CZ on the Future of Crypto

16:45CZ:Yes, yes. So you have many, what do we call it, hubs? Yeah, like spokes and hubs. Yeah, spokes and hubs, right? Yeah. So it's totally possible. Look, in many countries, they're not totally comfortable with a purely open blockchain. They all want their own national blockchain.

17:01Alex Thorn:Is that true?

17:02CZ:Yeah. So like with many of my discussions with different country leaders, they all want like a national blockchain. So interesting. But it's just the human psychology takes them time to say, look, we're going to let go control of money or we're going to let go control of the financial sector in our country. So, you know, so that might be a stepping stone. And over time, you will evolve. And also, for a large country like, say, for the USA, if all of Wall Street somehow uses one or two blockchains and that's kind of proprietary, all the big players, you still see trillions of dollars moving through those networks.

17:34CZ:And that's fine. The retail guys may be cut out from that even. But that's fine. As long as, you know, a corporate internet, the intranet, as long as, no, there's enough activity on there, no, that's fine. Like, that serves its purpose.

17:49Alex Thorn:So to each their own, basically. and we'll see how it shakes out, I guess. Yeah, yeah.

17:52CZ:So I guess especially when we're advocating decentralization, decentralization is different from like everyone have to use an open source single blockchain. If we force everyone to use Bitcoin, that itself is actually not decentralization. Yeah, that's authoritarianism basically.

18:09Alex Thorn:Yeah, that's right. So it's a bit counterintuitive, yeah. That's a good point. Let's move on to some other topics. Binance built the modern perpetual swap. Now, of course, perps are – and not then too, but even more so now, they're sort of key financial instrument today in crypto and have been – even before Binance, obviously, BitMEX had sort of the first perps exchange. I was saying like the perps that Binance offers now are the perps that people use today. So they modernized it. But separately, though, as long as back into 2016, 17 when Arthur Hayes had perps on BitMEX and later, these have been very important and highly efficient and for those who know how to use them well, a great financial instrument.

18:53Alex Thorn:Now it looks like we're going to get a legalization of crypto perps in the US. So you're going to see maybe the big futures, CME and SIBO probably and whatever else, CFTC licensed entities trading crypto perps, but also perhaps stocks, perp stocks.

19:09CZ:Yeah, yeah.

19:11Alex Thorn:When they arrive officially in the US or any major market, what happens to like the like, you know, quote unquote offshore crypto exchange leading the perps world? world because that's been the case even today. Hyperliquid also is an example of that.

19:25CZ:Yeah. So there's quite a lot of interesting implications there. It's a long question. Yeah, sure, sure, sure. There's quite a few things there. I think, well, first of all, Perpetual Futures was not invented in crypto. It exists in traditional finance. Was it the first implementation though? Arthur Hayes did the first implementation in 2014 in crypto, BitMEX, right? And then Binance was late. Binance only started offering them in 2019, so five years later. And there was a few others offering different varieties of maybe not perp futures, but like delivery futures. Every Friday you have to do a settlement and rollover.

20:08CZ:So there was different variations. Binance started offering them, but Binance had the largest user base. So now it's got by far the best liquidity and the best volume and also the best prices, lowest slippage, etc. And now with CME, this traditional giant futures exchanges, listing futures now, I think it's good because they serve a market that Binance never served. So Binance never served those institutions in the U.S. Well, Binance Global doesn't serve any U.S. users. and which one will get bigger? That's actually a less important question, at least to me personally. As long as we have more people trading crypto, it is better.

20:55CZ:Most likely if CME or CBOT or whoever else in the US, they can get all the institutions trading crypto futures and that's more liquidity that, there will be guys who can trade on both platforms that will bridge liquidity. There will be more liquidity for crypto trading and I think that's really, really good. So I'm less concerned about who has to be bigger than the other. I think the more people have access to crypto trading, the better liquidity is. And the better liquidity is actually the best protection for consumers. When there's good liquidity, you see much less crashes, et cetera, and much less liquidations, et cetera.

21:34CZ:So it's just better protection. And then we saw the last part, which is, well, now the crypto exchanges are trading like stock futures. and there's many other things that they're not trading yet. Even the unstructured products that's not traded today could potentially be structured enough to be traded on the blockchain. And FX can trading, I predict, will move to the blockchain. Every country will eventually have their own stable coins and then those will be available to be trading on-chain 24-7. And I think the FX price discovery might actually happen on-chain because it's much more transparent, much easier to see, and much more continuous.

22:14CZ:So I think all of those things will happen. Will that have a negative impact in traditional stock markets? I think so. But again, at least for Binance ecosystem, for what I can see, the users are very separate. So today, the guys who live in New York and this country, we can buy stock whenever you want. But most other people outside the country cannot buy. It's not that easy for them to buy U.S. stocks. Some of them can, but it's actually a very small number percentage-wise in the population. Which country don't want their stocks to be available to everyone in the world, right? So, like, look, if you list SpaceX, why don't you want everyone in the world to buy the stock, right?

