AI Agents, Quantum, and ETH

Transcript

individual and discreet observations like the police saw you walk into the doughut shop. That's fine. But flock cameras creating a comprehensive visual record of all public spaces at all times is the equivalent of following that person around. That is a very different sort of search than oh we were incidentally there and saw them. Um, to your point, I feel like AI is posing a similar problem for the way the world is currently structured, which is nobody really thought about what if there's a device with all these connectors that has all of your context about all things. Like that is obviously much closer to somebody's papers and personal effects in like fourth or fifth amendment terms in the United States.

>> Yeah. Well, it's a classic trade-off between security and liberty. And people historically have traded away liberty for convenience and security. So then OpenAI says, "Wait a minute, we've lost the narrative. Anthropic has faster revenue, better revenue growth. The best like the technical staff at Anthropic is the who's who of like the NBA Dream Team. It's incredible what they've done." So then we have this incident where these agents run a muck and HuggingFace, which is an open- source project that no one really cares about because it's open source. There's no one from Hugging Face coming out and talking about this. It's if you're going to have a target that was run over by these little pussian agents for a press release event, it would be Hugging Face.

This is the nothing. This is It's just a media stunt. That's all it is. I We use these agents every day. They are not capable of this. They're not They're not that capable. They're not I wish they were. We're not entering the age of AGI or super intelligence anytime soon. We're not. They're incredibly productive. I'm excited. I think agents are more powerful and more impact than the computer. But we're entering the age of midwit AGI. So if you're a consumer staple that generates this long tail of free cash or rates go up, your stock declines. It's not actually creating a earnings impact. What it's doing just discounting those cash flows at a lower rate and it's it's oversold and those names are attractive now. Like now is the time to go shopping. I I say this with like high conviction. You can quote me on this in 30 60 90 days. Like I

think all these ETFs are quite interesting right now. The rates aren't going to 6 and a half%. I had dinner uh in Nashville last Thursday with an individual who's a CIO of an endowment. That means we're always looking backwards in the rearview mirror. Okay, I used to work at Archagos of all things too. I hope he's not listening. So, what he said is, "I don't see why rates can't go to 6 1/2% to 7%." And he said it with such conviction. And I remember immediately after that moment, I said, "That's it. Rates stop. That's the guy." And there are going to be thousands and tens of thou like, "I don't think rates are going to go 6 and 12 to 7." Okay, great. The market just achieved consensus that rates are going to go higher. Now it's done and and rates come lower.

>> There's a high chance that you're going to be tracked up until the point in time that you're going to go to jail and uh it doesn't worth it. You even cannot tell this story on the parties on token 2049. But imagine if you're finding a vulnerability, you are reporting this vulnerability. You're getting a bug bounty. Bug bounties are pretty high bug bounty that is enough for you to buy Lambo and then you are a king on the cocktail parties and then all of the girls are around and you're saying that you are the guy who discover this and by the way do you want to hop in my Lambo that I got up this is much better this is much better and nobody is disrupted uh and like everything is great nobody is thinking now how to convert XMR into

USDT much smoother and a very great story to tell to everybody and say that you are the king, you are the prince, white prince on the white your white knight on the on the white horse and you're here bringing the joy and and better security to everybody else. Now the tricky part with economy is that it means that there needs to be value in this economy in case the system that we are building is not protecting the value. uh which means that we're not protecting the ownership of some tangible assets. It means that we are destroying the value of these things. So these numbers that you're seeing in the

ledger now they should not have the value because they can be stolen and nothing is going to happen. There is no uh no responsibility for it. there is no you know consequence which means that if we're building these type of systems without boundaries it means that we are building towards the future where crypto doesn't have any value so it is not going to become an economic backbone of the future this is the paradox that I'm telling to you and uh this is one of the thinking that uh says to me that fully open system where that protects thieves is not something that is going to help us change the world do you know this wonderful US show that is called pen Pen and Teller I do >> and then magicians are coming and showing to Pen and Teller different

magic tricks and then the Pen and Teller are talking back in code to them in order to say to them that they understand how this was done. Yeah. So we are playing a little bit of a pen and teller with the hacker telling telling them in code that we kind of know what happened. And the same thing was in the second message when the attacker was sending us an onchain message that uh willing to cooperate uh please give your signal to us and what we did we provided encrypted message in the next tweet and this encrypted message was encrypted with the public key of the attacker and in this encrypted message was a signal group to join. So we knew that this group was created and then the only person who is able to decrypt it uh up

until the moment the quantum computers are in existence so that the attacker actually decrypted these messages and the only person who was able to join was this attacker and that's why uh later on when he joined the group we were able to have the private communication channel that is not not available to the to the outer world >> like to your point if OpenAI has figured this out right it's already been moved into classified sections of the government like it's being used for cyber security. I think the bigger concern for crypto like that gives us a window to act and and I think if there's anything to these rumors and again I give them relatively low probability of being true but if there's anything to the rumors that like open AI is coordinating with the EF or whatever like we'll see things happening in

pretty short order that tell us because the real risk is like with as with all the AI stuff is that the Chinese models are not far behind and in that case you do have you know first of all they're open weights but there's also an adversarial part to it you have maybe some number of months if openai was able to do this with their cutting edge frontier model, then you have some number of months before a Chinese model is going to be able to do it, right? So that's that's like the clock if this were to actually be the case. People had to create these tokens that were not going to ever return value. There's no dividends, there's no buybacks, there's nothing. We're never going to do that. It's just governance because if you said that you were going to do that, you were at serious risk of violating securities

law. Now, the good news, I think, is that that's changing, right? And so what comes along with that, I think, is increased scrutiny on teams who aren't doing it, right? So, if you're a big protocol and you are monetizing or have potentially the the ability to monetize and you have a token or you're thinking about issuing one, you ought to have a story for how to drive value to that token that's actually rooted in something real, right? Like not some like moon math. We're setting up the incentive so perfect. It's like no, we're charging a fee and then we're distributing those fees or we're using those fees to buy back the token in this like programmatic way the way that like say unis swap or other you know big projects are now doing. And the other thing I'll say is that I don't think that's like a small the point of

governance tokens and governance in general for project is that you're supposed to be like it's to provide economic security, right? Um so it's not just like oh the token doesn't matter. I don't buy that excuse anymore, right? The regulatory excuse is going away. I think it's just a different dynamic when Zach then makes something public. It lights a fire under everyone cuz it's kind of like, wait, if this if this bro on Twitter can tweet this, why didn't anyone do anything about this beforehand? But the other thing is just knowledge. A lot of people don't understand the moneyaundering dynamics. A lot of the teams don't understand like the especially the centralized exchanges. It's a clear day DPRK hack, but then they'd see really strong Chinese indicators and Chinese language and Chinese everything on the accounts that were laundering the money. And if you don't have any like open- source

public reporting on the the laundering dynamics, you're basically like one by one trying to explain and to convince these exchanges who are often Chinese by the way like no no we swear these are money launderers who know that they're laundering money. If you follow me on Twitter, post bybit, even pre-bbit, you would see me bitching at the a lot of the exchanges for for not giving >> reacting to this. Yeah. >> Yeah. But I mean the amount of times that I have sat there and explained to the exchanges, yes, they're Chinese, but they they're working like really handinhand with DPRK. What if your crypto could do more than just sit in your wallet? Nexo is a digital assets wealth platform where you can generate daily interest on your crypto or borrow funds against your assets. Today, Nexo serves more than 10 million clients.

