Shady El Damaty on privacy and digital identity in Web3

0:00I'm Ashen Addison from the Crypto Coin Show and today on blockchain interviews we have Shotti Elmati, co-founder of human.te here to discuss digital identity that protects privacy, handling, governance, token distributions in crypto and with proof of humanity at a massive scale and much much more in how we're going to integrate this into the mainstream into

0:24governments and countries and more. Shotty, welcome to the show and thanks for taking the time. Hey Ashton, thanks for having me on. Thanks for the hype intro.

You're welcome and I'm excited to dive into this kind of technology because blockchain is great. It has so many benefits. But of course, if we're going to integrate it into the governments,

0:46into real money, into voting, there's going to be some form of digital identity that's going to be needed. And hopefully we can protect privacy at the same time and not be as transparent as some of the Ethereum addresses where I send you funds and all of a sudden you're looking into my entire bank account. I know that there's technology that can help protect privacy

1:08and I feel like there's at least a subset of people that are concerned about digital privacy with CBDC's or their online privacy and that's why they're in crypto and they want to preserve that.

Yeah. Yeah, no, absolutely. I think it's one of the things we've been warned about for a long time now. The cyber punks had it right that, you know, we

1:30really don't want to be building systems with negative reputation. Nick Sabo, one of the OGs, made a lot of really clear cases how this could lead to some pretty terrible outcomes. Because once it's out there, it's really difficult to take back and this identifier can can follow you for the rest of your of your life, right? So I mean we pride

1:50ourselves on being in the United States in the western world we pride ourselves on being societies that really elevate and respect self-determination the value of the individual. And there couldn't be a bigger threat to the value of the individual than these immutable identifiers that we assign to individuals that can't be ever taken

2:17away. Yeah, I agree. So, with human.te, what's the way to go about this with blockchain? Some block block all blockchains are a little different, but with most people know Bitcoin and Ethereum transactions at least, they're pseudominous, but fairly transparent in the transaction aspect of it. How do we build a digital identity system that

2:42can work efficiently and effectively, but protect privacy at least in some aspects? Yeah, it's a great question. It's interesting because, you know, our problems really didn't become more apparent until Bitcoin came around and people realized that these were identifiers. These were NIMS. And it was it took a little bit of time for users to understand what best practices were

3:05for privacy. Always recycle your addresses. never allow two addresses to be connected because once that's doxed then your entire onchain history could be could be revealed and it's it never goes away. So unlike for example like you know the social security database or you know any government database right now that's centralized someone can click delete and you know

3:29through that deletion your record can be lost which is another problem right but with blockchains this is the first time we've really had to deal with the fact that hey we kind of mastered entropy we found a way to create an incentive mechanism loop where we actually keep information stable over time which goes against you know the nature of the of the universe of natural

3:53systems to be disordered over time. So with that in mind how do we actually fix this? Well you know I think probably your audience and others have heard a lot about zero knowledge proofs about encryption fully homorphic encryption about data minimization. People have been thinking about this for a very long time. But today I wanna I want to actually shift the conversation a little

4:21bit. This tech has been out for a while, but it hasn't been adopted yet. Better ways to encrypt, better ways to do privacy preserving computation, but it hasn't moved the needle. And why is that? It's because we've been obsessed with IDs instead of keys. because none of this works if we don't have self-custody enshrined absolutely enshrined in protocol design

4:45and the user experience average user experience on the internet. So self-custody means being able to create a key that is very difficult to lose that you alone can generate and that you can use to sign and generate encryption. So once you have your key then you can have self-custody and local encryption and that's a superpower

definitely. And with those keys is that

5:12the same you know people think of keys they think of okay I have my seed phrase for my wallet and I write that down and that's those are my funds. Does that directly translate to okay I have a wallet that has my digital identity and I write down my keys. Yeah, it's interesting. The seed phrase was came later in the adoption of Bitcoin, right? This first

5:36cryptocurrency. In the beginning, you had to have this random string. The random string was basically it's it's a secret and you don't want anybody ever to see the secret because if they have a secret, then they can impersonate your signatures. They can impersonate you on the blockchain. They can have control over assets that might be kept within with that secret. So, you know, this was

6:00a huge problem. You were asking people to memorize 128 bit or 256-bit in some cases random strings. And then, I think it was like BIP 12 and BIP 32 came out later that allowed you to create more memorable seed phrases. So these are random words that are selected from a big set and then the computational power needed to randomly generate a

