Why Enterprises Would Be Wise to Choose an EVM-Compatible Chain: Horizen Labs CEO

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David Berlind's Interview with Horizen Labs CEO Robert Viglione

David Berlind: Today is April 26th, 2023. This is the Blockchain Journal podcast. I'm David Berlind, your host, and I'm at Consensus 2023 in Austin, Texas, where we are surrounded by all kinds of blockchain-interested people, cryptocurrency-interested people, and standing with me is Rob Viglione. He is the CEO and co-founder of Horizen. Horizen is one of the exhibitors here at Consensus 2023. Rob, thanks for joining me on the show.

Robert Viglione: Thanks for having me, David.

Berlind: Yeah, it's great to have you. So there are many exhibitors here. One of the things that I've been looking for are companies, solutions, [and] anybody who wants to talk about blockchain in the enterprise, because we really target that enterprise audience, the IT professionals who are trying to figure out what their next move is going to be with a disruptive technology. They don't want to be Ubered or Amazoned the way that's happened in the past. What does Horizen do?

Viglione: Yeah, so Horizen, Horizen, Labs, my company, we launched in the Web3 world. So we've been in Web3 from our origins. In fact, from launching a cryptocurrency ZEN, which is the currency of the Horizen Protocol. It's really a Protocol that has deep cryptographic engineering, zero-knowledge, [and] cryptographic capabilities. There were tooling specifically to be useful to enterprise.

Berlind: All right, let's talk about zero-knowledge because a lot of people are going to be watching this again. They're the sort of people who they only read the headlines in mainstream media and they're scared of everything that has to do with blockchain-based on those mainstream media headlines all about something that's going wrong with cryptocurrency, people getting scammed. What is zero-knowledge?

Viglione: So zero-knowledge is a special class of cryptography that lets you broadcast encrypted information to a public environment and still make use of that information without decrypting it. So that's actually an extremely powerful tool that we think is that missing link to get a Web2 or enterprise on-chain into Web3 because what matters to enterprise [is] access, control, and privacy for data and information.

Berlind: Let's talk about an application for that because that's a little bit cryptic. I want to unpack that. You said that it's for enterprises that want to use the information without necessarily decrypting it, which — that sounds like —how can you use the information if you can't decrypt it?

Viglione: It's so magic, right? Yeah.

Berlind: So what is a workflow that somebody in an IT department would understand and suddenly just have that, "Aha!” moment where they say, I get it now?

Viglione: So one simple workflow or application that I like to talk about is: imagine the world of digital invoicing, a massive trillion-dollar market, and a factoring market around that. So you take [a] digital invoice— or you take invoices, and before suppliers are paid for their services or products, you have finance firms that actually come in and factor them by basically buying them at a discount. What we can do with this technology is you could broadcast digital invoices, encrypt it into a public blockchain environment where now the world sees it, the information's there, but they can't see exactly what it is.

But financiers could actually query the information to see things like, "Has this vendor paid their bills historically? Are they a AAA credit quality, or do they have problems paying their bills?" And without actually seeing the particular invoice flows, which companies may not want the world to see. You can actually disclose whether you're a AAA credit quality, and a financier can come in and factor those invoices without actually seeing the details of them. But you could still know cryptographically — know with cryptographic proofs —that this vendor pays their bills on time.

Berlind: So some of the information is available, just not all of it. Does zero knowledge technology make it possible for you to decide who in the organization can see what? Sort of the identity and access management systems the way something like active directory used to work?

Viglione: Yep. Exactly right. So there's two elements here. One is the pure cryptographic side. And not to get too in the weeds on the cryptography of it, there's a property of this type of — called homomorphic encryption in which you could actually perform an operation on an encrypted data set and get the result that you want without even seeing the data set. This is [a] mind-blowing new technology that can completely transform how enterprises engage with Web3.

But there's a second element here. The second element is exactly what you said, which is about access controls. With zero-knowledge cryptography, you can broadcast information to the world, encrypt it on a public ledger, so you know it's timestamped, it's there, it's valid, and you could selectively disclose who you want to see that information. So you can imagine a regulatory body, a vendor in your supply chain, or maybe a consortium.

Berlind: And so this is really good for those sorts of applications that deserve to be on a public blockchain where you need something like multi-party transparency.