Find out more at nexo.com. One more thing, we've got a listener survey open. It takes just a few minutes. It's anonymous and it changes what we make next. Use the QR code on screen or go to unchainedcrypto.com/servey. The link is in the show notes. $540 million. That's how much concentrated liquidity sat idle in a given week in the first half of this year. About 30% of the DeFi TVL if you're wondering. That's according to Dune Research commissioned by 1 in. But there's a solution. 1-in Aqua is the new shared liquidity platform. It lets LPS back multiple positions with the same

token balance and keep their tokens in their wallet till a swap comes. Why does that help? Because the LPS don't have to split their tokens across positions. They can cover more market conditions and pairs with their full balance. That means more activity across deeper liquidity. See how it works at 1in.com/aqua. Remember that providing liquidity carries risk and fees aren't guaranteed. Heads up everyone. We've now fully transitioned Bits and Bips to its new dedicated channels. So if you're not yet subscribed to the new Bits and Bips channels on X, YouTube, Spotify, Apple Podcast, or wherever you get your podcast, go there and subscribe now. For the next few weeks, we'll play segments of the full interviews on Unchained as a reminder. But for now, you'll only hear

those short segments of bits and bips on Unchained. No more full episodes. You can get links to all of the dedicated channels Hi everyone, welcome to Unchained, your nohive resource for all things crypto.

I'm your host Laura Shin. Thanks for joining this live stream. This episode is brought to you by Nexo, the premier digital assets wealth platform. Earn daily interest on your crypto or borrow funds all through one platform trusted by more than 10 million clients. Find out more at nexo.com. GEIO restrictions to eligibility and terms apply. Before we get started, I want to ask you for something. We're making a bunch of decisions right now about Unchained. what we make next, when we go live, what we should be doing more of, and I'd rather hear from you before we make them than after. So, we put together a survey. It takes just a few minutes. It's anonymous, and there's a box where you can tell me what we could be doing better. I read all the responses. The link is in the show

notes, or you can snap the QR code on screen or go to unchained crypto.com/servey. Thanks. Today's guest is Lorenzo Valente, director of research digital assets at Arc Invest. Welcome, Lorenzo. >> Hi, Laura. Thanks for having me. Excited to be here. >> Yeah, excited to chat with you. It's a very interesting time in the industry. We're, you know, hopefully, I think, coming out of this bare market and you sit at this intersection of investing and frontier tech. of course being at ARC, it's probably one of the probably best known investment firms sitting at

that intersection and everyone's talking about how we're in this era of crypto adoption and how the previous speculative periods of crypto will at least be tamer if not, you know, kind of go by the wayside. How are you thinking about it? What era do you think we're in and what's investable this time around? >> Yeah, it's a good question. So just to I guess I guess like preface like we we're obviously like more of a tread asset manager and we have the ETFs and so um we we're more like late stage uh investors I would I would describe probably and so uh I think as we look at the the space right now uh it's going through I think 2026 is going to be like

a pivotal year regardless of you know what happened with clarity but I think it's definitely marking like the end of an era and the beginning of a of a new on and I think you know there there's a few big trends I think we're seeing just massive consolidation in the industry massive you have like a record number of projects protocols applications that are that are just closing and suns setting which I think is uh is you know is good o overall um I think from the investment side the first kind of part of the era was more you know we were like in the pioneering and discovery phase and I think the the winners were really the ones um setting kind of new standard or discovering or

tweaking some of the primitives that you know the AMMs the money markets like a lot of what built basically the successful protocols um I think that is changing uh right now right I think uh we've kind of discovered most of the the primitives and things that we can do on chain and basically the second part of this era at least for us uh it's not so much about underwriting like net new you know applications or protocols but more so seeing hey the ones that are working like how big can they get right like what what are the modes that they have and can how big can they get and so it's it's not really like the zero to one part but more like the one to 100 right like which are the protocols which are

the companies that can grow kind of exponentially and that can continue to grow and merge basically with treadfi which you know we'll talk about tokenization which is a market like much much bigger than uh than crypto. I also think you know it was mostly like a retail kind of focused market. A lot of the the kind of wins in terms of layer ones applications like pretty much any company was mostly like a retail facing product and the and you know the people using the protocols and applications and and products were more the DJ Dgens's like early believers in the in the industry and clearly like that phase of the market is completely look is is just ending right and I think now it's much

more institutional and seeing like how we can on board, you know, Tread like just the the Treadfi institutions and people that are really like the the persons that real like move real money and use cases that actually matter at size right which is like payments you know crossber payments um trading all basically you know adjacent topics around like finance which is you know I think like after basically 10 years I think you know Ethereum launched in 2015 it's kind of core use case and best PMF for for crypto right now.

>> Yeah. And I I did want to ask you earlier when you talked about how you're making assessments of companies and protocols that can go from one to 100. What factors are you looking at? Like what do you think are the make or break uh you know characteristics for this next phase? Yeah, I think uh that goes I think one of the main questions uh is you know where does value crew uh which is kind of the big question in crypto right and I think now that we're merging with with with Treadfi and and tokenization in general and RWAS it's a question like that is just even more important right now right because you have some of these companies with big balance sheet with you know a very

good technology that are integrating crypto and now basically the cost of integrating the cost of developing with AI, it's essentially going to zero, right? So, I think a lot of the modes that we had in the industry in the last kind of 5 to 10 years, they're just not as powerful, right? Um I think one of the other things is um I think when we look like five years ago, there was you just didn't have a lot of crypto companies that were big, right? like they weren't like you didn't have a lot of companies that were doing upwards of 100 or $200 million of of AR uh for example and so it was just much easier to compete right because uh everything was kind of new and you can bootstrap

something like in six to six months to a year and now things have completely sh changed in my opinion where you know now you have huge companies they're public like publicly traded companies they have like management teams. They have people that have been building technology for 10 years. They have huge balance sheet. And so obviously right now if you're a stablecoin startup and you come and you know you see hey like we you know we're we're doing this product like in this in stablecoin like now you have tether and circle that are just like humongous like huge companies. They're compounding.

They're doing extremely well. And so I think it's just like changed a lot. Uh, right. I think for the the actual companies that we're kind of underwriting and we're we're looking at and see, you know, how far can they get, it's essentially, you know, um seeing how crypto can merge with the with the um with RWAS and with off-chain assets, right? I think at ARC like we've been studying like Bitcoin, Ethereum layer ones and all these crypto assets for a year. We have a pretty good idea how big they're going to get like in the next 5 to 10 years. And so that kind of underwriting process is is done, right?