6:28private key that actually belongs to someone is just so high that it's considered secure. Now the reason we do this is because we want to maintain entropy right so entropy means like a string that is completely random meaning that if you were selecting randomly each subsequ each subsequent car character in the list in a string that the odds of

6:52selecting the next character don't depend on the previous one. For example, like with the word 'the', if I start spelling T and then H, chances are you'd guess E as the next the next letter. It doesn't work like that with secrets that are used for private keys because they're maximally randomized. And so we created this seed phrase, the se these seed phrases

7:15to make it easier to generate kind of this randomness while still maintaining UX. But the problem is that seed phrases were not enough. Seed phrases can still be forgotten, they can still be lost, they can be stolen, etc. So there's there's a way forward here, right? So if what we want is entropy, what we can actually do is build an entropy machine and that's one of the I

7:42haven't spoken much about what we're building, but that's one of the core technologies that we provide is a distributed entropy producing machine called the human network. It uses a bunch of nodes all over the world to collaboratively come together and then take in some information. Say it could be like a biometric attribute of a person that's unique to that person.

8:04Only that person can create like say a combination of heart rate variability with face livveness.

And it can take this information and add entropy to it in a way that you can derive this random string. And then this random string can be used to sign, create a wallet, transact and nobody will be able to link your actual identity or biometrics with the account

8:30that was derived, which is which is pretty cool.

That's very cool. And I feel like people are warming up to the biometrics just because of ease of use. Whether it's just using your finger or face scan, but the concern has been that, you know, they don't want to give up their their personal DNA to the government or whoever owns the centralized server, you know,

8:56because it's one thing [clears throat] to for your password to get leaked, it's another for your fingerprint and your DNA sequence.

Yeah. You can't change it once it's out there. You can't change it at all. Yeah, one of the big improvements I think that's made it possible for us to leverage pass keys you know the things that like with your Apple device

9:16it lets you create a random string from your face is client side computation. So the Apple device requires its own separate sandbox like hardware. you know, there's an entire chip that's specific just for creating these keys so that Apple themselves can't actually even can't even access it. Unless you set up recovery with Apple, then Apple can potentially access

9:43it,

although they claim not to. But, you know, we've been stuck with crypto because there is no such thing as like an Apple crypto phone. There is no phone that creates crypto wallets by default. It's not designed for that. And those that have been built have a lot of problems, right? From the supply chain from lots of issues. So if you don't you know for true freedom as we've

10:06you know alluded to with kind of western society and what we care about and why privacy is important you really want to be able to control the supply chain for hardware. But if you don't have that what do what can you do and that's client side encryption. So you can have these biometrics analyzed and pre-processed on the actual device instead of within a

10:29hardware sandbox. You can do it in an encryption sandbox. So it's running on the software within the phone, but it's running in a way that the phone itself can't read the information that's being generated. So when you send the information off the phone, there's no way for your biometrics or your DNA or whatever it is that you're using to create a key with whatever fits you

10:54[clears throat] that's not that's not able to be leaked or have it have the private key compromised.

Yeah. No, that's important with the integration of the digital identities into to governments. Say we get to the [clears throat] digital driver's license, digital passport, you know, the way that it's currently set up and they have that data database like the social

11:17security database you mentioned. It's great. The people who own that information, they love to use that to, you know, the more the more data about people, the more they can use it to learn about them and to sell to them in certain instances, maybe in other countries. But with the move the move to a digital identity that uses encryption and zero knowledge

11:40proofs, the people who own the current systems, they'll probably have less information about the you the citizens of the country. I feel like there might be some hesitancy to move towards a system where they don't have as much information in control. How do you how do how would we balance that if we're you know going to the government convince them hey let's use this system

12:02that's better for the citizens but you don't get as much information.