22:58CZ:Which company wouldn't want that? Which stock exchange wouldn't want that? Which country wouldn't want everybody in the world to buy your government bond, right? Why would you prevent other people from buying a government bond? So, and look, if one country buys a lot of your government bond, that's actually the easiest reason for you guys not to have a conflict. Right, it's true. So you guys have to negotiate on trade and not attack each other. So I think the world is becoming a smaller place, even with all the geopolitical tension, et cetera. I think the world is becoming a small place. Also, I think crypto exchanges providing access for people who are not in that country to buy your stock doesn't hurt the current stock exchanges in the country.

23:39CZ:It actually helps it. It's better liquidity, better demand, etc. So, yeah, that's my view.

23:44Alex Thorn:Okay. I like your point about increasing access to stocks being one of the key benefits to tokenizing stocks. And I did look into this also. I was surprised to find it. It's actually cost prohibitive for many people to buy stocks. Here we can, you know, I can buy them on, I think you can buy them right in Cash App or like in Venmo. But, I mean, it's really quite easy. But, you know, in some countries I've heard, you know, to even be able to open an account that can trade a USADR there or has access to a, I don't know, corresponding broker that can place the trade here has like really high minimums.

24:18Alex Thorn:For example, you know,$5 ,000, which, you know, most of the world can't actually put up as a minimum. Yeah. Yeah.

24:24CZ:And each trade is like 2 % to 5%. Right. Right, so how many times can you trade? And also just many parts, you just don't have access. It doesn't matter how much premium you want to pay. You just can't get it in at all. You just kind of get access.

24:38Alex Thorn:I want to ask about Hyperliquid. It's one of the few actually positive coins in return this year, year to date, but also obviously a big and growing platform. It sits somewhere, I would say, more decentralized than Binance, although less decentralized than Uniswap, as an example. somewhere in the middle. Have you met Jeff? What are your thoughts on hyperliquid, you know, just generally?

25:02CZ:Sure, sure. So we have some interesting history with hyperliquid that I didn't know about with Jeff specifically. I never met him in person. He was actually in one of the earliest Easy Labs incubation seasons. Right. So I assume he's a very smart young kid and he's obviously very capable. So there's some long history there. And also I think the hyperliquid invention is actually awesome. He proved a new market niche. That was not proven by other people before. So he created something new, which is very interesting. And apparently he has a very small team. And I'm sure that team is very capable.

25:44CZ:They occupy a niche that Binance Exchange cannot compete. They don't have KYC. They claim they're decentralized. Again, I'm not going to comment on another project. Based on the technology we see, they have a lot of control. It's a small team that controls the platform. So whether that's – they use a smart contract for deposit and withdrawals. That claim, that's decentralized. I'm not going to get into the definition of it. That's not my place. But they serve a niche where, look, in the U.S., if you have a VPN, you can use it, right? So everybody knows that. So, yeah, but they have pretty decent volumes.

26:27CZ:And they are able to service many users that Binance cannot serve, which, again, it's not my place to comment whether that's good or not. But they have some technology innovation that I think is quite good. Yeah.

26:41Alex Thorn:Well, I mean, just since you raised it, too, the history of NoKYC crypto exchange is filled with people getting in trouble for that. Like, should they be – yeah, should they be worried?

26:53CZ:I would never do what they do given what I've experienced in my life. But I'm not a legal person. I cannot give other people advice. Again, I think – I assume they have good lawyers. They're making a lot of money. So I assume they're big boys. They handle themselves.

27:13Alex Thorn:That's a fair answer. So not perps but prediction markets. I think one of the breakout sort of new segments of – it's not necessarily – it's not really crypto, although Polymarket, I think they're the largest or at least the largest independent one, is built on crypto. What are your thoughts on prediction market? A lot of jurisdictions are – both inside the US, certain US states are mad. Then different countries are either grappling with them or trying to regulate them or mad about them. but also just they appear to have a fair amount of utility, especially in certain circumstances where you would have to trade a proxy to an event rather than the event itself.

27:56Alex Thorn:Either on the regulation or just on the product, the concept, how do you think about prediction markets now?

28:00CZ:I also think that's a very clever or good invention. Well, that's not a new invention. Prediction markets have been around for a while. Event futures, prediction markets.

28:08Alex Thorn:I remember trading on one called InTrade, I think, that was based on the UK one time. presidential elections, like in 2008, I could trade.

28:15CZ:Yeah, they come and go, right? So as you said, it feels a little bit like betting, right? You're betting on, you're like going to kind of predict an outcome of an event. So again, I'm not a lawyer. There's many, I assume there's many different regulations, different places about this particular industry. But it does feel like, at least in my, when I listen to talks by like, For example, the CFTC chairman, Michael Sillick, in multiple talks, he's quite supportive of it, at least in tone. I don't know the legal definitions, how they define it. But at least in tone, he's very supportive. Multiple important people in the U.S.

28:56CZ:agencies are supportive. I personally think it's a great thing. I think anything that allows people to discover price, price discovery, liquidity, is good. There are many implications for this. real-world implications, whether it's funding to predict the weather better. Predictions are important in our lives. We want to be able to predict things better. So where there's real money on the line, I think the prediction markets are much more accurate than every other prediction because anybody who has good predictions will be in those markets. So there's some really interesting implications for it.