I think the the bigger part of the market right now and where we see like a lot of growth is just like stocks, equity, you know, obviously equities, fixed income, RWS in general and all like new kind of asset classes like prediction markets, compute where we're spending a lot of times these new asset classes and can you use crypto technology and on or like crypto primitives to unlock like even more value for those asset classes which is kind of order of magnitudes bigger. So those are kind of the questions that we're asking ourselves right now. And even I think a lot of companies that have been super successful right now if they're not able to make this transition I think are you know uh um I think we'll get kind of overrun by by other

companies. >> And so when you said cryptographic primitives what what do you mean because as I'm sure you're aware there's there's a lot of questions about cryptography right now as well. So what uh just yeah before we before we move into all that because that's its whole you know ball of wax what what did you mean by that? I mean a lot of a lot of the things that you know we've uh um we've kind of invented in crypto like perpetual futures AMMs like unis swap like those sorts of like blog like you know building blocks of what's what's been DeFi basically like call calling it DeFi you know can you merge like current DeFi with RWAS essentially and you know it can you does your protocol or your

company has like a realistic path to actually supporting some of those like those asset classes like that that's kind of the the big question uh right now or is it going to remain like a niche and look like there's still players I think that are going to be very big that support Ethereum Bitcoin and some of these assets that you know are still kind of smaller uh but those that's one of the questions that you know that we ask ourselves >> all right so let's now talk about what I alluded to a moment ago which is we're in this very remarkable period where people are expressing fears is that quantum computing could break cryptography, potentially even public key cryptography. I don't know if you saw

that tweet from Matt Green. That was uh kind of disturbing. Uh and and Matt Green's a famous uh cryptographer. Um but so, you know, this all got kicked off last week when Justin Drake tweeted, quote, "In my opinion, it is now reasonable to brace for the possibility that ECDSA breaks before Qday in the worst case in months, not years." And then he wrote, "By break I mean fast private key recovery, eg in one week on available hardware, eg a large GPU cluster."

Wow. How do you think about investing in this era when it seems like so many kind of foundational assumptions may no longer hold? It's uh it's definitely something that we're talking a lot about and I think u you know crypto is kind of a bubble and I think sometimes crypto people think like you know um institutions allocating uh uh money to the space they're looking at you know what is the inflation rate of Salana versus Ethereum or like what what is the revenue it's like they don't they don't know any of that but like if you ask some of these institutions what they care a lot and we get a lot of questions And you know probably 70% of the questions we get from RAA it's like

wealth management platform and like people that manage money for as a professionals it's questions like that hey like what happens with Quantum like are the signatures you know are they going to have to transition like which blockchain is um is uh like has a better roadmap and those are really the questions that they um that they care about. I think internally >> I have to say that I find that impressive that they're that sophisticated. So kudos to them. >> Yeah, I think maybe because quantum is more of a general technology that they've heard also like in other fields, right? And so I think uh though that's really the thing that it kind of makes the the headline, but they definitely know about it. And so um I think that that's one thing, you know, that that we

uh that we hear a lot for specifically kind of quantum and AI and the Justin tweet. Um it's it's scary honestly, right? I mean, I think quantum like internally and and I'm not the one specifically that that has done the work on that, but it it's certainly something that we see more like in the 10 to 20 years uh uh kind of forecast in terms of where it's coming. Now I think what you you've seen from uh some of the companies like from some of the models like open air and anthropic and the discoveries they've made um in such a short amount of time is just very hard to you know it's it's scary because like um so I don't know if they one of the

one of the the discoveries was the Navier Stoke conjecture which was was a millennium prize problem actually so it was one of the seven problems that you know people in the failed, you know, in the math in the math community like they win Feld's medal uh for for you know, disco discovering things like that. So, it was really like a problem that has been around for centuries and very very difficult. And so, I think just with with AI and the pace of improvement right now, it's just very hard uh to project yourself because I think when we talked internally like a year ago, we say, "Hey, like this technology is probably going to pull forward like two year. what we see in two years, it's going to pull forward now basically. So what what do you see in two years that

can happen now, right? And then like in this in the past six months it's hey like this technology can probably pull forward like 10 years like what do you see like and like in the next in in the last two months with with you know what open what can happen in the next like 30 to 50 years because it's going to get pulled like now basically it's just like timelines uh that are very hard to imagine as a as a human being in terms of investments and thesis internally. So it's it's definitely scary. Look, I'm I'm not a cryptographer and obviously a lot has been said about CECDSA, which is kind of the core elliptic curve cryptography that that Bitcoin and and Ethereum uh serves. Um but I think internally um we think, you

know, self-custody is just like a harder and harder cell in terms of uh of uh crypto and kind of the core crypto ethos. We've been having this thesis internally that you know cryp self custody is slowly dying and I think this is just accelerating and we can talk about why and I think it's one of the core reasons DeFi is actually not growing is because like we don't have anyone that's willing to self custody and so we're waiting for the Robin Hoods the Coinbase and other applications to actually kind of on board uh uh users so that's that's number one I think number two the other thing that is scary is the solution to that which is other sets of signatures that like they're not well known, they're not well tested and

people have very divergent opinions about it, right? And so that is also the scariest part where I think a lot of the layer ones that we built Bitcoin, Ethereum and and others honestly now they have s like an amount of governance like we as the miners there's onchain votes like there's the Dow there's the community there's the users the stakers and clearly this this seems like a topic where you want like founder mo mode you want someone to say hey we're going to make this transition we're going to do this we're going to use this signatures and we're going to do this before next like mid next year basically and it seems like at least like my concern is like a lot of these will get will get you know kind of lost in governance and

like you know votes and stuff like that and so that's also the part that uh that um that is you know that is a bit a bit scary I think other than that look like there are solutions again like I've said there there are other signatures like in the Ethereum road map they've been thinking about this for years um there are a lot startups kind of helping on that. Uh but I think AI is definitely you know a force now that is um forcing you to basically you know think about like the future not the future where we see in investing which is probably like five years 10 years venture fund but more like 20 to 30 years and it's something that we've we've kind of never done. So yeah it's scary.

>> Yeah, we have a question from the chat that's an interesting question. It says, "Why do people assume that quantum won't help crypto? Why don't people assume that there will be a quantum coin? Quantum security is theoretically amazing." So, I I have my own answer to that, but I'd be curious to hear yours. >> Uh, so the question is why quantum isn't helping uh crypto? >> No. Why people assume that it won't help crypto? I mean, I think it it it could help like just like at AI, like a lot of people are saying, hey, like um this kind of fear about AI models breaking ECDSA like they're also going to help us, you know, create kind of solutions.

