My guest today runs one of the few crypto companies that Wall Street actually uses. Not in a pilot deck, but in production. Yuval Rooz is the co-founder and CEO of Digital Asset, the company behind Canton Network, a layer one that names like Goldman Sachs, HSBC, DTCC, and JP Morgan have all touched in one form or another. They just raised 355 million led by A16Z Crypto in a market where a lot of people say the institutional adoption story is mostly hype. So today I want to get past the press releases: what is genuinely happening on chain in regulated finance, what's just a new distribution channel wearing a blockchain costume, and whether the thing that makes Canton different is a real moat or a nice slide. Yuval, welcome.
It's great to be here, Aaron.
Yeah. So before we started, you helped jog my memory for a second there. You're actually in Korea right now, which means that you're one of the few people on this podcast that is actually in the same time zone as me.
Yeah, yeah, happens to be for another 24 hours.
That's cool. Tell me just real quick what you're doing right now in Korea, what's going on, what's brought you there.
So I'm here to speak at the Global Digital Asset Summit, which is a conference taking place today here. But it was also an opportunity to come meet with some of the financial institutions here. Part of the round we announced that Hanwha, which is a Korean conglomerate, is an investor, but we might have other Korean investors join the round. So here to meet them and talk about some of the regulation that is relevant to Korea.
Cool. That sounds great. Well, let's get to it because I know you got a tight schedule. So my first question is cutting right to the quick. For someone who already understands Ethereum and Solana, can you describe Canton in one breath? Like what category is it in and what is it deliberately not trying to be?
Well, it's not trying to be Ethereum or Solana. You know, I think for us, we always had conviction. I've been in crypto since 2012, 2013. Our thesis was always that at the tail end, institutional adoption is going to be really the strongest moat of actually taking advantage of this technology. And therefore, when we started building Canton, our question was, well, what are going to be some of the features that are needed in order to get institutional adoption. So of course, one of the hottest topics today is privacy. We were the first ones, I would say, that already 10 years ago said that without privacy, we won't get institutional adoption. You know, a lot of times people in crypto say that it's immutable. Well, it is only immutable as long as the validators agree that it's immutable. And we've seen multiple forks in public chains. We've seen Arbitrum reverse stolen funds. So crypto is not really immutable. Also giving features to asset issuers to have full sovereignty and control over their assets without having third parties being able to fork it for them is another critical feature. We can talk about the governance of the network being very different than Ethereum and Solana. And I would say also the economic model, the tokenomics of the network is very different than Ethereum and Solana.
Well, let's dive a little bit deeper into the idea of what sets Canton apart in terms of it being a different type of network. It's actually called, according to you guys, a network of networks rather than just one huge monolithic chain. In practice, what does a transaction crossing two of those networks actually look like? And who runs the infrastructure underneath that transaction?
Yeah. So the reason for the name Canton is from the Swiss federal system, right? In Switzerland, you have all these different cantons. Every canton has its own language, it spells Canton differently across different cantons, different tax rates, different rules. The thesis when we were building it was that the world is not homogeneous. Different use cases have different requirements. Different jurisdictions have different laws. And therefore having this monolithic ledger that has the same behavior across means that if you want to comply with your local regulation, you will have to do a lot of things off ledger. And in our view, the whole goal of this technology is to do everything on the ledger. And therefore the name Canton was that you can create effectively a network of networks where every canton has its own permissioning, its own configuration, its own privacy rules, the assets that run on it can do different things. And as a result of that, you also get the benefit of horizontally scaling the network. You don't have just one ledger which has effectively one centralized sequencer that is going to become the bottleneck of the performance of the network. So that's conceptually the idea of Canton. The way a transaction happens is imagine you could have a Canton for payments. Let's just say you issue stablecoins on that Canton. And then you will have another Canton where you could issue US equities. When you want to do a DVP transaction, meaning I want to move equities from one account to another against a payment, meaning the payment will at the same time move from one account to another, you have effectively a public infrastructure, which is what we call the global synchronizer, that is effectively coordinating those transactions across the different Cantons. So you can do one single transaction that will facilitate movements on multiple Cantons, all atomically together.
Okay. So for starters, it's not Canton as an American would say it, it's Canton.
Canton. Message received.