29:38CZ:So I am, you know, I funded one of the exchanges. So I like to see any tool that provides price discovery and liquidity. So I think it's great. And also it's also great that I believe Polymarket, CalShit, they all have licenses in the U.S. And so this, you know, this means that I didn't know that you mentioned that states may, some states may not like it, etc.

29:59Alex Thorn:Yeah, because the reason, though, is because they have prediction market. sort of the hook for them is that they have prediction markets on sports outcomes, which is historically considered sports gambling, which is a highly regulated state-by-state level activity historically in the U.S. Okay. So that's why they're upset.

30:16CZ:Okay. So that's just the state versus federal. Yeah.

30:18Alex Thorn:Because you're right. You are right. The CFTC has taken a strong stance legally as well. They've joined cases to defend prediction market firms against state. They've joined them. I submitted amicus briefs in support of the prediction markets. And they're releasing a new rulemaking framework for prediction markets, which the existence of alone is supportive. So they are supportive. And also the CFTC is very clearly asserting its federal primacy over the states as it relates to prediction markets. So there is an interesting intergovernmental sort of thing here. But yes, you're right. They are supportive.

30:57CZ:I actually didn't know those details. I always stay away from politics. So any sort of jurisdiction fights, I stay away. But I think for consumers, as an industry globally, for crypto, it's a good thing. But with any new technology, new platform, as long as they do it well, you'll be really good. There are always ways to do badly. But I think the larger players today do it really well. And I think there's quite a lot of new upcoming prediction markets as well. That's probably like 100, 1 ,000 plus prediction market projects in the crypto space. So I hope all of them will execute it responsibly.

31:35Alex Thorn:Let's talk about something you mentioned earlier about many more blockchains, many more consumer choice being good. And of course, there are many and there probably will be more. Most activity in crypto today is probably, I don't want to say centralized, it's sort of coalesced around Ethereum, Solana, BNB, Tron. That probably falls off after that, but a few others. BNB has definitely consolidated itself into a top-tier chain. It's also a top asset. What's exciting about BNB right now that we should be focusing on or looking at? Sure. As researchers, but also just the public.

32:14CZ:Sure, sure. So now I don't run the exchange. I actually have a lot more time to talk with developers in the community. I'm actually really excited about some of the new features they're building on BNB chain. so one of my recommendations to the developers is like don't do big upgrades during bull markets but in bear markets, market is quieter you make a big upgrade so I actually advise this to every blockchain not just the BME blockchain developers so now they're working on a next version which is much faster, which is much cheaper more privacy controls for users there's quite a long list of features, when I saw it, I was like, so I'm not a very imaginative guy, actually.

32:58CZ:I don't drive these things. But when I saw their, like, when I talked to them, when I saw the list of features that they're building, I was like, wow, you're going to get all of this in one version?

33:06Alex Thorn:So they're building it. Do they have a name for this forthcoming upgrade yet? I don't know the name, actually.

33:11CZ:I think they have a codename, but I forgot.

33:12Alex Thorn:Well, we'll check it, and I'll throw in the show notes.

33:14CZ:Sure, sure. No, I forgot. But I talked to the developers, like, no, but I don't run it, right? So this is their drive. Yeah, so...

33:22Alex Thorn:Is that to compete a little bit? Like Solana, you know, broke onto the scene, I guess, years ago at this point, by being faster and cheaper than Ethereum. You know, you've got, like, and other differentiations. Privacy has been a big topic these days as well. Like, is that for, one, just to make it better? Or is there competition? I don't know how sort of semi or decentralized L1 developer teams think about big upgrades like this.

33:45CZ:Sure, sure. I think, well, no, I think there's not a competition with a specific chain. I think Solana came around four or five years ago, I guess. Maybe even a bit longer. And then initially it was going to be supported by FTX. Yeah, I know. SBF was all over it. Yeah. And they suffered quite a bit because of the FTX crash. But it was great to see their recovery. Yeah. So it shows the resilience of a decentralized blockchain. Solana, when B &B chain was first started, there was quite a lot of accusations of B &B chain being overly centralized because they have less nodes than Ethereum. But Solana has much less nodes.

34:23CZ:So there's always a balance of nodes versus performance, right? The lesser nodes, the less time you need to synchronize. I think Ethereum is still like the holy, well, they want to be the fully decentralized. So every upgrade is really difficult for them. So there's a balance there somewhere. I think BNB chains up to like a, I don't know, I can't remember. I actually don't know. It's like 41 nodes or 100 nodes. I actually don't know.

34:46Alex Thorn:We'll look to and we'll throw that in the show notes as well. Don't worry, don't worry.

34:48CZ:This shows how untechnical I am now. Get a computer in here, Phineas. Look it up. Yeah. But I think Solana's rise and recovery wasn't so much the decentralization versus non-decentralization aspect of it. It's that they were very heavy into the meme space. They also marketed themselves really well in the U.S. where B &B chain was not marketing themselves at all. They got a lot more U.S. developers on the chain during the last administration where BNB chain was trying to stay out of the U.S. Anything related to BNB chain, Binance, myself, were trying to just stay as far away as possible. And also, during the last cycle where the last administration, the last SEC was suing every crypto project, it's very hard to launch a crypto project that has utility.