Yeah. We're still living in the shadow of the Patriot Act. That's the problem. all this stuff didn't really matter until 2001 when when these laws were passed and the government basically said you know what soft power projection through you know mass information drag nets

12:25through access to finance your ability to open a bank account or use money these these are tools in the arsenal of democracy right we're going to use this to keep everybody safe

so before then you know it wasn't even an issue like nobody really collecting or doing much with this sort of data. it was very the incentive wasn't there let's say now I think we

12:48can't have this conversation without policy work needs to be done you know we can build a lot of a lot of technology we can build new solutions but the power rests in the institutions that actually set rules and if we don't have change there it's very difficult to make to move the needle in people's lives But that doesn't mean we can't build parallel systems that allow refuge

13:16for those that say get isolated by the system or that perhaps want to protect themselves in the case of an event. So what's really interesting though is that you know the government I think is kind of it's I want to say somewhat neutral or orthogonal to people in tech or crypto in the sense that the government is optimizing a different set of requirements or it's operates on

13:39different incentives right than say people cyber punks or dgens or people that are building technology and sometimes you know because it's uncorrelated we get random overlap in things that are good both for government and good for crypto. [clears throat] And one of those is, believe it or not, the AO 9303 standard. It's an aviation standard, international consortium of

14:04standards from the international consortium of standards and it gives us the cryptographic framework for creating basically I'm going to pull out my fancy document here. It lets us create basically NFC chip credentials that have government cryptography signed in it that's now in my possession. Meaning that I now have a cryptographic

14:32proof from the government that's signed in a chip that can be verified within this document that I can now use to prove my identity. Which means that as long as I have this document, my identity can't be taken away. You can't delete me in the database. And that's great for developers because now developers have a root of trust that we can use to create identity proofs.

14:53and this is just kind of like a random, you know, this is just random. It's not like, you know, this was developed in collaboration or anything. So governments that are being more intentional about how they want to design identity systems that helps them meet say their goals of keeping the population safe and running an effective government while also say advancing

15:17Other types of protections like privacy and making things attractive for companies and consumers. That design space is like is huge. [laughter]

Yeah. Yeah. I love that overlap of cryptography. You know, they're halfway there to integrating a Bitcoin wallet into your passport. Hopefully, you know, they that they understand, that cryptography is

15:42good and important and that there's a reason it was integrated into Bitcoin. [clears throat] can you, you know, we've talked a little bit about different governments and they're all at different stages of adoption. Some were innovative, some were conservative, and I'm sure there's many other use cases as well that we could dive into. Can you talk about a few examples of projects or

16:03ecosystems that are that are already using human right now?

Yeah, absolutely. Yeah, I'll start off kind of maybe what's familiar within the crypto ecosystem. We're pretty well known for providing civil resistance and proof of human for large ecosystem projects like optimism. We run civil resistance and IDV identity verification for their governance house. We also

16:28do the same thing for Lido for the Lido DAO. It lets them actually reward stakers to make sure that very big stakers aren't splitting up their stake into multiple operators or infrastructure providers to drain the treasury and attack the governance. We worked with folks like Story, Lana, you name it. And that's really where we carved our teeth and we built

16:57out this kind of minimal viable identity verification software for, you know, one of the most adversarial environments on the internet, which is crypto, right? The incentives are huge for people to beat these systems,

which made us feel pretty confident about beginning conversations with governments. We spoke to quite a few and the one that really I think

17:19instantly understood what we were trying to do because they were kind of you know hot on the heels of a recent data breach was the small island nation of Barbados. There's about 300,000 people on the island just under and they're in the process one of the fastest growing GDP per capita in the last I think not this year but two years previous and then I think for a

17:40couple years in a row before that and they're in this process of basically overhauling and upgrading their entire digital infrastructure. So Barbados follows British common law and but they don't have like many resources. However, it's kind of this grounding in process and rule of law and that really, you know, allows them to recognize that they can act as a

18:05gatekeeper or as a trusted as a trusted intermediary within the Caribbean and set the standards for how trade and commerce can can can occur. So they're incredibly incentivized to ride the leading kind of the leading wave of this new technology. And so for them they started from step one. First off, every single citizen gets what's called a Trident ID. The

18:34Trident ID has this embedded cryptography within it. And not only does it have say a proof of passport like the US passport does, but it has proof of biometrics. So you can register each person and then they can hold their encrypted biometrics within this document and then they can always present that to any reader, e-reader, NFC reader to prove that they're the

18:54person presenting the document. Now some of the work that we're doing is helping them achieve self-s sovereignty in their tech infrastructure. So we're helping them set up their own entropy network. So the network that we rely on to create wallets and identity proofs we're going to be basically providing that for that framework for Barbados to assess run through the

19:19gauntlet and test out with this idea that now they can run networks all around the world or even just in the Caribbean and they don't need to rely on like an American company or some other company that might have not be have the same incentives, right? and that holds all of their citizens data. And once they're able to onboard onto this, they're able to basically create

19:42wallets for each citizen, which means that by default, every citizen gets what I talked about in the beginning, which is the most important thing for privacy or freedom on the internet, is their own cryptographic key, and that key itself is backed up by the government. And that's something I think we should strive, you know, depending on how this

20:03goes. Hopefully, it's super successful. Depending on how this goes, you know, it'd be incredible to see other larger countries begin to experiment in this way from a first principles perspective.