Um it it's true. I think I think the the part where um I I I'm not totally sure is just we have like a noise like we we kind of have noise in crypto in terms of hacks, fishing like wallets being drained like yearly that is like already in the billions of dollars, right? Like if if you add like all the hacks and all the fishing scams and we can talk about what happened with Ledger which was like more than$und00 million. If you add all of this like you have a noise in crypto that is sizable, right? Like I mean North Korea kind of has a job out of it basically where they steal like billions of dollars like yearly out of crypto, right? So, I just think like, you know, maybe like the um we we won't know

exactly for sure when when someone has kind of broken uh ECDSA or it's the Q day. Like maybe they'll just start kind of, you know, slowly stealing like within the noise of crypto. And unless you have a huge spike where you see hey like there's definitely something going or like you know an an address has stolen like you know um an amount that is really like an outlier. I'm just afraid that it's going to get lost in the noise which is pretty constant or even growing uh uh for for some of the years. So um I agree. I think it could it could help. Um I think it depends a lot what the closed models uh do I think with the new releases. Uh but you also have open models uh out there, right?

Like you guys have talked like in in in some of the shows and those can be used by by anyone, right? And so uh that's just harder to to kind of control. >> Yeah. Yeah. It's exactly that that like somebody could in secret harvest a lot of stuff and then wait to attack. And so it's like the fear the fearful thing will happen first and yeah later maybe uh crypto can take advantage of quantum but um in the meantime uh you know there's potentially a bunch of projects that are going to be sitting ducks. All right so in a moment we're going to talk a little bit more about which uh companies and protocols are uh well poised to withstand the threat from quantum but first we'll take a quick

word from the sponsors who make the show possible. What if your crypto could do more than just sit in your wallet? Nexo is a digital assets wealth platform where you can generate daily interest on your crypto or borrow funds against your assets. Today, Nexo serves more than 10 million clients. Find out more at nexo.com. One more thing, we've got a listener survey open. It takes just a few minutes. It's anonymous and it changes what we make next. Use the QR code on screen or go to unchanged crypto.com/servey.

The link is in the show notes. Back to my conversation with Lorenzo. So there's been a lot of conversation about how different protocols and ecosystems and companies are uh facing uh different uh kind of levels of threat from quantum. You probably are aware of this with Bitcoin in particular, but I was curious if you could just talk a little bit about how it is that you're thinking about the threat to different types of companies and protocols and which ones you're more bullish on.

Yeah. Um, so are we talking specifically about quantum also like AI threats to public key signatures and crypto cryptography in general? >> No, go ahead. Talk about both. >> Yeah. So I think you know internally like we've we've kind of discussed this. I think uh uh for us um some of the so if if you see the hacks in in the industry which is something I was actually uh looking at the the other day um you know most of those are in um kind of Asian exchanges and and brokers and and platforms right and so I think right now from a user perspects I think as we as we discussed uh

previously I don't think the net new marginal user in crypto and I'm pretty sure of that will want to use you know either like a hardware wallet or want to self-custody through like a a browser kind of wallet right and I think that has like many consequ consequences like I think the coinbisses the Robin Hoods the people that really abstract that like the crypto complexity they're going to board the net marginal user and they're going to be best equipped just like same for the ETSs right I think we're you know we were talking about this and today like if I if I had like a normie friend that comes to me and that wants to buy Bitcoin for the first time, I I I would probably recommend him an

ETF to to be completely transparent, which which was not the case like I think three or four years ago. And I think internally even for people like myself uh which you know I've been self-custodying for years I'm actually thinking now of consolidating a lot of the custody that I have because it's just like so hard to keep up with with what what it's happening in terms of AI breakthroughs quantum and you don't only have that like even crypto protocols like uh closing right like I I don't know if you know you've seen this but like abstract which is a layer 2 is closing and they're basically giving their users like a month to to withdraw funds, which is completely nuts. Like a month like imagine imagine you're on holiday like in Australia for two months

and you come back. It's like they should give at least a year or something like you know that that makes more sum sense. And so I think from that perspective there just so many angles right now where you can either lose your funds or forget about it. And so I think some of these institutions are actually like very well positioned um to add more assets onto your platform and to on board uh the the next new uh user. And so um I think from the companies it's kind of the barbell strategy of what we think like crypto protocols and companies will do well either the ones that sit very close to the user that owns the user relationship uh like the

exchanges the brokers or basically um crypto infra that can get that that is infrastructure and then that will get used by just like a TAM that is massive right where like you have multiple companies building on top of it. So for example like the Salas, the Ethereums, the unis swaps, the az right where you basically have like other companies or the morphos where you can build businesses on top of that infrastructure and where actually the time is much much bigger where it's basically almost the the entire world like in terms of of addressable market, right? anything that sits in between where you don't have the user relationship and you're not like core infrastructure that is basically

used by a lot a lot of people whether it's trading borrow land or custodying or whatever you're doing I think you're just going to have a very very tough time right because you're going to get squeezed in the middle and so those are kind of the two types of companies that uh um that we're looking at uh right now >> oh so interesting and it makes a lot of sense um one question I did want ask you about the hacks was you said that if a normie friend came to you and they wanted to buy Bitcoin, you would recommend they get an ETF. Um how do you think about uh sort of the threat level to owning spot on an exchange? Do you consider the ETF still safer or um do you consider you know just like custody

Bitcoin at a crypto exchange also safe? >> Yeah, that's a great question. I mean um I think so you've seen BitGet for example like the crypto exchanges have an emergency fund right obviously that they can use like in in these sorts of hack and um for now it seems like the buy bit one the bit get one like they've been able to compensate users right but it it does seem like you know this is something that that happens and I think actually like for for a certain set of companies like the exchanges I think honestly like security and regulation is starting to be like a bigger and bigger moat, right? Like I think internally like 5 years ago it was more technology.

Hey like you know what assets do you have? What can you trade? Can you trade options? Can you trade per? And I think that part is kind of not commoditized but I think you know a lot of people are competing there now. I think if you're an exchange that you have like a perfect track record of security, you've never had hacks for example, uh you have a set of licenses that let you operate like in a lot of different jurisdiction. I almost feel like right now that's kind of the boring thing that is becoming a mode, right? Like if you ask me Laura like between spot spot bitcoin on an exchange or like an ETF like the exchange matter a lot like right now if I had to custo an exchange I would definitely do a lot of research

on what are the security setups has there been like you know previous incidents how are they dealing with incidents do they have an emergency fund like how big is the emergency fund like those things like start to matter a lot actually and I think for that honestly it it seems like the US exchanges have an advantage. They're just much more regulated. They're public companies. So, you have like public balance sheet income. So, like you just have like a clear picture of the company that you probably don't have with some exchanges in Europe and and in Asia. So, that's that's probably the advice I would I would give right now. Um, as for the security setup, like clearly there are a lot of differences between exchanges. I think that is going to get kind of

consolidated. I assume like some of the the US exchanges um have teams that are thinking very very deeply about this. So like like how does quantum affect their security kind of setup? How does AI affect their their security setup? How are they going to transitions? How is all the the partners that they have like custodians or exchanges or brokers that they work with? How is it going to plug into? And so um that's definitely some of the research that would probably never have done like three or four years ago that now I think is just very important. Yeah. Yeah. I mean, it's so similar to like the kelp thing where, you know, you need to ask questions about really obscure parts of the setup to have an understanding of what the true security

threat is. Um, before we move because we're we're definitely going to talk more about that. But before we move on, I did want to ask you in about Bitcoin in particular when it comes to the quantum threat because obviously it's has a sort of unique set of issues with like Satoshi's coins also the kind of conservative nature of the community um you know just um even even how decentralized it is and and how hard they sometimes find it to come to consensus. So, I was curious like, you know, what your opinion is on um how well Bitcoin can face the quantum threat and and what they should do about some of the dilemmas.

