S15 E60: Sabelnikov & Nikienkov on Zano

I opened this livestream the way I rarely open an interview: by telling the audience not to buy the coin we were about to discuss. "None of this is promotional. None of this is financial advice. Nobody got paid to be part of this interview," I said, and then went one step further. "Don't buy Zano."

Mine it with the GPU you already own, poke at the wallet, and if you still find it interesting a week or two later, that is your business. My guests did not object. Pavel Nikienkov even suggested people skip mainnet altogether and grab some testnet coins from a faucet, since the testnet "is ahead of the main chain" and already carries features that have not shipped yet.

That is a strange way to start a two-and-a-half-hour conversation, but Zano is a strange and fascinating project. The short pitch I had heard from Roger Ver, who name-dropped it when he joined me in S15 E26, is "Monero privacy but for tokens." The long version involves a hybrid proof of work and proof of stake chain, confidential assets that look identical to native coin transfers, a decade of tribal warfare inside the CryptoNote family and a pseudonymous cryptographer who used to sit at the next desk.

My guests were the two co-founders. Andrey Sabelnikov, better known on GitHub and Bitcointalk as crypto_zoidberg, wrote the original CryptoNote code base at Bytecoin, the project whose code would later be forked into Monero. He then built Boolberry, which became Zano. Pavel Nikienkov is the product mind who handles the roadmap and, as Andrey told me, "is the father of tokenization" in Zano. We were live in front of roughly 850 listeners, and the result was much spicier than I expected.

From CryptoNote to Zano

Pavel gave me the broad strokes. "Originally this story of Zano begins in 2014 with the first CryptoNote project Andrey launched," he said, and CryptoNote itself "was launched as the next iteration of Bitcoin aiming to fix the issues Bitcoin was having." Andrey went on to build his own CryptoNote implementation, Boolberry, which served as Zano's predecessor. Over the years the team added a hybrid consensus system and a long list of improvements, until a single-coin project grew into an ecosystem with "completely anonymous proof of stake and the privacy tokens, which we are calling confidential assets."

Andrey's own path into this world is the opposite of the usual Bitcoin origin story. He came from eight years in antivirus companies and network engineering, and he was skeptical when a company started talking to him about "virtual money that is like real but not central, decentralized. I didn't believe in this at all." What convinced him was a generous offer, "higher than market," and then the work itself. He got excited from the inside, learned open source culture on the fly and posted on Bitcointalk because that was all he knew to do. "Originally I didn't know anything about Bitcoin," he admitted.

A Hybrid That Leans Toward Stake

My research suggested Zano alternates blocks between proof of work and proof of stake, so I asked whether it is really a proof of stake chain. Pavel's answer was candid: both run at the same time, each covers the other's weaknesses, and "frankly speaking we would move to proof of stake if we ever were able to solve all the issues proof of stake is having." He called it "an uphill battle."

Andrey is the proof of stake evangelist of the pair, and he knows the other side intimately. The first project he launched was pure proof of work, and he says he "learned my lesson in a bad way" once he calculated how cheap it was to attack a small proof of work chain. Proof of work stays in Zano mainly to block long-range attacks, where someone buys up old, emptied wallets from former holders and uses those historical keys to rebuild an alternative chain from deep in the past. For the common attack, a reorg of 10 or 20 blocks, he believes stake does the heavy lifting: "proof of stake is the main power that holds and gives security to the blockchain."

He distinguishes two families. PBFT-style systems have a delegated group of large stakers who agree on the chain and can offer finality, at the cost of decentralization. Zano's model is "statistical": anyone can stake a block with a probability proportional to their coins, much like proof of work, so it does not give true finality but makes deep reorganizations extremely expensive. I pushed for numbers. Andrey said a new consensus upgrade proposal was under review and he had asked reviewers to calculate the cost of attack, but he would not quote figures yet.

Then I played the nation-state card. What if an adversary with a printing press quietly accumulates coins over two or three years? "Of course they can do it," Andrey replied. "There is nothing impossible." His point is that consensus design is always a contest of costs, and for a state, renting or ordering hash power is "way cheaper" than cornering half the stake of a coin whose price would explode the moment you started buying. As for renting GPUs to dominate Zano's proof of work, Pavel said the team tweaked Ethereum's ProgPoW specifically to keep the big mining farms from switching over, and he did not believe the coin was popular enough to show up on NiceHash.

What Happens If the Founders Get Arrested

Since both co-founders are public, I asked what would happen if someone held them at gunpoint and forced a malicious protocol change. Pavel was refreshingly unheroic: "I'm not going to say I would resist being tortured. I would say I would do whatever." The protection, he argued, is that users don't have to follow. There are no control levers, no central server, and every release is open source. "Whenever you see something shady going on, just do not install the update." The team deliberately ships no auto-update button for the node, which earns them complaints, but every binary has to be downloaded and can be built from source.