Viglione: Exactly right. So think about what's the point of getting on-chain to begin with. Really it's about coordination. It's about sharing information and putting information into a public commons so that the world can see it's there, it exists, it's timestamped, hasn't been tampered with, and the process of getting it on-chain has gone through a public validation process.

But most firms in the world, governments or enterprises don't want all of their data to be made public, whether it's their operations, [or] their supply chains, they don't want their competitors to see exactly what they're doing, who they're paying, how much they're paying, but they still want that information to be available to the world and to make use of it.

So, the important point is the intersection of coordination across the economy, coordination with maybe your competitors. Imagine a world where now you can coordinate with your competitors in a way that still preserves the privacy of your underlying firm's information, or coordinate with regulators or tax authorities.

Berlind: Right. So we're really not talking about the world because you say the world can see it, but we're talking about the subset of the world that needs to see the information. But why put this on a chain? Why can't we just use today's existing technologies, databases, Mongo, Cassandra, to do the same thing?

Viglione: Yeah. Which worked completely fine by the way for all of the Web2 and traditional enterprise scenarios that are out there today, and you have tens of trillions of dollars of economic value that work perfectly fine. And Web2 with databases. It's at the point where you want to share your database, share that information in a credible way with other people around the world. So coordinating across... outside of your firm boundary, This is important. And also to intersect into the world of Web3.

So this is the point where my company, Horizen Labs, is... our mission is to bring Web2 into Web3 in a secure way. So we use cryptography, we use high security to bring you into these public markets of Web3. Now, the Web3 world is in its infancy. It's just starting. So when we talk about enterprise and our company and our focus now is enterprise and governments as a company, Horizen, Labs, it's to bring these guys into the world of Web3. It's not just to replicate what they're doing and calling it Web3, is to literally bring that information and create a public commons. So that information, it could be like what Starbucks is doing with their loyalty program on-chain. It could be —

Berlind: Odyssey.

Viglione: Yeah, exactly. It could be bringing your loyalty programs on-chain. It could be having secondary markets for your luxury goods that you could never capture previously. Bring that on-chain, right?

Berlind: I want to pick a word that you used at the very beginning of that. You said credible. Why is something on-chain more credible than if it's in a database? That's the million-dollar question that a lot of enterprises are going to ask is, "I can do this already." So speak to that credibility. That is the big idea here is the credibility that public chain brings to this data. What is that credibility?

Viglione: Yeah, so the credibility comes to the nature of blockchain and having a public forum, like a public commons basically, where anyone in the world can come and participate and verify that the information that is on-chain is valid.

Berlind: But what makes the chain easier or better for doing those sorts of verifications than a database? I can go visit a database for some company that decides to make their database public, because that — you could just say, "Well, you know what? We get the idea of Web3, but let's just make the data that's in our database public already". Why not do that?

Viglione: So to make sure it hasn't been tampered with is really the underlying message. So, companies in general have high integrity. They wouldn't be there in public markets if they didn't, and they're audited, they're verified. There are regulators that ensure that this is an extra level of assurance, though. This is where anyone in the world can verify that the information you're making public has not changed.

Berlind: I think what you're getting at is that we hear a lot about this idea of decentralization in the blockchain space. A lot of enterprises don't really know or understand what that means. When you've got a decentralized database where the governance of the data, the validation of the data is taking place in a public scenario by third parties that are not necessarily the company itself. That company doesn't have that proprietary control over the data in a way that anybody can question did this company itself out of its own maybe malicious interests, tamper with the data for whatever reasons.

Viglione: Trust but verify, right? I mean, that's really what it's about. It's about making sure that the world can verify that the information you're presenting maintains its integrity, it hasn't been tampered [with], and the natural incentives that you might have as a business to present information that's favorable to you. We're moving past that.

Berlind: And, by the way, if you go to, for example, the SEC’s website, the Security and Exchange Commission, they have press releases about all of the companies they've fined for some form of malfeasance. I just use that as personal evidence that some percentage of us are just bad people that are going to do bad things if we have that sort of unguarded proprietary access to corporate data.

Viglione: That's exactly right. And again, this is one important function of bringing data on-chain. The other is participating in Web3. Participating in a world of decentralized applications where you have basically a world's computer running smart contracts, basically automated functions, and being part of that.