>> Yeah, it's a it's a also like one uh I think as you said like the Satoshi coins make this case like particularly different I would say than than the others. Um look there's there's been a lot written about this like should they should they burn the coins? Should they wait until they the coins are moved? Should they use the coin to basically pay for tail emissions on miners? Like there's a lot of theories out there. Honestly, like we've been talk we've been having a lot of talks internally with some of the biggest players in the industry and also like the the core dev team. Um we um we're in the kind of consortium with Micro Strategy and some of the other companies that are thinking about this. And I think internally uh things have changed a lot like from a

year ago. I think people are um much more in tune with this and they know that the problem is is kind of real. So I actually think like much more positive than than a year ago. I think some you know they'll find a solution before uh kind of Qday and there will be a transition. I don't know exactly what will be done with with Satoshi's coins. Um but I think you know if I had to be I think I was much more worried a year ago uh than than than today. I think people are aware of this and they're working on it and there's actually like solutions that kind of that are being drafted and so I'm sure the community will um will arrive to a conclusion and also the there are just more companies that are depending on Bitcoin right now than like

two or three years ago. Like as as as I said like you have the ATF issuers, you have the exchanges, you have the devs, the miners and so um I think there's just like more people thinking about the problem and some somehow I think they're going to be able to to find a solution in time. Huh. Okay. Okay. Well, that's that's positive and reassuring. Hopefully, you're right. Um, so let's now talk about these um additional hacks. You alluded to the allegger one earlier. So, obviously this one is I mean it's just it yeah, it reminds me of all these North Korea hacks that we've been seeing because you know the issue here was a reseller was sold to a new company. The

former owner, I saw this today, uh said on Twitter that he was forbidden to tell the community about the sale on until October 19th, which is next week. And so far it looks like about $und00 million has been stolen. Uh this is all from, you know, individual devices. Um so the other thing though is like this is just weeks after the bit hack for $400 million and that was a a sort of similar situation. you know they were using this third party vendor and then the like you know allegedly DPRK is the one who had compromised that third party vendor to get into betett's uh you know machinery.

So, how do you think about these types of security issues, you know, in terms of like how somebody can protect themselves against these types of situations, but also how the industry can grow into this era of so-called adoption when it actually feels like it's so vulnerable? >> Yeah. Um, so I think on one hand, like we just talked about like AI and the quantum thread, which is more like I would put it like mathematical, right? like it's you have to kind of figure out the math and now like as you said like the bit and ledger one it's more on the UX UI and kind of security right um and it seems like the hardware wallet space

honestly is such a it's is very very hard right because there are so many supply chain attacks that you can do either like data leaks I mean between you know between a treor uh treor ledger and cold card like all the big wallet the providers basically they've all had like several problems like in the last two to three years right so it's like there's nowhere to hide honestly like from from the user perspective there is literally nowhere to hide um I think it's a tough space also Laura because um it's honestly like this I don't know how I don't know what the revenue pull is but clearly it's not a part of the industry that makes enough money to

basically entice other big players to come build and kind of think about it right it's Um, ledger has been around for for almost 10 years. Um, and uh, Cold Car and Trezor like a smaller players and there are like smaller players thinking about this, but like the the the the re like the reality is like the hardware wallet is so specific to crypto. It's kind of the same problem with a with miners and AS6 and Bitcoin. It's like they're produced solely for this. there is no overlap to any other kind of security problem of more like consumer or like finance that I think is just a place where it's very niche. You kind of have like three or five vendors that have been around for 10 years. Nobody

wants to get in this space because there's not a lot of money to be to be made quite honestly which is kind of the same with with miners. And so I think it's just a space where there hasn't been a lot of of innovation. Um it's a very hard space to build and I think it's very hard to monetize. And so um in terms of uh of hardware wallets like yeah it seems like this this problem in particular was pretty crazy where they they were basically put implant like within the hardware the hardware wallet like custom hardware to be able to steal basically um the the seed phrase and it was like through a third party vendor in Malaysia that was approved but it wasn't really Ledger and so I think all of this to the end user is just so complicated

to manage honestly and they don't they don't have time to do this. And so I think we again like I come back to like where I think the the marginal end user in crypto is and I think it's going to be like through kind of centralized exchange and other um other forms of custody basically than that that are not like self- >> custody. Yeah. Which is so interesting given the way crypto started and the whole >> movements that uh you know kind of launched it toward the mainstream. Um, so now let's switch topics because I notice you have been tweeting a fair bit about Ethereum this year. Um, it sort of looks like your position has changed a little bit because you started the year

saying, "I think Ethereum I I think ETH is starting to look really uniquely positioned from a macro perspective. You cited like quantum readiness, flexibility around upgrades. There are a few other factors. At that time, I I think I agreed with you. Then in July you uh tweeted about Ethereum's economics not being priced um fairly especially in relationship to for example Robin Hood chain and I was curious like for your opinions now currently on both Ethereum the network and ETH the asset.

>> Yeah it's a also and they're two separate things so I think it's it's good that we touch on both. Um I think from the network perspective um in terms of in terms of value acrruel I think it's pretty clear that where we are today the value of cruel is pretty broken right I think imagining a world where um ethereum acrews like several billions of dollar is just very very hard to imagine if not clearly impossible right because we have two things it's basically the base layer is used to store assets like not much activity is happening at the base layer.

