Dev Ohja on the Osmosis Story and his Return to Privacy

Anna Rose hosts a conversation with Dev Ohja, co-founder of Osmosis and a ZK researcher, focusing on Osmosis's evolution since its launch in 2021 and its impact on the Cosmos ecosystem. Oja discusses significant changes within Cosmos, including a boom and bust cycle, and notes that while Osmosis is currently smaller than in 2021, it has introduced pioneering technologies and facilitated experiments in proof of stake and cross-chain communication.

After his work with Osmosis, Oja returned to Zcash and privacy technologies, reflecting on initial blockchain challenges around scalability, privacy, and proof of stake. He breaks down privacy into Miner Extractable Value (MEV) and user anonymity, noting that while MEV solutions are not products, the decentralized exchange (DEX) is. Oja details the development of Osmosis, including the launch of the DEX and efforts to implement a threshold decryption scheme to prevent validators from seeing user transactions before execution. However, challenges such as code merging difficulties and security concerns delayed implementation.

The conversation touches on the impact of the Terra collapse, which was seen as an existential crisis for the Cosmos ecosystem due to UST being the only stablecoin at that time. Oja discusses the urgency of establishing an Ethereum bridge and the choice of Axlar as the bridge provider, emphasizing security concerns with competitors. He recounts significant bugs during the Luna crash and the actions taken by Luna validators to halt the chain and implement upgrades. The freezing of IVC channels provided relief for Osmosis users, ensuring that DEX users were not adversely affected.

Oja highlights the internal coordination during the crisis following the Terra crash, leading to a calm response from the Osmosis team. They decided to freeze UST and Luna liquidity pools to protect liquidity providers and organized emergency calls to discuss an emergency hard fork. This unprecedented move involved multiple public audits and rapid upgrade deployment, marking a significant moment in Cosmos history. The Terra crash was identified as the first major disaster in a series of events impacting major VCs and leading to legal consequences for some.

In the aftermath, Osmosis shifted its strategy to prioritize security and cross-chain standards, recognizing the need for mechanisms to manage large withdrawals in lending markets. The team aimed to build a robust Cosmos ecosystem, attracting developers from Terra and others to create an integrated DeFi strategy. However, there is a noted lack of new app chains that do not aim to be decentralized exchanges. The demand for cross-chain solutions remains uncertain.

Oja discusses the potential for Cosmos to emerge as a central hub for privacy applications within the crypto space, highlighting notable projects such as Secret Network, Penumbra, and Nomada. He emphasizes the talent present in Cosmos to excel in privacy solutions, particularly in light of recent challenges faced by the ecosystem. Osmosis is identified as a key player in revitalizing the Cosmos ecosystem, with a proposal to merge it with the Cosmos hub to enhance liquidity and volume through a decentralized exchange.

He observes a trend of developers leaving the Cosmos ecosystem for Ethereum roll-ups or Solana, attributing this to the natural consolidation during a bear market. Oja shares insights from his experience with Zcash, emphasizing the importance of privacy in the 2026 roadmap and the design of a shielded system for Solana to improve privacy UX. He stresses the need for privacy without a global master key, especially in the context of AI and global surveillance.

Oja addresses Zcash's current usability issues, particularly the lengthy "shielded sync" process that requires users to download the entire blockchain. He contrasts this with Aztec's faster syncing capabilities and discusses the potential of Private Information Retrieval (PIR) to enhance usability in private payment systems. He outlines challenges in payment verification, noting scalability issues with downloading all transactions and risks associated with direct messaging for payment confirmations.

The conversation touches on the application of verifiable databases in Zcash, where zero-knowledge proofs may verify correctness without exposing underlying data. Oja mentions the necessity of a PIR database to synchronize with an oblivious thinking service for scaling purposes. Key challenges for scaling include eliminating shielded sync to facilitate final transactions without downloading full history, aiming for several hundred shielded transactions per second on-chain within the year.

Oja proposes solutions for establishing the first payment, such as a dynamic address method or an invoicing method with a specific payment request. The relayer concept is introduced, with "Raven" acting as an intermediary, allowing users to recover keys if lost. He explores the use of ephemeral data on the blockchain for data availability, allowing the blockchain to serve as proof of communication without additional verification.

The conversation concludes with a focus on the first payment problem and mentions Zottel, a new wallet being improved for user experience in Zcash. Oja discusses the proposal to reduce block time to 25 seconds, emphasizing the need for pre-confirmation mechanisms to enhance user experience, particularly for small payments. He highlights the introduction of post-quantum recoverability in Zcash, allowing users to freeze shielded pools and recover funds in the event of quantum computing threats.

Concerns are raised about the performance of Zero-Knowledge (ZK) technology, with discussions on the limited product-market fit of ZK technologies outside blockchain. Oja envisions a future where Zcash is widely used for private payments, capable of handling thousands of transactions per second without quantum security concerns, advocating for a world where individuals own their digital data and can prove its validity without sharing it.