Berlind: For CIOs IT directors who have no idea what Web3 means. What's your definition?

Viglione: Decentralizing technologies, really.

Berlind: Okay. And you said smart contracts. So let's go in there a little bit. I know what a smart contract is, but I want to hear it from you so that our audience can understand. What's a smart contract?

Viglione: So you write a piece of software, a computer program that automatically executes on-chain — or period. Automatically executes, period. And there are rules that engage how it executes.

Berlind: So, if you're in enterprise IT, you probably are looking for a chain. If you buy into all this idea about the credibility and putting your data on-chain, you probably want a chain that supports this sort of customizability, this programmability, and gives you that same ability to use blockchain as a platform the way you would use any other application technology as a platform.

Viglione: Exactly right. And, one that integrates into your own existing systems, if possible, where possible and provides a lot of security and privacy for the information that your proprietary information.

Berlind: You mentioned that Horizen provides one of these chains. It's got its own token — protocol token — which is ZEN, I believe you said. So you probably have the ability to support these smart contracts. What are the characteristics of your virtual machine or whatever it is that allows people to do that?

Viglione: Yeah, so I'll take one step back from that because it's a great question, but I think it deserves a little bit more explanation. I believe that blockchain will be commoditized over time. I don't think that we're going to have silos of different blockchains where enterprises should have to choose one or the other. I think that's a bad business model for the industry and bad for the enterprises choosing. What I see is a future where blockchains commoditize; basically, when we talk to each other over Zoom, I don't care which ISP is routing your data. And right now in our world of Web3, there's a lot of tribalism and we pretend that people care what ISP is routing your data.

Berlind: Well, it's early days in any new technology space. You're going to have dozens of players pour in, try to establish themselves as the de facto standard. Usually two or three rise to the top, but there's probably... no enterprise is going to be on a single chain. I mean, people are going to have to make choices. And depending on who your partners are, what your customers are doing, what your applications [are], what your use cases are, you're taking payments in crypto, are you engaging — like you talked about Starbucks and their Odyssey program, which is on Polygon. They're engaging their customers through NFTs. You have all the different use cases. For the time being, we're going to be in this multi-chain environment.

Viglione: No, that's exactly right. Now you talked about standards. I completely agree with that. Now, standards are different than silos. The standard that we have to conform with is the Ethereum standard for smart contracting. That's actually what we're integrating is our chain right now is an Ethereum Virtual Machine. So you have exact compatibility with the Ethereum network and all of the other EVM, Ethereum Virtual Machine compatible chains that are out there. So we have one standard, and then we create bridges between them, so they're interoperable with each other.

Berlind: So you have the EVM on the Horizen network now?

Viglione: Exactly right. So it's on testnet right now. It's migrating to mainnet in two months.

Berlind: So that's an enterprise feature that you're looking forward to launching pretty soon. And of course with the EVM, if there are other networks than the EVM, and I've spoken about this in previous lives with other application server technologies like Java for example. The advantage here is: the more of the chains that are on EVM, the more you have some options. If for some reason you become dissatisfied with the chain you're on and it's an EVM-based chain, and you've written all your code and Solidity, which is the language for that EVM, guess what? You can take that language. You can take all the code you wrote and move to another chain.

Viglione: Exactly right. And this is the beauty of the EVM standard and how we're building Horizen and how our company Horizen Labs operates. We don't want IT managers to choose between one silo or the other. We want you to adopt the prevailing standard. And we're building out our infrastructure —

By the way, we have the largest infrastructure of the industry. We're focused on building out. Like 45,000 servers run our software right now all over the world. [It] never goes down. The uptime is 100% so far for all of our history, and now it's EVM compatible.

So this is what we're building towards, and we're integrating in tools like selective confidentiality, so that CIOs and enterprises could be sure, and governments as well. Your information is protected on-chain.

Berlind: What's selective confidentiality?

Viglione: It's an application of zero-knowledge technology where you can broadcast your information encrypted, but choose who you want it to be —

Berlind: That's what we were talking about earlier.

Viglione: Yeah. I didn't use the term for it as selective confidentiality.

Berlind: Okay, great. Well, Robert Viglione, the co-founder and CEO of Horizen Labs, thanks very much for joining us.

Viglione: Thank you very much, David. Happy to be here.