Andrey added a request I will repeat for the record: "please don't arrest us." The mobile wallet is a softer spot, since it lives under the team's Google Play account and nobody can verify what was uploaded. Pavel's answer to that problem is to hand mobile over to others. The team was integrating with Cake Wallet and Bitcoin.com, and Andrey said they would be "really happy if there is going to be more third party mobile wallets," so they can focus on the core code.

Bytecoin, Monero and an Old Grudge

The history was where the temperature rose. Around a decade before our chat, Andrey said, he was "hired to the project that actually built the CryptoNote protocol," wrote its first implementation and then left after "a very questionable launch." Once the source was published, others forked it into Monero, and the years that followed were what he called "tribal wars," with Riccardo "fluffypony" Spagni (who has since been a guest in S17 E8) as his chief antagonist. "We had a very negative story the first few years," Andrey said.

He was frank about why he quit Bytecoin. In his telling, the team built a genuinely new technology from scratch but misrepresented the coin supply in circulation and how much of it they owned. "I didn't like it and I quit Bytecoin because of this," he said, while insisting that the developers were not criminals and that we should separate "the business side of things and the technology."

I read out a recent tweet from Riccardo about the CryptoNote launch and the long-running claim that Bytecoin originated with the Russian Business Network. Andrey did not hold back: "This is absolutely stupid conspiracy that people keep bringing." His theory is that the early Monero crowd needed a villain to separate themselves from Bytecoin while their own project was still young.

He also has a list of specific grievances. In his view, Monero at launch differed from Bytecoin by little more than the one-minute block time, and he objects to fluffypony being called Monero's creator: "it's like calling Michael Saylor Satoshi Nakamoto." He accuses the early maintainers of stripping the original copyright from the source code and of branding CryptoNote's ring signatures as Monero inventions, and he says Wikipedia still describes Monero as an implementation of the whitepaper rather than a fork of running code.

These are his claims, and I present them as such. Even so, he gives Monero credit where it is due. From 2015 and 2016 onward, the community "started to do a really great job" gathering researchers around the project, and Andrey called Monero "the most successful project that built on top of CryptoNote," adding that he is proud his name is still all over the source code.

The thaw came through Douglas Tuman, who runs Monerotopia and MoneroTalk. He invited Andrey on his show, then to the conference, where Andrey met the current Monero developers. "For me it felt like all this negativity left behind," he said. Today Zano works with Monero researchers, and the anonymous proof of stake design was built with help from one of them, who was hired as a reviewer and "quickly started to throw some ideas."

My takeaway was the same one I have had about GrapheneOS and CalyxOS, Zcash and Monero, or the Wasabi and Samourai Twitter battles I joined a few times: privacy people spend an absurd amount of energy fighting each other. Pavel put it neatly. Privacy is "a tiny piece" of the crypto market and people fight over "some tiny percent of the market cap," when they should be fighting outside the niche "to convince people to join privacy."

The Man Behind Nicolas van Saberhagen

Then came the moment I had been waiting for. Andrey wrote the CryptoNote code, but he did not invent the protocol and refuses the credit. The cryptographer behind it, known by the pseudonym Nicolas van Saberhagen, "taught me basically all things about crypto back in these days." I asked whether this makes him the Satoshi Nakamoto of Monero. Pavel corrected me: he "came up with the math," while a business side ran and paid for everything.

Does Andrey know who he is? "Yeah, I know who he is," he said. "He was sitting next table to me." He still meets him a few times a year in different places, and he even invited him to attend Monerotopia incognito. Nicolas helped him build Zano's first proof of stake and the concept of a stake modifier based on key images, and he supported Andrey after he left Bytecoin, when the founder had effectively told everyone not to talk to him.

Back in 2014, as Andrey was trying to build a memory-hard hash function based on Keccak and doubting himself ("I'm not a cryptographer, why am I doing it at all"), Nicolas told him to keep going. That function became the basis of Boolberry. Andrey even sent him some Zano from the genesis block.

So is Nicolas van Saberhagen also Satoshi, as one popular theory goes? "I know it for sure that it's not," Andrey said. As for who thankful_for_today, Monero's original launcher, really was, Andrey declined, citing an NDA he signed when he left Bytecoin. He would only say that "the guy wasn't an average community person."

Is Zano Better Than Monero?