So it doesn't produce like it it's not producing a lot of fees and basically activity has been outsourced to these layer twos and frankly like mainly two layer twos. space and Robin Hood and like there are other layer twos like lighter and but it's basically like five to seven layer twos that have like 99% of the of the activity and those fees are not is they're not acrewing to to Ethereum right like I I made the point with Robin Hood like Robin Hood was making several millions of dollars a day and basically Ethereum base layer was acrewing $100 like literally a hundred to $200 right as right now and so I think from an from a value crew

perspective like it's pretty clear and I I kind of I've written about this where Ethereum has this u you know franchise model where basically it's scaling through f franchises right like really base and Robin Hood you can think of it as a as a McDonald's franchise right I think just the Ethereum foundation and people around Ethereum haven't internalized it and they're not realizing but growth is not happening anymore uh at the Ethereum layer one, right? And so I think just ETH the asset is just, you know, it it hasn't done very well because I think people are starting to price that. I think number two is tokenization is just changing the

whole uh the the entire market and structure and I think also people are not realizing where um if you see like the the tokenized equities and the trading volume it's basically all happening on Salana base and Robin Hood right and so internally as we think okay what is going to grow the most like in the next two to three years and we think it's going to be RWAS like I do think Ethereum the the asset is going to continue to grow but it's going to be most like I think the the winner is going to be RWAS if nothing is happening at the Ethereum base layer and all the activity is happening on base Robin Hood and other layer 2s like I don't see why Ethereum

L1 just doesn't become just a layer where you post proof right like where it's basically a DA layer where Ethereum B like where Robin Hood base and other layer 2s post post their proof which is literally what happens today. And then you have like kind of I think 50 to 100 billion worth of stable coins and Ethereum obviously which you know if you fast forward like you would imagine like some of that being pulled into like the layer 2s if most of the activity happens there right I think the Ethereum people think that it's the opposite way like because there's a lot of assets on Ethereum L1 it'll pull the activity but like the the net new user like doesn't care about you know a token a bal fund

like you know that is issued on L1 like they want to trade the circle stock they want to trade Nvidia and that is happening on base and Robin Hood and so I think there's just like a um a dichotomy here where like Ethereum needs to choose like exactly what is its strategy right and that's not happening on Salana because everything is happening like at that base layer but I think they they should just like embrace this and say hey we either want to scale the L1 and we're actually going to make efforts uh to have activity. We're going to scale the throughput and we want applications to be here or we we fully become like a franchise model where we're going to support the L2s and we're going to support them like in a better

way but activity is going to happen like at the layer 2 level, right? And we're going to try to acrew more volume and kind of change the economics. I think right now it's just playing both games and not not very well basically. And I think the overlap between the users that you have right now and the treadfi og users is just very small actually right and so I think the net user doesn't care much about what is happening on on Ethereum moan which which was kind of the same thesis we had with Bitcoin and Bitcoin layer 2. We just thought like in terms of the the demography of like people that have Bitcoin, they're like white 45 year old people that were early

in tech like in the 20 thou two 2010, right? They're not they're not your they're not the same people that are going to want to bridge Bitcoin to NL2 and then stake it in DeFi and do weird stuff and like take risks, right? And I think that just the same thing is happening on Ethereum and and and crypto in general with RWAS and this kind of net like new set of of users basically if that makes sense. >> Yeah. I think like um one of the kind of ironies really is that the value acrruel or the thesis around activity and the um like yeah the value of Ethereum uh that

worked during the NFT era because people wanted NFTts that were on the Ethereum L1 and those those NFTts were considered considered more valuable and it w it's so interesting because the reason for that was literally just about status which is so funny like like just having an NFT on the Ethereum L1 like uh gave it you know some extra I don't know special sauce we'll we'll just call it um and that was yeah and so it's it's sort of ironic because it's completely not um like there there's no like logical or rational like you like

you can't put that into a tokconomic system, you know what I mean? Uh but that was like the one time when when actually those lined up and benefited Ethereum. >> Yeah. I think it's hard. Look, we're also like pretty like we're also very humble and and when I say this is um it's there's there's a nonzero probability I think that some of these layer ones actually don't make any money and become like very very valuable networks over time, right? Like I think it if you look at Bitcoin, Bitcoin will never do like you can't you can't value Bitcoin on like discounted cash fl cash cash flow or EV to eB like multiples because it it doesn't make any money, right? And I'm not saying that you can

have like something very similar to Ethereum because I think that kind of non-programmable store of value, you probably can have like, you know, 10 layer ones applying in that field. But, you know, it's it's I don't see it impossible a world in 5 to 10 years where there's probably like5 trillion dollars worth of assets on Ethereum and Ethereum is not making a lot of money and Ethereum is still very valuable. like if the asset is valued like very properly. I think it's a it's a very small probability. It's probably one that I I don't want to bet on, right? Like I'd rather have Ethereum like actually make um money, but I think it's one that is that is possible. Basically, it's a very small possibility, but I think it's one it's definitely one.

>> Yeah. The the issue about the Bitcoin one though is that if that actually happens then Bitcoin security is effed and uh then the whole value of the coin is effed. So um yeah I uh yeah they they in my opinion need to solve the security issue. Um all right let let's actually keep talking about tokconomics. You told me before the show you think buybacks are dumb. It was a word you used. You think they get too much attention. I would love to hear more about your thesis there.

>> Yeah, look, I think and they're dumb. It's probably a strong word. I think people are people have become like crazy with the subject with this topic, honestly. Like it's it's a it's crypto twitter only talks about that like I think there there's two things. Um I I agree that the dual equity and token model for a lot of these uh projects um has been has been just a huge problem in terms of of investor value acrruel and just like interest in general in the companies right I think the remedy to that to that has basically been like some of the companies and these protocols say hey we want to signal that the token has importance so we're going

to buy back the token and we're going to burn the token so people that have the token are happy basically right and like in some sense like I I agree right I think it's just taken to like an irrational place where um you have like very early stage startups like literally startups that raised like two or one two three years ago that are using 100% of their revenue to buy back the token right and I I just found that completely crazy right because it's clearly not the right way to allocate capital if you're a startup. And you know, I tweeted about this like it's pretty funny like you have the AI venture market where literally investors are calling the

startups and they're preempting rounds like a week after they race to give them more money. And in crypto, we have like one or two years year old startups that are, you know, they're saying, "Hey, like the best way we can uh we can uh invest capital is just going to be to buy back and burn our our model." And honestly, like from the investment perspective, it's such a turnoff because basically you're telling me like, hey, we think we're the best. We think there's nowhere to grow and like the best use of capital is just to to to buy back the token. And obviously, we know that's not the real answer for a lot of these companies, but they're basically getting bullied into buy back, you know, into buying and and burning the token. And I think that's just like it's just crazy, right? So, I

think one thing, that's one thing. The second thing is I think generally some companies don't see um a path to like becoming 10x bigger and so they're using that basically to to allocate the capital and make kind of investors happy right like I would rather a founder like come to me and say hey like like my stable coin is like $5 billion of supply I see like a clear market or pathway to becoming like 50 billion I'm going to use the capital to do this like 100%. Like I I I'd rather have that instead of kind of buying back the the token. One thing that people forget also, Laura, is like you had a lot of

past companies that were super success successful that were that were doing the same thing. I bet a lot of those companies wish they hadn't, right? Like if you if you go back and you see like the DYDX, the OpenC's, the Blurs, like some of those companies have similar tokconomics and clearly they're dead now. So it wasn't a good use of capital at that time. You know what I mean? And so I don't want to be like, you know, that that sarcastic, but I think people are just focusing too much on the on the buyback and like value acral kind of thing.