35:38CZ:so that's why all the meme coins were proliferating and Solana didn't have an exchange associated with them anymore after FTX went down so they just went like they used the word pump and dump a lot right so there's a platform called pump.fun in the BNB chain ecosystem if there's a platform called pump there will be like a lot of regulatory increase right so like in the BNB because there's a binance like a large exchange and BNB chain, even though it's a completely separate blockchain, it's completely independent, but we're kind of still in the sort of closer ecosystem. We're much more scrutinized by regulators.

36:18CZ:Anything that's called POMP on the BNB ecosystem will get a lot more scrutiny. So the chains are all grown in differently. But I think that's good, right? So I think that's actually very good for the space. If you only have one chain in the space, then regulators will probably be shut down by now. The fact that we have multiple blockchains is actually a good thing. And they proliferate in different places at different times. And that actually helps the entire industry to grow. So I think that's really good. I think Solana's recovery is fantastic. It's actually phenomenal.

36:50Alex Thorn:Ethereum sort of community took a path. They were taking this path before Solana, but it sort of became urgent, which their own hub and spoke model because the layer one blockchain is highly decentralized. So they promoted this L2 thesis, but then the L2s are predominantly optimistic single sequencer roll-ups today, not decentralized really, and I don't think any have reached whatever stage of, I think it's stage two of actually being decentralized. What do you think about that thesis? I know Vitalik has seemed to sort of say, well, maybe we should be working on the L1 more again. Yeah, yeah, yeah.

37:23Alex Thorn:You know?

37:24CZ:I did sense that shift in Vitalik's tone, and also, yeah, I think it was like also four or five years ago where the Ethereum community was all about L2s. And I think in the last couple of years, they kind of reversed course and stopped.

37:39Alex Thorn:Because now the biggest one by far is Base, which is basically operated by one company. It's not, I mean, there are some, you know, safety ways. It's not that you have a unilateral exit capability, but, you know, the sequencer can order transactions, charge arbitrary fees, whatever.

37:54CZ:Exactly, exactly. So the L2s are not very centralized, extremely centralized. So now with the Ethereum community, you want to promote fully decentralization but all the L2s are super super centralized and then so and also the L2s but I don't think that's the main reason I think I believe the main reason is L2s don't contribute to the L1s right so they only the L2s only need to spend the Ethereum once like I don't know with a batch right so they actually don't

38:24Alex Thorn:contribute to I think we did the math and we found that base was paying more in licensing fees to the Optimism Foundation to use the tech than they are actually paying in Ethereum L1 fees.

38:35CZ:Oh, by far. Yeah. Oh, by far. It's probably by like two or three magnitudes. Right. So, and then eventually, I think Vitalik figured out the L2s don't help the L1s. And then Ethereum went through a period of where they had, Vitalik has to deal with a lot of pressure due to the price performance of Ethereum. And there was a lot of jokes online, which was unfair to him, to be honest. but I think that all of those things combined made him realize that well he's still got to work on the L1 so now he's shifted his focus a bit which is fairly normal for you experiment you try different things so there's still like as you said there's still pretty strong a few strong L2s but I think in the future it's still L1 to be honest it might be like what do you call it a back and forth thing for a while L1s will get faster but then the demand will come and then the L1s can't scale that quickly and then there may still be other L2 type of solutions in the future again.

39:32CZ:They may be back and forth.

39:35Alex Thorn:I think this is a decent option too instead of building a whole new chain if you're a big bank or something, do some kind of L2 on an existing chain, especially if the chain is natively built for like safe bridging. The way the optimistic roll-ups are, right? They're not bridging back to the L1. They integrate directly. That could be an interesting way for the hub and spoke to, where it just doesn't seem like what the decentralized main consumer base of Ethereum actually wanted today. It may have a place, though.

40:02CZ:Yeah, but L2 is as centralized as they are. If after batch, you still synchronize with the L1, it's still immutable.

40:11Alex Thorn:That's right.

40:12CZ:So it's still better than where today a bank can just change records. You can change records from 10 years ago.

40:20Alex Thorn:Right, because if I ask the L2 to process a transfer from Alex to CZ and the sequencer refuses, I can just replay that directly on the L1. So you can. But that does get to this one thing. This is what the L2 maximalists always say is that that unilateral exit capability is like the stopgap. And it is. But if the transaction isn't a simple transfer and it's a top-up of a loan collateral, some kind of trade, that has real implications even if you could get out. You know what I mean? Like if I need to top up liquidity or I need to – Oh, that's interesting. Okay. That's where it starts to actually become problematic, right?

40:53Alex Thorn:Or honestly, even if it's just a trade. I actually didn't think that far. But it needs to be like right now and even one minute late is like a problem. Yeah, yeah. Then having to go through that, like that's sort of what I – again, if the sequencer chooses to censor you on the L2.

41:08CZ:Yeah, yeah.

41:08Alex Thorn:That's one thing I think about. I think about it a lot with tokenized securities.

41:11CZ:Okay.

41:12Alex Thorn:We tokenized Galaxy stock on Solana.

41:14CZ:Yeah.