That's really exciting that transition from crypto governance, which is important because there's a lot of financial incentives at stake there. you

20:24you talked about, you know, optimism and I not as much in 2025, but in the previous years, you know, the airdrops and the snapshots of these blockchains, you know, there was it was notorious that people were creating 50 accounts to try to game the system and there wasn't really an ID block in place there. And especially with staking on Ethereum or Lido, you

20:50know, decentralized staking, if [snorts] you can just create a bunch of master nodes, you can sort of get get closer to that 51% and take over the chains without people knowing that all of the different nodes are actually you. So the same person. Yeah, it's the same thing with AI too today because somebody could very easily if they have more compute resources

21:12than somebody else and we're highly incentivized to consume as much compute as possible

say for me to trade like do like high frequency trading or to I don't know compete for some mathematical prize or something

how can we really truly assess the competency of an individual versus the access to resources they have. So being able to rate limit access and verify

21:39this rate limit to compute or to verified identity or whatever it is that you're that you need to check. That's like it's it's going to be so important and continue to increase in importance.

Definitely. Well, that Barbados partnership is huge. Moving from crypto [clears throat] chains to actual governments, that's like a huge step. And I feel like there

22:03might be a short list of other countries that have been experimenting with different parts of crypto that would probably be open to integrating the digital identity in a privacy preserving way as well. With the with the use case in Barbados, you know, at least in the US, I could imagine it would take a long time to go through the bureaucracy. Maybe with a country that

22:25only has 300,000, it'll be much easier. But how do you shift from from dealing with you know decentralized nodes to actual working with governments?

Yeah. You need to raise a lot of money.

That's what it is.

You need to raise a ton of money because some of the standards you need to meet just to the rules are there for a reason, right? They're there to

22:48

protect these systems that run our society.

and as much as they suck, like the inertia is part of that protection. Mhm.

So just to meet some of these certification standards, it's 800k to like a couple million per year, right? So yeah,

you need to and that and that kind of also sets the cost that then you incur you know that you carry over to the to

23:10the governments and

then there's this whole game theory competition landscape between you know do we subsidize the cost get buy in and regulatory capture versus so the whole regulatory go to market is it's there's a lot of ways I think to win the easiest are going to be when the law is actually on your side that incentivizes is this adoption and I think we're

23:34seeing that now in Europe as well

with recent you know geopolitical happenings the EU is starting to think a lot more about how sovereign is their tech stack how reliant are they on other countries infrastructure to power their economy like how much of that GDP

is actually attributable to service providers from outside of the country

and yeah and I think for them to

23:58actually break free and be their own thing they're going to have to really change the rules and move fast on it.

Yeah. Well, I feel like it's going to come to an inflection point in the EU. It seems like they're against innovation. You know, they're striking down stable coins or they're making it really hard with the regulation and in certain countries

24:23they're, you know, the bureaucracy is quite slow. So those millions for the licenses might stack up just from trying to get them to get back to you. [laughter]

Oh yeah. Yeah. Totally. I mean I think once this Europe has been kind of they're Yeah. I don't want to like I'm not a historian or commentator or anything like that, but I do think that

24:45the EU has benefited immensely from the role of the United States being able to subsidize security and other soft power projection on behalf of the EU. So, they're going to have to, I think, you know, the incentive is really strong for them now to reframe their their perspective and they're going to have to move fast if they want to stay relevant. I mean, it

25:08was like their GDP like I think they were like number two or number three just like 10 years ago.

and GDP just hasn't kept up and I think a lot of their dependency on other countries, right? Namely the US

is what's what's causing that. So yeah, I think we've seen some mixed news of this, but I think some of it has been pointing in the right

25:31direction. for example, with they're creating their own Delaware type core registration flow now so that if you're [snorts] an EU company, you can register in this kind of like madeup jurisdiction which is supposed to be super fast and have all these like tax benefits. And they've set that as like a top priority. Christine Lagarde and all those guys,

25:53they set that up as a top priority for getting across the board and that seems to be moving. But really what they need to do is figure out the right balance between protections for citizens through social programs and incentives for companies to continue innovating and expanding on that.

