Alex Buelau and Rayls: Bridging Billions from Banks to the Blockchain

In a recent conversation on the alpha un# podcast, guest Alex Buelau laid out a clear and compelling vision for the future of finance. With twelve years of experience in the crypto space, including being an early Bitcoin miner, he has a deep understanding of both the potential and the limitations of blockchain technology. He and his co-founder, Marcos Viriato, are not trying to replace the traditional financial system but rather to build a bridge - a set of "rayls" - to bring its immense liquidity and vast user base onto the blockchain.

The core of their mission is to solve a fundamental problem: while the traditional financial system serves five to six billion clients, the world of blockchain and crypto is used by a few hundred million at most. The goal is to merge these two worlds. 

The Problem with Existing Tracks

Alex explained that the journey for financial institutions into the blockchain space has been fraught with roadblocks. Before Rayls, banks were faced with a difficult choice.

On one hand, they could use permissioned systems like GoQuorum or Hyperledger. While these offer a controlled environment, Alex points out that they often create "isolated islands." Banks would run pilot programs or proofs-of-concept, but these internal systems wouldn't communicate with the broader financial world, limiting their utility and eventual adoption.

On the other hand, public blockchains like Ethereum or Solana presented a different set of challenges. The anonymity of accounts, lack of built-in compliance and Know Your Customer (KYC) protocols, and the persistent risks of hacks and stolen funds made them unsuitable for the highly regulated world of banking. As Alex noted, some banks would run small tests on public chains, but they weren't "taking it seriously." 

"We have set out to do when we got together, Marcos and I, a long time ago to build a company, is that we want to bring, merge those two worlds, you know, and bring this liquidity, you know, to all chain and also bring the younger generation that is very used to using blockchain onto this merge with the traditional financial system."

Rayls: The Bridge for Finance

This is the gap that Rayls was built to fill. It’s a system designed to give financial institutions the tools they need to finally use blockchain technology in a meaningful way by bridging the gap between permissioned and public chains.

A Permissioned System Built for Banks

The first part of the solution is a permissioned blockchain designed with the specific needs of banks in mind.

• Performance and Standards: It is fully compatible with the Ethereum Virtual Machine (EVM), the dominant standard in the blockchain world. This ensures that assets created on Rayls can interact with the vast DeFi ecosystem. The system is also incredibly fast, capable of handling up to

• 10,000 transactions per second.

• Familiar Architecture: Instead of forcing banks to adopt a complex, decentralized model they don't necessarily need, Rayls uses a single-node system for each bank. This node connects to an enterprise-grade database, a setup that is familiar to any bank's IT department and compliant with standards like ISO 27001 and SOC 2, type 2.

• Privacy by Design: Banks can install their Rayls node on their own premises. This means data remains private by default and only leaves the node when the bank initiates a transaction with another institution.

A Public Chain with Built-in Trust

The second part of the solution is the Rayls public chain, which is an Ethereum Layer 2. Its most crucial feature is a novel approach to compliance.

• KYC-Enabled Accounts: Every single account on the Rayls public chain has undergone a KYC process by being linked to a bank account. This design elegantly solves the problem of anonymity that plagues other public chains.

• Preventing Illicit Activity: This built-in KYC makes the network a much safer environment for financial institutions. Alex shared an example of how BlackRock's fund on Ethereum was "dusted" - sent a small amount of tainted funds from an anonymous account. This created an accounting and compliance headache. On Rayls, because the owner of every account is known, such an incident is far less likely to occur.

Enigma: The Technology of Privacy

For transactions on the permissioned network, especially between institutions, Rayls developed a protocol called Enigma. Inspired by an MIT paper named ZK Ledger, Enigma uses zero-knowledge cryptography to ensure privacy.

When a transaction occurs using Enigma, observers can see that a transaction happened, but they cannot see the sender, the receiver, the asset being traded, or the amount. This allows for confidential activities like Delivery versus Payment (DVP), where a government bond could be atomically swapped for a Central Bank Digital Currency (CBDC) with complete privacy. The team has published a peer-reviewed paper on Enigma, available on their website, and is now working to bring this privacy technology to their public chain.

Gaining Momentum: From Laughter to Adoption

The journey hasn't been without its challenges. Alex recalled a meeting with a major bank where the idea of Rayls was initially met with laughter. Today, that same bank is a client.

The work Rayls has done with the Central Bank of Brazil over the last two years to help build the country's CBDC network has been a significant and public project that has helped validate their approach. The firm has also worked with other major financial institutions like

Citibank and J.P. Morgan.

Alex believes that the industry is at a turning point. A more favorable regulatory environment in the U.S. is prompting more banks to seriously consider their blockchain strategy. They are realizing that being on the right "rayls" is essential for the future and that they don't want to be left behind.

"I think what we will see is that other banks, JP Morgan, like I said, led the pack, but other banks are going to start to see, especially with the products we are planning to launch in Rayls, that, oh my gosh, I can either be in and part of this revolution and be ready for the future, or I can be stubborn and be left behind and maybe miss a big opportunity to make more money." 

The Future is a Seamless Integration

What does the future look like for the average bank customer? Alex envisions a world where using blockchain is as simple as tapping a button in your existing banking app. Your bank would manage the complexities of private keys and wallets, offering you access to DeFi protocols as just another financial product.

Imagine your banking app offering you two loan options: one from the bank at 5% interest, and another from a decentralized protocol at 4%. For the user, the choice is simple, and the underlying technology is invisible. This seamless integration is the key to bringing the next five billion users into the on-chain world.

Looking ahead, Alex is particularly excited about two key areas: the continued development of

CBDCs with central banks and the tokenization of receivables. By tokenizing assets like commercial and credit card receivables, Rayls can bring new, yield-generating products to users on its public chain, creating a richer and more interconnected financial ecosystem for everyone.