41:14Alex Thorn:I think we would do other general purposes too. We just started with one as an issuer-sponsored security. But one thing I knew is that I just didn't think the L2s were decentralized enough to be the credibly neutral platform upon which we wanted to trade.

41:29CZ:That's true. That's true. Yeah. So you actually delved this much deeper than I have. Yeah, yeah. No, I went deep on this one. Yeah, yeah, than I have.

41:34Alex Thorn:Let me ask you about YZI Labs. It used to be called Binance Labs. It's a core investment vehicle for you. What is the core thesis these days? is because I've seen that it used to be mostly crypto or all crypto. Now I'm seeing some AI, some biotech stuff too. What are you guys doing there at YZI Labs?

41:51CZ:Yeah, so I give a rough guideline. Say, look, 70 % crypto, 20 % AI, 10 % biotech, roughly. So I think all three are large sectors that will continue to grow tremendously. And all three have so much more new innovations to be discovered, to be done, to be built. that can have tremendous positive impact in our civilization, basically. So EasyLabs philosophy, I want them to invest for impact and not necessarily financial returns. Sometimes they may diverge. I'll give you an extreme example, right? Let's say we invest a billion dollars into a drug research company that cures, say, a common disease, like cancer.

42:34CZ:And the cure is very cheap. And the company may not make any money. but it will cure like a million, 10 million, 100 million people. I'd be very happy to lose that one billion, couple billion dollar investment. It will make me super happy, right? Because we have the impact.

42:50Alex Thorn:Well, and it's also like a smaller principal investment. I guess it's more the loss of it being a$1 billion gain, right? Yeah. So funding it at the early stage is interesting for that reason. Yeah.

43:00CZ:So EasyLabs funds like look for very early stage projects. Many of them are a bit crazy. So they're very high failure rates that we expect. But we also have, I think we invest in some really good projects.

43:15Alex Thorn:Are there any that stand out right now or, I don't know, recently in a new batch or something that's been around that is really exciting you want to promote, like a portfolio company?

43:22CZ:Well, there's a bunch of crypto companies which I would not actually talk about because I don't want to be seen as promoting them specifically. Many of them have tokens. There's an artificial womb company that we invested in. So now you can have a kid in a machine. Right? So this frees the ladies from the pregnancy process. And then you actually freeze the guys from, like, getting attacked. Well, begging a woman.

43:44Alex Thorn:An artificial womb.

43:45CZ:Yeah. So I think they actually went to the second trimester testing in rats. Wow. So I think they're probably five, ten years away from humans.

43:53Alex Thorn:Is this, like, growing humans, like, for space travel, for example?

43:57CZ:Potentially. Like, the different use cases are huge, right? So, like, well, this is going to be, like, the metrics if humans are farmed.

44:01Alex Thorn:Yeah. Well, that's why I gave more charitable. one. We actually got to set up a new civilization light years away, and so we just send the ship for a thousand years, and eventually it just births humans there. I don't know if I'm making that up. Pretty good sci-fi concept, though.

44:14CZ:When I say humans are farmed, people can understand both positive and negative impact of it, which I understand the technology could have. But anyways, it's a technology that can help many, many people. And then there's recently another one that uses a 3D-printed styrofoam that puts in your knee cartilage and your cartilage will grow around it. So it causes more growth of your knee cartilage. Oh, wow. Many old people have knee problems, right?

44:42Alex Thorn:You don't have to be that old to have any problems. Yeah, yeah. That's telling you right now.

44:45CZ:Exactly. So stuff like that. And this one is also quite early. They haven't quite started. I forgot the stage. They might just be starting the next clinical trial on humans. So stuff like that. And we invest in a bunch of AI robotics as well. But, you know, it's actually the biotech companies that gets me really excited. It's just very tangible. Like one day you will help many, many people, right? Where AI, robots.

45:14Alex Thorn:We all know it's going to be big, but it's not like you just solved everybody's knee problem. Exactly. That's much more tangible.

45:21CZ:Yeah, yeah, yeah. So there's a psychological reward for those biotech investments. Yeah, so.

45:27Alex Thorn:I love that. Let's talk about AI. You guys are investing in AI. We're an AI data center company also in addition to crypto. Everyone's using AI. I've got a bunch of – I asked the employees of Galaxy to submit some questions. One that everyone wanted me to ask was, what is your favorite LLM for you to use personally? Right now, like, you know, I switched between them. You know, there's ups and downs. But right now, what do you – like, which phone app of AI are you super excited about?

45:54CZ:I have almost all of them installed. I subscribe to all of them. and I use different ones for different things. Well, OpenAI is the first one you install, right? So that's the oldest.

46:09CZ:Anthropical Cloud is much better for coding, I find. But I don't write much code. But it's still pretty good for answering questions. I also find like the different AI companies, sometimes they're not available in different countries. I travel a lot. Is that true? Interesting. So I travel a lot. So you travel to some countries, one AI company is not available.

46:25Alex Thorn:You just open the app and it's like, Like, sorry, I can't operate.

46:28CZ:It's conservating this country. I'm like, I'm just waiting here for three days. But then, you know, you go to the next one. There's also some geopolitical tension as well.

46:37Alex Thorn:Like, for example, when I traveled to Hong Kong, none of the U.S.