I demanded a yes or no answer, then made him wait through the ad break. Andrey came back with no short answer. The products are different: Zano is building a platform for others to build on, while Monero is "building a pure coin for paying the cup of tea." Monero has a deep bench of researchers and many eyes on its code, while Zano is smaller, takes bigger risks and makes faster decisions. Zarcanum, the hard fork that brought hidden amounts and private staking, was one of those risks. "I cannot even tell you how much risk we took," he said.

So I narrowed it down. If you send plain Zano, not a token, how does that compare to sending Monero? Here he did something I rarely see from a founder in front of a live audience. Monero, he said, has a longer history of hidden amounts, a bigger user base and more transactions, which means more decoys to hide behind, so sending coins "would be more private on Monero at this moment."

Zano's bet is that token transfers look exactly like native coin transfers to an outside observer, so a busy token economy should grow the decoy set quickly. Pavel finished the scorecard himself: "In terms of privacy, Monero is better," and in terms of liquidity too. I told them I respected the honesty, and I meant it.

Andrey did claim one clear win, consensus. He wants Monero to adopt proof of stake once it finishes full chain membership proofs, and he asked Douglas to organize a proof of work versus proof of stake panel at the previous Monerotopia so he could make that case. Peter Todd was on it, bringing "all arguments against proof of stake from 2014," and the moderator compared proof of stake to the banking system. Andrey was not discouraged. He asked Monero developers to review his new consensus proposal and made a bet on air: "in five or eight years they will switch to a new consensus model."

Private Tokens in Practice

The real selling point of Zano is its confidential assets, and Pavel was clear about the level of privacy they get: "It's the same level of privacy as the native Zano coins. There are literally no difference," except that fees are paid in Zano. His motivation was practical. "People don't pay for the coffee with Zano or Monero or Bitcoin. People pay for the coffee with stable coins."

The underlying math came from Zano's main mathematician, known as sowle, whose Zarcanum paper with koe describes proof of stake over hidden amounts, followed by a confidential assets paper that extends it to tokens. The team won't issue a private stablecoin itself, since that requires collateral and financial expertise, but wants to provide the tools, the way Ethereum gave stablecoin issuers the tools without issuing anything itself.

Of course I tested this myself. Before the show I minted a "Bitcoin Takeover Podcast Season 15 Episode 60 Airdrop Token" in the Zano wallet, 100 units, and offered them to listeners. An earlier experiment with a token I called Vlad coin had frustrated me, because I could not batch payments and had to wait for change to confirm before every send.

Pavel said that is "an interface issue": the command line wallet supports up to 30 outputs per transaction, and new mints now come pre-split into several outputs. Andrey explained the deeper reason. In a privacy chain the wallet cannot order transactions the way a Bitcoin wallet chains unconfirmed spends, so "you cannot send coins that did not get confirmed," and change takes 10 blocks.

Two other design choices came up from the chat. New assets show up as anonymous stars until you whitelist them, because otherwise people would spam wallets with slurs, scams and worse. "If you make a transaction on Ethereum network with a big amount of stablecoins, you are getting spammed with all kinds of crap," Pavel said. And when a listener asked how to send Ethereum privately through Zano, Pavel pointed to Confidential Layer, a decentralized bridge for wrapping assets from public chains onto Zano and back, distinct from the older Zano wrapped on Ethereum contract that the team holds keys for.

Zano also has on-chain aliases, so people can pay "@name" instead of a long address, and I made the mistake of comparing them to the Ethereum Name Service. Andrey bristled: "I created this in 2014 before even Ethereum was created." Then I reminded him of Namecoin, and a listener chimed in that Namecoin domains date back to 2011 and 2012. Andrey accepted it with grace: "that's my bad, so not the first." He simply had not been following other projects when he built it, since Nicolas explained everything he needed.

Tail Emission, Burned Fees and the Premine

Zano issues one coin per block forever, which is 1,440 coins a day and, as Pavel put it, about 2% a year that shrinks as the supply grows. Every fee on the network gets burned, whether it comes from transfers, alias registrations or marketplace offers, so sustained usage could even make the coin deflationary. Pavel was blunt about why Zano did not copy Bitcoin's halving curve: "the Bitcoin curve for a smaller project is a death sentence." There will never be enough fees to pay the miners and stakers.

Both founders want people to stop treating staking as a savings account. "Everything there is because of the security, not because we see it as an interest pay mechanism," as they explained it. That is why the mobile wallet does not stake and there is no delegation: "staking is the actual job," Andrey added, and the yield tends to settle around 3% to 5%. A listener asked about the dev tax. There isn't one, but there is a premine of around 800,000 coins held in a public audit wallet that the team stakes, funding itself mostly from the staking proceeds and dipping into the principal only for big expenses.