Definitely. And you know some of these other countries are

26:16accumulating Bitcoin. Obviously El Salvador is one that's been very public about it. There's a few other ones around the world. I feel like those would be easy targets for human.tech tech to be like move move next and maybe you need to show that first use case and the success in implementing in Barbados but you know what about El Salvador and some of these other you

26:37know Bitcoin favorable countries to be next.

Yeah, absolutely. No, you've you've zeroed in on our secret plan there. But yeah, that's the idea is we show a really strong proof of concept that goes beyond just kind of like vaporware or promises of road map features and just really show how citizens benefit and then let that speak for itself. El Salvador, I think it's

27:01tough with El Salvador. It is a pretty gated administration. So, and they don't have a lot of transparency in how they set up their crypto infrastructure. Like nobody even knows. There's no public Bitcoin address that you can verify funds or anything like that. I [clears throat] think partly for security but also partly for you know optics and all that stuff. The other

27:24country I'm excited about is Bhutan.

Mhm.

it's in Asia and they have I think one of the largest Bitcoin treasuries. And they've made incredible progress. They've set up a sovereign wealth fund that is investing back into public infrastructure and

they're using zero knowledge proofs today and building their own applications. That allow users to

27:43do a lot of the stuff I was talking about earlier with self ondevice proving and self- custody. So, but yeah, I think what they're missing is still the public key infrastructure. This entropy machine that they'll need to create keys for users in a way that you know they're not dependent on a third party service provider but they can run their own network and be

28:05able to issue keys for users and create you know root signing authorities for their domain or you know or other government stuff.

Yeah. No, Bhutan was was the one I was thinking of next after El Salvador. So that's exciting. So, you know, we don't have a lot of time left, Shotty, but I want to get a glimpse into 2026 and some of some of the initiatives

28:31beyond obviously Barbados is the big news and that's I'm not sure how long that's going to take and then it will be an ongoing thing, but is there anything else that's sort of in the works for 2026 in the main goals of advancing this further?

Yeah, absolutely. So, yeah, lots of stuff happening. The biggest thing is the this entropy machine I've been

28:52talking a lot about the human network has been running since last April. And [clears throat] yeah, we've added a bunch of features in its path to progressive decentralization and it's run without incident until now and we've created over 3 million keys to date and we hope many many more to come. as part of the flow of our you know towards decentralization we're

29:15going to be releasing a token later this year and that token will be basically the main utility token of the network. So it's our way of incentivizing operators to participate and be able to provide security

to the whole network. Yeah, that's the big thing for us coming up in 2026. A bunch of other tech stuff too, but that's the one thing I would put a

29:37pin in.

That's the exciting thing. Cool. What's the best way to follow along with that? And as it gets closer, the when the timeline gets more concrete, you know, if people want to get involved early on, what's the best way to follow along?

Yeah, the ticker will be hu short for human.

And, if you want to find out when Human's coming, follow us on

29:59Twitter, x.com/hum. Hu tech t or te c, I can't spell. and hit the subscribe button, the bell icon, and then those notifications will come straight to you when we're ready live.

Looking forward to it. Would love to have you back on the show when that gets announced as well, so you can dive into it more on the crypto and blockchain side, on the tokenization side. And

30:24congrats on the Barbados partnership. That's huge. I know they've been early on they've been looking at digital asset solutions for stable coins and for governance. So I can see how that's a great partnership to make. Congrats on that and the other growth and first of all obviously the early adopters of the decentralized finance and governance for

30:48for layer ones and layer twos. Keep working with the crypto people. They are the perfect evangelists to showcase this and get it the next stage into more governments and more countries. So then people can start protecting their identity using cryptography and blockchain and they won't even know it. and soon everyone will have a blockchain ID. So I love it and I appreciate

31:10you taking the time, Shotty, and all the best with human tech moving forward. Thank you. It's going to be a fun ride. Thanks, Ashton.