46:42CZ:AI companies work. So then you use DeepSeek, Kimi, a bunch of the Chinese guys. I'm not political. I'm like, look, I just use whatever is working on my phone.

46:50Alex Thorn:I just have to ask this question real quick. Yeah. Can someone answer it, please?

46:54CZ:Yeah. But overall, though, I generally find the U.S. large language models to be much more precise and much more accurate, whereas the Chinese open source ones are very good as well, but they are not as comprehensive sometimes. Yeah, Quinn, DeepSeek, Kimmy.

47:10Alex Thorn:I've used some of these at home myself. Do you think, well, you mentioned the geopolitical aspect. I think this is very interesting. There's a great essay. Many people have theorized, but AI 2027. Have you read that essay? It's really good. I'll share it with you after.

47:22CZ:I got to read it.

47:23Alex Thorn:Well, it's sort of like from 25 to 2027, what might happen? And then eventually it becomes a choose-your-own-adventure like accelerationist or safety. But one of the big stories clearly of AI, I saw China has announced some 200-plus billion state investment in data center growth. Obviously, we have enormous private, mostly private, but I think plenty of public support of data center growth and CapEx spending here in the U.S. Like, is this, is it kind of turn into like a, you know, Cold War style AI arms race? Like, should it? Is it? Is it already happening?

47:56CZ:Like, I, okay. Again, I'm not expert on this area. But I actually do think that it's going to, it's definitely going to be a race. Every, especially with what's happening recently. I mean, I, like, it doesn't take two brand sales to figure out. China's definitely working on their own chip, right? So China definitely is working on their own data centers. both countries. So the U.S. is definitely trying to work on its manufacturing. And so it's a race. But race and competition can be healthy. It actually increases the speed of growth. But I think on AI, we've got to be a little bit careful with the speed of growth because AI is so powerful that it can be dangerous.

48:43CZ:It can be very dangerous. So right now, many people are looking at crypto regulations. Very few people talk about AI regulations. What can you not do with AI? And crypto regulations are actually much simpler. It's just like a record, right? You're just dealing with money, basically. There's not a whole lot more. There's KYC, AML.

49:01Alex Thorn:It's all that same money stuff, basically. It's just new technology.

49:05CZ:But AI can do so much more. AI can hack your computer, can figure out how to build a nuclear bomb. AI can do so many different things. You can program robots. You can program nanobots. You can fly nanobots. What can you do and cannot do with that? They obviously can program drones, et cetera. So there's so much application for AI, but I don't think anyone's really thinking about, well, in a deep way, in a comprehensive way on how to regulate AI. I say that, but when I actually think about that problem, I don't know how to do it.

49:38Alex Thorn:It's such a hard problem. Because you want to promote the growth and innovation too. It's not just like – because we have seen some proposals I know in the U.S., probably everywhere, I would assume. There's a small but rising populist backlash of like no more data centers even. Not just make the AI safe, but like build less AI. That's not winning out at the moment. But I haven't seen anything more nuanced than that yet to the point.

50:01CZ:Typically, the first versions of regulations are what people say is like too binary.

50:05Alex Thorn:Yes.

50:05CZ:Okay. Yeah, we can regulate the industry by killing it.

50:08Alex Thorn:Right.

50:08CZ:That's not regulating. That's just killing. Regulating the industry means that you want to promote use of it. Otherwise, you don't need to regulate it. You just kill it. That's not regulating. But it's just so hard to regulate AI. And many people are not thinking or talking about it deeply. But when you think about this problem, it's actually very important for our civilization. Crypto, no matter what it does, it doesn't have the power to extinguish our civilization. It's very powerful. there's a lot of money involved it's a great industry but it helps global commerce it grows our economy etc but AI has the power to extinguish our civilization if we don't use it carefully so yeah but anyway that's just me ranting yeah no I appreciate it that's what I wanted to hear you know we

50:59Alex Thorn:I think one of my favorite things have you built anything personally at home with quad code or whatever that like most people are tinkering with something it's one of our favorite questions to ask like over a drink Like, what are you building with AI?

51:11CZ:I tried, but very unsuccessfully. I tried OpenClaw. I installed it on one of my unused Macs. And then I tried to get it to download my Gmail, which it very easily connected to. And I tried to get it to filter my email. I get so much junk mail.

51:30Alex Thorn:Yeah, oh, yeah.

51:30CZ:I get so much junk mail to the point I don't use email at all. No, I know. Me too. It's so bad. I just don't use email. But I thought, like, it has this Gmail skill. So like download, plug that in, got a Gmail API key, put it in. But it was so careful. It was so resistant to deleting emails for me. I'm like, remove all the junk. Only show me the emails that are important. But I would say probably 30%, 40 % of my emails are requesting for some kind of meeting with me. It was like, well, this guy's requesting an email meeting with me. like there's all this meeting request he thinks it's important.

52:09Alex Thorn:Right. Right. A lot of that's junk as well in your mind. Yeah, it's just spam inbound.

52:14CZ:I'm like 99 % of that is like just junk from people I don't know. Right. I'm not going to accept those meetings. Right. So like AI, I tried it. It just doesn't do what I need to do. Interesting.