Fees came up because the 0.01 Zano I paid to send a token worth about 6 cents struck me as ironic, given that Roger Ver is one of the project's loudest supporters. Pavel said it was not a hard rule and that a fee market was planned for Q4 2024 or Q1 2025. Since fees are burned anyway, their only purpose is to stop spam.

Scaling a Private Chain

I asked what would happen if an entire nation of a million people showed up tomorrow. Andrey called scaling his concern "for ages," because validating private transactions is far more expensive than validating Bitcoin or Ethereum transactions. Zano's maximum capacity is around 12 to 15 transactions per second, according to old stress tests. The paths forward are optimizing (already pushed nearly to the limit), heavier hardware requirements or sharding. The fastest fix would be a PBFT layer with non-private validators, but he does not want it: "I would rather have it slow but completely decentralized and anonymous." I told him he is clearly not a marketer. "That's my only excuse, that I'm technical guys," he laughed.

On full chain membership proofs, the Monero upgrade that will replace small decoy rings with a much larger anonymity set, Andrey was genuinely enthusiastic. He met Luke Parker at Monerotopia when the idea was still considered impossible, saw a working proof of concept not long after, and promised to adopt it for Zano while keeping token creation intact. "It brings the whole family of the projects to a new level," he said. Tari, the Monero merge-mined token project, got a polite shrug. Pavel had not seen it ship, and Andrey was puzzled about proof of work until I found RFC-0132 on merge mining.

Bitcoin, Maximalists and Why Privacy Is Not a Crime

The designer who makes my YouTube thumbnails sent a question meant to provoke: why do they live in 2017, when people still believed altcoins had a future? Pavel answered with an offer: "If at some point Bitcoin will adopt the technology we are building, we would ditch right away whatever we are doing and work on Bitcoin." Andrey refused to be negative and said he likes Bitcoin, even if it is "not a very innovative project these days." His wish is simple: "I just hope that nobody screws up the project, nobody screws up the emission."

Pavel's critique of Bitcoin was sharper. In his view the ETF era has turned it into a wealth preservation story, and as long as the ledger is public, it lacks fungibility: "one Bitcoin is not equal to one Bitcoin," because an average person cannot check whether their coins once touched hacked funds. I agreed more than he probably expected. A fresh receiving address gives you decent privacy, but your privacy "only degrades over time" as you, or the people you transact with, make mistakes. I wrote about this in more detail in On The Limitations of Bitcoin Privacy.

The end goal, in Pavel's words, is to become "a digital cash platform," and Andrey wants to break the myth that privacy is for criminals. Ethereum users, he warned, will be surprised when all their transactions are tied to their names, and with AI, digesting that information is getting easy. As one of them put it, "people don't post their banking statements online," yet they happily do the equivalent on a transparent chain. The word criminal, they pointed out, depends heavily on geography. "Being a Russian citizen, I do a lot of illegal stuff just by existing," one of them joked.

Humble Founders, Real Risks

What baffles me about Zano is how it attracts supporters without any marketing charisma from its founders. Roger Ver backed it years ago, Andrey was shocked he even agreed to a call, and Aaron Day, who once debated me on behalf of Bitcoin Cash, now onboards people to Zano. Pavel's guess is that the CBDC opponents like private tokenization.

Andrey credits his link to Nicolas and a bit of Monero's reflected shine, while Pavel pointed to sowle's paper on anonymous proof of stake. "The fact that we haven't bailed on this thing for many, many years," Pavel added, "shows that we are not here just to get a quick buck." Compared with his first project, which he built alone in a toxic environment, Andrey said the last few years feel "so, so different."

The last serious question came from the chat. With the developers of Tornado Cash and Samourai arrested, how safe are privacy developers? "We don't know and we hope it wouldn't get to us," Pavel said. They write open source software and take no cut, but laws change. The one thing they can promise is structural: "We do not have a kill switch." Locking them up would not stop the network.

We ended in a much lighter mood. I sent tokens to Pavel's alias, @ravaga, and to Andrey's, @zoidberg, the real one, because "there are at least five of them" squatting similar names. We agreed, half joking, that only Nicolas qualifies as the Satoshi of Zano, and that Andrey is not Nicolas.

And I closed with the thought that this is technology which "could have been built on Bitcoin, but that's another story for a parallel universe where we could have had real cypherpunk money." The story continued later in S17 E3, when Andrey returned with sowle to talk gateway addresses, the move to full proof of stake and FCMP++. If you want to follow the project, the team is most active on Discord and the Zano X account, and the code lives on GitHub.