Yeah, your comments here remind me of how after the pump ICO, somebody tweeted, "Okay, so we sent you all this money to buy these coins." Um, but now you're going to use that money to buy the coins back from us. And I thought it was hilarious. And I was like, "Yeah, that's basically what's going on here." >> It is. So >> it it is literally and and and that's why I think like for some of these companies like per pump for example like I would much rather have the team say hey we're doing these memecoin market this is a market that we think can grow to this we want to expand to this and this and we think it's going to take

this money this much money and resources and this is how big we see the market and how we can grow into it. I I don't want them to buy back the token, right? Like it doesn't do it doesn't do anything for the protocol uh in the in the long run. And so um yeah, and as you said, like for for companies and protocols that that have actually raised a lot of money, it makes even less sense to be honest. So yeah, >> and and but out of curiosity, so you also think that about Hyperlid because obviously that's sort of like the darling in this category. it is the darling and I think right now obviously hype like has most of the market share but uh I think yeah I think it's not the best uh the best use case like I mean I you know I tweeted about

this like I was half joking but I was half serious like when I I posted that hyperl should buy Gemini in in the US and I think they should acquire the exchange I think to to be completely honest like and I've I've discussed this a lot with the team I think L1's have been very very monolithic think as to the strategy right I think in terms of uh distribution like acquiring other companies acquiring technology acquiring talent I think there's a lot of things that you can do with the token and they actually have these huge market caps like at peak like you know Ethereum was worth like more than $500 billion um you know if you use like 1% of market cap you can acquire something for $5

billion that's that's just that's a lot of money like you could acquire a lot of things with that. I'm just I'm just giving, you know, an example for for example. So for hype, look, I think they're going to have uh more competition. I think per is going to get very very competitive. I think it's a market that is going to increasingly going to is going to become increasingly um regulated. You now have per like approved in the US. I think you're going to have stock bs also approved. So Coinbase, Robin Hood, you know, the backpacks of the world, they're all going to compete there. And so I think you want to be in a position where you al you have resources to be able to to compete, right? And not not buying back and burning the the token. And so and

look like maybe you can do that, but it doesn't have to be programmatic and like something like set in stone. You know what I mean? Like you can decide on the month-to-month basis. You you know like it it depends on market cycles, right? your your token may be worth like a hundred billion one day and like the month after that it's maybe worth like 60 billion and maybe that the strategy isn't the same basically. So that's that's kind of what I'm saying. >> Oh, interesting. Okay. Yeah, I've had other investors on the show who said the opposite that they thought programmatic would signal something to the investor and basically create more confidence in the token. But anyway, okay. Hey, just slow on that. Just slow on that. That that that doesn't make the the same way like a team can make a buyback

programmatic, which means like, you know, it's basically automated, they can do the same the day after where they basically, you know, they take off the suite like they they they go back to the old model. And so it doesn't give you any more confidence that it's programmatic, right? Like tomorrow the hype team could come and say, "Hey guys, we're gonna we're not going to burn like any tokens. were going to go to zero, right? And they could do that. And so clearly the automatic thing doesn't doesn't mean much, right? Like at the end of the day, I think that's what people forget about these protocols and teams. You have to underwrite the team.

And so you have to, you know, there's some there's there is some trust in the team that they're going to do the right thing, right? Like if you have to encode some of this stuff like that early into >> equities could surpass stable coins in onchain supply in 3 years that was remarkable. ARC itself is bringing its $ 1.3 billion dollar venture fund ARC VX on chain through securitize and um you know I also want to just mention the the call you made is is so interesting because tokenized equities just recently passed 1% of global stable coin supply which you also tweeted about. So given kind of how big stable coins are compared to onch tokenized

equities right now, why are you so bullish tokenization that you think it would soon outpace stable coin supply? >> Yeah. So I think if you look um if you look at the market right now um you roughly have like 300 billion worth of stable coins, right? Between like all the all the all the issuers basically you take all the issuers. I think mainly even in the stable coin story like it's super super early you know people talk about payments and like crossber payments and like remittances and stuff like that the reality if you look on chain and kind of the use cases it's mostly basically the PMF is exporting the dollar to emerging markets right

like that that's a real PMF of of cryp of uh of stable coins today and I think it's I think it's great I think it it means like we're very very early on and I think more use cases like remittances. I think there's a lot of great companies uh working on this um that are that are going to happen at some point. I think if you see like of the US capital markets, I think the demand to do things with US stocks and getting access to US stocks is extremely large like uh in in emerging markets and and offshore basically, right? And so I think you'll see something very similar actually where their first leg of growth of of US like of tokenized stocks and mostly I

think it's going to be super very concentrated in a few stocks. It's going to be basically exporting the asset to other countries distributing the asset and so right now we're very very early. If you see like a tokenized equities, per have mo mostly, you know, is the dominant kind of trading um primitive, I think spot is going to take more time because you need, you know, you have the asset, you have to store the asset, you know, now you have the innovation exemption, uh you actually have to plug into the US equities and you have you have to work with a bunch of the custodians, the you know, the clearing houses and all that stuff. So, it's going to take longer. Uh but I think in terms of uh just appeal and what we've

built in crypto like the the biggest P like PMF is finance. Like I think blockchains are very very good at moving, storing and managing money and assets that represent basically that have value, right? And so I think equities are just like the normal evolution. We're we're very bullish honestly on tokenization and that's why we've you know we've tokenized uh our venture fund and so I think stable coins again I think they're going to continue to grow probably like 40 plus% kagger a year like compounded over the next few years but I think equities and you have you'll have like different flavors um are also going to grow a lot I also say one thing like most of the yield that we

have in crypto is very circular right like most of the fixedish income kind of yield in crypto depends either on leverage you know borrow markets or looping basic basically ETH or Salana yield essentially like you know a lot of the yield that that you can see on a moro in all of these uh these markets I think just equities they bring like a new set of assets they're they're volatile like in a different way and so also like in terms of yield I think it's going to bring like more uncorrelated yield that is not correlated to big like the big three basically Bitcoin, ETH and Soul and that is going to be like very very healthy for markets. It's going to attract like a a different sets of a different set of of users basically. So

that that's why like we're um just very excited about the RWAS in general and and why we we tokenized the the the venture fund. >> Yeah. I mean, I was also wondering if when you did that if you had thoughts on how it might affect the trading of it like and and I understand obviously you know tokenized equities are so small right now so um there is that also which will have its own effect but yeah I or do you think it will just look you know in terms of the trading it'll look exactly like um you know how it does in tradi?

Yeah, so it's a good question. So right now you can basically subscribe and redeem to the fund uh on chain basically uh through um securitized but there's no there's no uh secondary trading market right right now enabled just yet and so I think there's it's really like the the what we did with securitize it's really the first step right we wanted to tokenize the fund but I think the real work really starts uh now I think um you know more guidance obviously uh over the next kind of months will will help. I think there's a lot of utility that we can bring to the tokenized venture fund and stuff that you cannot do in Treadfi with like the normal shares and we're we're

very excited. Um but in terms of in terms of pricing right now if you subscribe to the venture fund the nav is basically public right so you will have the v the nav will be the same offchain and onchain essentially right and so there is no like secondary liquidity a market onchain just now I think perhaps it's something that we will be able will enable at some point so again like still very early I think we're very confident for us really it was can we get to a new set of users like basically onchain users and we really think of as crypto like as a new distribution platform. Can we be early to this game because we're arc invest generally? We're very good when we're early at at things like that.