52:22Alex Thorn:Very interesting. Let's talk about quantum a little bit. Yeah, yeah. That's another thing. I did a presentation earlier to an investment bank about Bitcoin and quantum and the mitigation paths. Are you worried about quantum as a threat to Bitcoin?

52:37CZ:No. I'm actually not worried about it at all. I think number one is the more compute power we have, the better. They are already quantum-resistant encryption algorithms. So all we need to do, conceptually very simple, all we need to do is upgrade the, change the encryption algorithm. But for a decentralized technology like Bitcoin, and with so many users all around different parts of the world, the coordination is difficult. And there's also the Satoshi Bitcoins that, you know, that what do we need to do, etc. But overall, I'm not worried about it. I also think that I have a sneaky suspicion that Google says 2029.

53:14CZ:I appreciate that they give such— Some urgency. Some urgency and some early notice. I don't know what's going on. What do they have? Maybe they can already crack Bitcoin. They don't. If that's the case, I'd be super appreciative that the fact that they don't. But more likely, I think there might be a little bit of a PR angle to that. Like, look, if you're a quantum researcher, you want more attention for quantum. And you might not put out an estimate that's relatively aggressive. Like, say, 2035, nobody was going to read that article.

53:49Alex Thorn:Yeah.

53:49CZ:Yeah, you said no. That's true. Right?

53:50Alex Thorn:And I think actually under testing, one of the main Google authors of that paper, Craig Gidney, a longtime quantum researcher, said really he thinks it's about a 10 % chance by 2029.

54:01CZ:Yeah, yeah. So, right. But I appreciate it. Like, that's an engineering estimate. Right, right, right. And honestly, to be clear, I think they've been getting pulled forward.

54:10Alex Thorn:That Google paper did describe a substantial improvement in the math and therefore reduction in the number of qubits required.

54:17CZ:But regardless, the day is going to come. And then Bitcoin is going to have to upgrade. So the ecliptical encryption is going to have to upgrade. Yes. And we as a community need to somehow coordinate it. So that's a task on us.

54:34Alex Thorn:There's some early work happening, but I would say it's early. And you know how decentralized Bitcoin is. Like, you know, Ethereum Foundation released a whole roadmap. Well, great. Like, there's no such group in Bitcoin. Yeah. But I'm seeing some green shoots of activity, I would say.

54:48CZ:But I think when the urgency gets stronger, a number of key groups will get together. And there will still be a lot of debates. There may even be many forks of Bitcoin. But eventually, we'll get there.

54:59Alex Thorn:Yeah, I think about the risk of, well, we've, Bitcoiners have lived through many forks before. Many forks, yeah. Bitcoin gold, Bitcoin diamond, Bitcoin cash, Bitcoin whatever. Tell me about it. Tell me about it. It's funny that that doesn't happen as much anymore, but that used to be like a major theme of Bitcoin for like probably like three years, maybe like 2016 to like 2018.

55:17CZ:There's so many forks, right? No, it was more like, no, August 2017 was the first BCH fork. That was BCH, but there were some others before. So after the BCH fork. Binance is the first exchange to say, we're going to support both forks. Because otherwise, the users have to download the Bitcoin from the exchange, install both wallets, and figure out which one's Sigrid, which one's not, which one's like, you know. And to download the entire Bitcoin blockchain takes like three or four days back then. They have to go through all that work. So Binance was the first exchange. I gave this idea. I said, look, why don't we handle this for users?

55:54CZ:Because we have a big wallet. and we just give users the BCH that they're supposed to get. And then we're done.

56:02Alex Thorn:And then we list BCH and people can trade. Very few people exchanged. I did a study back then when I worked at Fidelity about how all the exchanges handled the BCH fork. Many did nothing. They technically had the keys, but they didn't give you the BCH. Coinbase didn't give you the BCH or let it trade, I think, until like December. Some, I think, maybe it was Bitfinex. They had perps also to see where it would trade in the future, which is actually a really important thing if a fork is going to happen. But yes, I remember Binance was one that said, we're going to give it to you. Some, I think, sold it and gave you the Bitcoin proceeds.

56:37CZ:Very strange. But the counter effect was that that helped a lot of users. But the counter effect is now then after that, people saw that Binance supports Bitcoin forks. And because we want to give users the benefits. So then there was like Bitcoin Gold, Bitcoin Diamond, Bitcoin. And then all of them are useless. Yeah, yeah. Right? But all of them have some value when they first fork. And so the exchange was forced to support quite a number of them. And after a while, we said, okay, we're going to have to stop. So there was like, I would say, probably a three, six-month period. There was a lot of forks, and then we stopped supporting them.

57:15CZ:That was that.

57:16Alex Thorn:That was the Bitcoin forks era was exciting. So just back on the quantum thing, you mentioned this. So assuming we get the tech to the new cryptography and Bitcoiners decide to add it and all of that part of it is solved, should Bitcoiners or Bitcoin do something with Satoshi's coins or not? My understanding is there's kind of three options. You could do nothing and effectively it's a bounty. And the downside obviously is that you likely get the coins one day swept by an entity that creates cell pressure. but the cell pressure does redistribute them ultimately to the community so like there's there's a minor upside there i would say potentially long-term upside versus short-term downside there's one that says i don't know some version of freeze and seize either to one day give him back if he can you know show up with a passport that says satoshi or whatever i know that's tricky since the only proof we actually would have would be cryptographic proof and that will have been broken and then there's some sort of middle ground idea which is like you slow the spending or something.