Okay, that's really interesting though. And I want to go a little bit deeper into the sovereignty area of Canton. And I'm going to have to fix it every time I think Canton, I have to say Canton, so please forgive me.
So Canton frames issuer sovereignty as its core differentiator from other networks and other protocols. Can you just define what that is? And what can an asset issuer do on Canton that they fundamentally can't do on Ethereum or any other app chain?
Sure. So I'm just going to take a very simple example. I gave the example of Arbitrum, and this is not me trying to pick on Arbitrum but it's just a very recent example where the world discovered that Arbitrum has a security council and nine out of 12 people can effectively make changes to the ledger with their own decision. Now if you think about, again, we are very much focusing on institutional use cases, so let's take an institutional use case. Imagine you have a clearing house and the clearing house has collateral in it that you pledged into the clearing. Theoretically speaking, and it's not theoretically, it's practically speaking because it actually happened, that security council can move collateral out of your clearing house without you having any say in it. And I know that everybody will say but they will never do that. And that is potentially true, but the fact that it is possible for that to happen is something that a clearing house would never get comfortable with. There's this thing called perfection of a security, meaning if I perfected a security, and this is a legal term that is very relevant to collateral management, the security is perfected, it means that I have full sovereignty and control over that security. But if there is a bunch of third parties which I have no legal relationship with, they have no liability, nobody can sue the security council for what they've done because they have no responsibility, no legal contract, no relationship, then I can't perfect a security like that. And that means that I will have to maintain another record of the collateral in the clearing house. Therefore I cannot really deem the asset that exists on the chain as the official books and records of my asset. And that is true to every permissionless chain. A 51% attack effectively means they can forge the ledger, they can change the ledger. And again, although statistically it is not likely to happen, it did actually happen. Now, I think that the reason that that is possible on all of these chains is because the architecture of these chains is that both the coordination of transaction and the storage of the transaction happens at the same actor, the validators. In Canton, we actually made that separation, meaning the global sync that I was telling you about, which is coordinating transaction, is run by a group called the super validators. So in our case, and this is going to be confusing, so I'll be very slow. Our super validators are the equivalent of the validators on Ethereum. But we also have validators. So we have effectively broken the relationship between coordinating a transaction to actually validating the data of the transaction. So the global sync is completely blind to what they are processing. They're like ISPs on the internet. They're just routing messages across the different Cantons. And therefore, if you 51% attack them, there's nothing to attack because they don't actually store the data of the transaction. The data of the transaction actually sits on the node of the customer. And therefore, by doing that, you cannot actually, the super validators, even if they were to get hacked, even if they were to be coordinated, cannot change the data on your ledger because they don't even know what is on your ledger. And as a result of that, you have 100% certainty that no one else can actually change your books and records, even with a 50% attack. That just cannot happen on Canton. And again, when you start thinking about some of the use cases, when you think about collateral management, securities financing, all that boring stuff that TradFi does but does in the quadrillions of dollars, those boring details become critical. And that's why sometimes I say, when you see TradFi participate in crypto rails today, they don't actually run a business on those rails. They purely use the wallets as distribution, meaning the books and records all exist off chain. They don't really exist natively on the ledger. Even with stablecoins. If you think about a stablecoin, the books and records of a stablecoin is not the chain. It's what exists at Bank of New York Mellon or at Cantor or whoever is managing the underlying inventory of those stablecoins. It is not the chains that they are on.
Okay. That's everything that you said totally made sense because before when I was doing my research, it seems more like Canton is more focused towards, like you said, the boring TradFi stuff. But thinking about cryptocurrency as what it was, I believe, originally intended to be, which is sovereign, you don't have a middleman, you don't have to have a middleman to do transactions, but the idea of privacy, I feel like it was tacked on later. Bitcoin was never meant to be necessarily private, although the transactions are masked by alphanumeric addresses, but what you guys are doing is very clever in terms of creating a product that is applicable to a massive amount of money in TradFi. So, in regards to that, with your pushes to get adoption from TradFi, what do you feel like is the end goal for Canton in terms of your ideal partners? And what would that do for the crypto space in general? Because right now, things are pretty dry. Things are pretty red and rough, right?
I don't know. Canton is up about 100%.
Your guys' coin is actually incredibly just solid. I don't know what you guys are doing to that thing, but well done.