And then can we increase the time like can we expand to other geographies? Can we distribute the fund to geographies like in in a more efficient way than the traditional way? And so those are really the things that we were kind of uh looking at. But right now again very early. I think there's a lot of work to to be done still. Let's talk. We're We're kind of at time, but I really want to ask you two more questions. So, let's just quickly talk about um where the Agentic Commerce competition is going. Um you had a tweet about the announcement from Cloudflare and what you thought the like impact would be on L1's. Tell us about that thesis.

Yeah. So I think Cloudflare um you know obviously with with AI things are changing a lot in terms uh in terms of internet traffic right I think they announced like in their last earnings call that now more than 50% of the internet traffic is basically bots like through through AI right which was uh pretty shocking and obviously they they need um a way to you know to rate to to limit that right because basically that's that's kind of the role that Cloudflare has uh uh on on the internet right now. So, if you look at kind of the the podcast and and interviews, um it seems like, you know, using blockchain technology and basically um the the agent or bot, you know, having

to pay basically a nano transaction to be able to access content or website is something that Cloudfare is kind of looking at, right? And so I think it's just very interesting that more of a treadfight company obviously is thinking about this like the intersection of crypto in L1 and how it can provide like a solution to to basically uh agentic commerce and agentic you know just internet traffic in general. I think we're still very far away in terms of throughput. Like if you look if you're here, um Matthews, I think it's the CEO of Cloudflare. Uh we're talking about like 10 to 100 million TPS and so we're very very far from that. Um but look, I I think there are teams that are that

are working on that. Uh we're very excited. You know, for example, like layer zero is going to launch their their L1 like in the next few months. Um, and I think in terms of throughput, uh, they're going to be able to deliver things that are really impressive. So, I think in terms of the use cases, we're still pretty far, I think, from the 10 to 100 million TPS. I know a lot of people are talking about uh, Aentic Commerce and and and just aentic workflows in general on crypto. So, I think it's exciting, but it's still very early. And I think the the use you know the uses that we're seeing through MPPP and the X 402 protocol of Coinbase and Circle it's very very nent uh right now.

So we're we're looking at it uh but I think it's very early >> and and what and so how do you think this will impact L1's? Uh so what I think is like people are still I think we need to increase like throughput scale these1 like orders of magnitude still right I think right now the salana sui apttos um we don't like I guess like we don't have much activity going right now right like I think the it's it's still pretty small the use cases and so people are are okay with the throughput right now but I think actually like throughput is going to be a major vector like for some of these use cases and we're still like orders of

magnitude right and so I think we still need teams like working on that and again I think they are teams but I think we're probably like two or three orders of magnitude away and so we still need to scale like these L1's like very very aggressively basically >> okay so last question uh stable coins have come up a few times in the conversation um and obviously there's a lot of new entrance to the competition, but I know that you are bullish on Circle and Tether, who are the incumbents. Why is it that you think that this competition in a way has kind of already been called?

>> Uh, I don't know if it's been called, but I think people are underestimating basically the network effects around, you know, like network effects and liquidity mode of Tether and and Circle essentially. I think um broadly like people think of the stable coin market of this market where with like thousands of players and really like it's not the reality. The reality is like if you see at what has been used so far and what is being used onchain, they're basically like two stable coins which is USDC and USDC. Like the rest really don't really matter honestly. And you've seen obviously announcement of stable coin consortiums and and other

players trying to tackle that market share. I think it's just like overall a business that is super complex to build, right? Like people see Circle and Tether as this um kind of ERC20 stable coin on Ethereum and other blockchains, but really like it's it it's a business where you need like you know tens of licenses in different countries. You need to be regulated. Um I think the risk for businesses to switch is actually huge honestly. Like I was thinking about this um it it's like you know 3% yield or whatever you can pass on to the users for institutions like um the risk is enormous like we've

talked about now even with AI with quantum like just security and reliability around these assets is just huge for exchanges right like one of the things that that I kind of wrote like in one of the essays was Binance Binance has 50 billion worth of stable coin like literally has I think 25 billions worth of uh of USDT. They're not getting any yield on that. Like literally, they haven't been getting any yield for over 10 years. And so what I'm ask like what was asking I was asking myself this when I when I was writing this is like why haven't they switched? Like why haven't they switched to another stable coin?

I'm sure there's a 100 stable coins that are willing to pay Binance like at at least like let's say like 60 70 80% of the NIM like of the net interest margin. And so I think this the thought process was like why hasn't this happened? And I think people are just underestimating that the stickiness like the stickiness of these stable coins they're kind of liquidity supernovas where they power like so many other um companies in the in the ecosystem. there's a lot of people that rely on them and just like the main trading pairs like Bitcoin, Ethereum liquidity, they're built around the same. So I think the switching cost to to companies uh such as Binance,

they're just huge. The risk is huge. They're not going to they're not going to switch for 60% of the name or like even 80% of the name. That that's our thesis. And so I think just like you know circle I think it's becoming like a much broader internet money company type of business like I think in five years people were know circle for other things that are that is they're not like USDC and some of the the products that they have right now. And so generally I would say people are heavily underestimating how hard it is to launch uh a stable coin network that is big right that scales into the hundreds of billions.

And so, um, that was kind of the the thesis around the the tweet and some of the comments. >> Okay. Yeah. I mean, I think Binance did have its stable coin, but, um, the New York some New York regulator went after them for some reason. It was the Paxos. >> Yeah, it was the Paxos Paxos partnership. Yeah, exactly. And so, they went after the stable coin and they basically had it to they had to shut it down, I think. >> Yeah. And I don't remember how big it got. Um, but I don't think um >> I think it was in the pretty big like 15 bill I would say like probably 15 20 billion like it it was pretty big right but I don't imagine like any other company in the world wanting to use like a Binance stable coin if you know what I

mean and not not because B it's just like in terms of incentives like they're not very aligned right and I think that's sort of the problem that we have with some of the these other stable coins that are not very neutral or they're like consortiums where you have like a thousand companies and then like you know what's the strategy like who's aligned around kind of the incentives and the economics. So that that was kind of my point as well. >> H interesting. Yeah, there was a period where I think I thought that it would have been a good idea for Circle to for Coinbase to buy circle but um actually just the point you made uh about neutrality I think is actually a a reason why it is good that it's uh USDC is owned by Circle instead. Anyway,

Lorenzo, this has been so great chatting with you. Thank you so much for coming on Unchained. >> It was great, Laura. Thanks for having me. >> And thanks to everyone for joining this live stream and we will catch you Wednesday. Bye for now. Nothing you hear on Unchained is investment advice. This show is forformational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit unchanged crypto.com.