like, you know, okay, I choose this or I choose that. There will be pros and cons. There will be use cases where one competitor will shine and will be the best at, and another would be good at other things. We segment the market, and there are so many segments and sub segments. And if we just as, as a, as a, you know, a young company, as a startup, we try to focus and if we just lead one segment, that would be huge for us. So there's so much to do and so many specialties. If you're doing remittance, that's a completely different set of problems.

If you're doing a B2B cross-border transactions, and that is different from credit card payments. I'm not worried. The space is so big that I think that eventually protocols and interoperability projects will specialize, and it'll be clear what they're best at and what they're not.

Stephen: What are you looking forward as we head into 2025? Is there anything that you're looking forward to? Is it the The continued evolution of this TradFi and DeFi collaboration and adoption whether it's with Kima or just the industry as a whole. Anything that you're kind of like hoping for in 2025?

Eitan: Yeah, so I think that I really hope that the trends will continue. We see very, very positive trends. So that means that more stable coin adoption. By corporates and enterprises. We will see enterprises starting to integrate stablecoins into their payment processes, which will be huge. So that's one thing.

The other thing, clarity in regulation and compliance. This is extremely important for builders, for entrepreneurs. We want to know what, what the law says. We want it to be clear. We want to, if I ask a lawyer, my lawyer, a question, the answer should be very, very short and clear and not a presentation about, okay, let's let's talk about it.

So compliance and regulation, more clarity that is, that is very positive. The other thing is the trend of real world assets. So tokenization of anything. That will continue, there's no other way, and we'll see more traditional institutions, enterprises, feeling comfortable with owning a token instead of a stock, or some real estate deeds, or, or any type of asset.

They can just own the token, and they can sell it, they can move it, they can transfer it. Within a fraction of a second, seven days a week, so I think this trend will continue in 25. So, these are the payments and stablecoins regulation, clarity, and more real world assets being tokenized.

Stephen: Awesome. You know, since we have you, how much does it cost? You don't have to tell us your blockchain specifically, but I think I saw Blockworks was showing how many millions of dollars it costs to build your own blockchain. Any insights? You know, people are like, Oh, I'll just build a blockchain. And I'm sure after you building one, you're like, Oh, this, Maybe it seemed harder than you thought it would.

Maybe it seemed easier. I'm going to assume that it's always harder because there's always things that you have to build on top of. But can you give a range of like, how much does it cost to build a blockchain in 2024?

Eitan: Yeah, so, we, we, we opted to build a blockchain as, that is specialized. We're not building a generic Smart contract, blockchain, there are no smart contracts on Kima, we just specialize. So, so, in our case it's a bit more contained. But if anyone in the audience is thinking about, okay, I'm going to build the next Ethereum killer or Solana killer, man, that, that's, that's a huge task.

We're talking about many, many millions of dollars before you even have something. to run and show and experiment with. And the major problem is talent. Building a blockchain is nothing like building an application. It's not about, okay, we'll get some smart contract developers, which are more available.

Here we're talking about people that need to develop cryptographic algorithms, backend systems. Build architectures deal with scalability transaction times so these are the back end, heavy stuff, heavy lifting stuff, and the talent is scarce. So it's not only about the, how much it costs, it's also about getting the right people.

Stephen: I'm no economics major, but when talent is scarce, that usually means it's expensive. It's expensive.

Eitan: Yes, absolutely.

Stephen: And we saw that like early on in the Bitcoin blockchain days is that there wasn't that much talent. You know, developers could go anywhere, charge whatever amount, and it just raises the cost. Of, you know, any building anything.

But since I have a VC that, you know, that looks very futuristic at upcoming regions, is there anything that you're seeing out there? They're like, Hey, like, I don't have the time to get involved in this, but people should probably look because either it's a, an emerging region an emerging technology.

Maybe you're like, Hey, you know, chat GPT won't be the answer, but what they build on top of it would be any insights that has, you know, your mind tickling when you see it come across your Twitter feed.

Eitan: Yeah, yeah, yeah, definitely. I, I I have a backlog of ideas in my mind. You know, AI is so exciting and, and so every, every aspect of our lives there are things that can be completely changed with AI. Okay, so, You know, problems that are, have been out there for years can be now tackled with AI because it's, it's a new level of technology.

So, I have my own specific things because you know, things that I, I, I love doing. I love music so I, I always had this dream of composing and now I You can use AI to compose music, right? And, and, and the scale of things. You can use AI to, to do movies, you can do, use AI to do things that we didn't, the most creative things.

You need a human being there. Now. You can be a one man show of doing things that you needed a, a whole company in the past. So I think that, if you have an idea you know, think how you can use AI to accelerate it, build stuff in, in, in, you know, 30 years ago, you needed one, two, three million dollars just to get started.

And then came the uh,

Stephen: Just to have this podcast, you wouldn't need a million dollars just for anyone to listen to this podcast is what you would have needed.

Eitan: And then came the PCs and, and the mobile and the internet. And the cloud computing and, and we saw a reduction, not in %ages, but in orders of magnitude. So now we will see the same thing, reduction in orders of magnitude of building companies by a solo entrepreneur or a couple of entrepreneurs.

The things that can be done in the garage today. are really you know, it's, it's only a matter of imagination.

Stephen: I love that. Any, you know, quick advice for anyone building in this space now, they see the price go up, you've been through a couple cycles now, any words of advice that you've had to maybe learn the hard way or you've seen others fall by the wayside because they might have not stuck with these principles in their head.

Eitan: Yeah. So for the builders and the audience, I would say just ignore price, whether it goes up or it comes down and it will, both will happen. Just ignore price, just go and build. That's now is a good time to build. It was a good time to build when Bitcoin was you know, 80 % down from its peak.

So go out and build. For the non builders, I would say you know, I'm not a financial advisor, but I've been in several cycles. It's, it's a train. If you got on board the train, don't forget to get out of the train because otherwise it will be a round trip. So, don't be too greedy. Remember that you're on a ride, but a ride has to end.

Otherwise the train will come back. So don't find yourself on a round trip. Just try to get the most out of it. Educate yourself, learn as much as you can. But don't be too greedy.

Stephen: I love that. Great advice. Where can people find you? Where do you spend the most time? Twitter, LinkedIn? Medium. Where do you find, where can we find you spending most of the time.

Eitan: Yeah, so Twitter definitely, I mostly reading. But yeah, people can reach out LinkedIn as well. So I'm posting from time to time my thoughts. Feel free to reach out.

Stephen: I love it. You have some great thoughts. Thank you so much, Eitan. It's great. Continued success with Kima. Maybe we'll have you back in a year after we get through at least this. Maybe, you know, the next time it will be still rising. Who knows? And we can check back at what you've built and some of the use cases that have come out of this last bull market.

Eitan: Thank you so much, Stephen.

Stephen: Thank you.

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