Listen to Andrey Sabelnikov & Pavel Nikienkov on Spotify, Apple Podcasts, YouTube, and More

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Time stamps:

00:00:54 – Introducing Andrey & Pavel
00:02:46 – What is Zano?
00:04:50 – Hybrid Consensus Mechanism
00:07:15 – Challenges of Proof of Stake
00:10:27 – Security Aspects of Consensus
00:13:13 – Cost of Attacks on Consensus
00:15:09 – Nation-State Threats
00:18:00 – Open Source Development
00:20:07 – User Control and System Integrity
00:21:24 – User Interface
00:21:51 – Decentralization in Zano
00:22:30 – Mobile Application Concerns
00:23:13 – Integration with Cake Wallet & Bitcoin.com
00:24:31 – Sideshift & Starkware
00:25:59 – Introduction to Zano
00:26:40 – Zano's Technology Overview
00:27:40 – History with Monero
00:29:51 – Collaboration with Monero Developers
00:31:44 – Background in Bitcoin?
00:32:55 – Nicholas von Saberhagen's Role in Monero & Zano
00:35:19 – Conspiracy Theories Surrounding Satoshi
00:36:02 – Support from Nicholas von Saberhagen
00:38:28 – Addressing Community Drama
00:40:24 – Defending Developers Against Conspiracy Theories
00:42:10 – The Negative Narrative Around Privacy
00:43:06 – Infighting in the Privacy Field
00:43:51 – Polarization Among Blockchain Projects
00:44:34 – Criticism of Proof of Work vs. Proof of Stake
00:45:51 – Historical Innovations in Privacy Projects
00:47:41 – Community Dynamics in Crypto Projects
00:49:34 – Privacy as a Niche Market
00:50:16 – Tribalism in Wallet Choices
00:51:13 – Misconceptions About Monero's Origins
00:55:14 – Support and Community in Early Crypto
00:59:38 – Comparing Zano and Monero
01:02:45 – Zano Token Issuance and Privacy
01:03:14 – Monero's Privacy Advantages
01:04:48 – Future of Zano's Privacy
01:05:29 – Appreciation of Honesty
01:06:18 – Liquidity and Usability
01:07:50 – Building Private Stablecoins
01:08:39 – Consensus Mechanism Comparison
01:09:45 – Debating Consensus Models
01:11:51 – Market Influence of Discussion
01:12:30 – Privacy of Issued Assets
01:14:51 – Zano Wallet Experiment
01:15:36 – Batch Transactions Limitations
01:19:18 – Technological Limitations Explained
01:20:34 – Decentralization and Project Economics
01:23:06 – Discussion on Monero Fees
01:23:30 – Zano's Emission Strategy
01:24:35 – Clarifying Staking Misconceptions
01:27:28 – Challenges of Scaling Zano
01:30:25 – Transaction Speed and Validation
01:33:59 – Future Plans for Fee Market
01:35:35 – Discussion on Zano's Fees
01:36:41 – Audience Questions on Tax and Premium
01:38:44 – Whitelist Functionality in Zano Wallet
01:40:31 – Confidential Layer Project
01:42:13 – Adoption of Full Chain Membership Proof
01:44:24 – Zano's Domain Name Feature
01:44:59 – Zano's Core Features
01:45:32 – Comparison to Ethereum Name Service
01:46:20 – Origins of Namecoin
01:47:17 – Skepticism About Bitcoin
01:49:20 – Namecoin Functionality
01:50:32 – Decentralization Trends
01:51:08 – Zano Fee Burn Rate
01:51:44 – End Goals of Zano
01:52:31 – Privacy Misconceptions
01:54:03 – Transparency in Ethereum
01:55:03 – Bitcoin Privacy Concerns
01:56:30 – Criminal Definitions and Taxation
01:58:17 – Living in 2017?
01:59:21 – Bitcoin Maximalism vs. Alternative Projects
02:02:00 – Current State of Bitcoin Privacy & Fungibility
02:06:10 – Future of Zano
02:08:10 – Competing with Monero
02:09:40 – Industry Influence on Zano
02:10:18 – Tokenization and Practical Applications
02:12:52 – Competition from Tari
02:18:54 – Community Support and Development
02:20:06 – Recognition Despite Size
02:21:06 – Legal Risks for Privacy Developers
02:23:12 – Final Thoughts on Zano
02:25:15 – Use Cases for Zano
02:26:16 – Market Value of Privacy
02:26:35 – Following Zano's Work
02:28:05 – Twitter and Engagement Challenges
02:28:47 – Sending Bitcoin Takeover Zano Tokens
02:29:35 – Mobile Wallet Features
02:30:07 – Caution with Impersonators
02:31:06 – Closing Remarks