58:15Alex Thorn:What do you think? I mean, and knowing that, you know, I'm not sure where I stand on this, but.

58:20CZ:I think the first option is definitely bad. We should do something with it. But I would actually propose a different solution. I think we should say, look, once we know we're going to fork Bitcoin, I would put a fourth option on the table. Say, look, as a community, why don't we give a timeline, say within six months or 12 months, If those coins don't move, then we're going to lock them. So on the new protocol, there will be like only 20 million coins because we're just going to lock them.

58:53Alex Thorn:Take away a million coins.

58:54CZ:Just take away those million coins. Those addresses will be frozen. On the mirror one, those addresses will be frozen. I would say, let's give him a year. If he doesn't do that in a year, I think then we give him time. He may be alive, maybe not be alive. He may even not be a person. Who knows? Right. So, but if we don't do anything with it, then we basically give in to somebody who's going to hack it. The first guy who runs a quantum to crack it. Eventually that will happen. And that's not a good way to distribute, in my opinion. And it's slow. So that's what I would do. That's what I would suggest.

59:32CZ:I think at the end is what we do should be up to a community vote. and I don't know how we probably have to signal with a Bitcoin flag.

59:42Alex Thorn:Yeah, in Bitcoin the votes are usually like minor flagging. The minor flag. You can run nodes that support a UASF potentially but that can be civil attack but yeah. It's a tricky question. I don't think there's frankly any good answer to the question unfortunately.

59:57CZ:No, no. But I do think that if he doesn't do anything with it, my recommendation would be well the new protocol should be freezing. Those will be taken out of circulation.

1:00:06Alex Thorn:Got it. Yeah. Just two questions here to wrap up that are sort of really quite open-ended. What is something in the last year that you've changed your mind on? You know, last year or two years ago.

1:00:17CZ:Oh, this is a pretty simple one.

1:00:18Alex Thorn:Yeah.

1:00:19CZ:RWAs. I was pretty skeptical, like, say, a year or a year and a half ago. I felt like, you know, who's going to – like, I'm not sure if anyone's going to trade this stuff. I'm not sure if it's going to take off. But the speed is taking off actually caught me by surprise. Yeah. So I think stablecoins, all your futures, AI stocks. So they have very good uptake in the crypto community. That means that the demand is there. So that means that many people in the world wanted to access those things, and they didn't have access. So that caught me by surprise. So 10 years ago, it was stablecoins, but stablecoins, I got over that quite a bit earlier.

1:01:02Alex Thorn:Last question, CZ. You founded Binance in 2017, right? What's something that's as obvious to you today or that you are as convicted in today that was obvious to you then and that you were convicted in then? Something that's held true to you that whole time?

1:01:20CZ:Hold on, let me ask. You mean from a business opportunity perspective or a belief perspective?

1:01:27Alex Thorn:I would say a belief, a belief perspective. When you founded Binance, You had great conviction in this thing, and today you have the same or even stronger conviction. It can be an idea, concept.

1:01:37CZ:Okay, okay. That's simple. I mean, crypto is not going away. Crypto is going to be a big industry. So that hasn't changed. So that belief has now only got much, much, much stronger. So that's, yeah, I don't know how to explain it in simple terms. It's just going to get bigger. There's no way for it to get smaller, actually. Yeah. So the prices will fluctuate of individual coins, but the industry is going to grow. Right now, quite a lot of hard money went to AI. They're chasing all the AI stocks. Fantastic. Oh, guess what? People are trading AI stocks using crypto now. The AI is actually contributing to crypto's trading volume.

1:02:17CZ:That may or may not help crypto itself, some of the crypto itself, but it's now the people who are using blockchain to access those things. and also AI today as hot as it is today they don't transact for us yet so now they can find the cheapest ticket for us but we still have to pay for that ticket ourselves

1:02:35Alex Thorn:agentic trading and payments and stuff you're thinking

1:02:37CZ:they will come they will come in a matter of month not years I think and they'll use crypto they will use crypto imagine like today if you launch that thing you have an agent that can buy your tickets or trade for you or do whatever you can integrate payment system country by country. Or you can say we're going to turn on crypto. And also, many of the current payment systems don't work with AI. The AI can't swap your visa card. It can probably fill a form, but whenever there's a 2FA, whenever, like, how can the KYC show your passport? You just can't do those things. Whereas with blockchain, it's API driven, right?

1:03:16CZ:So it's much easier for AI to use. So while AI is great, AI is a tool for you to get stuff done. AI still needs to spend money. AI still needs to transact. Guess what? They're going to use the blockchain. Well, they're going to use a better... We still need a good... We still need to continually upgrade the current financial system. So the financial system is not going away. When we had blockchain, internet didn't go away. When we have AI, blockchain and internet is not going to go away. So all three are big, big technologies. So I think many people ask me, like, are you worried that all the money is going to AI?

1:03:51CZ:No. So yes, some money went, but that's okay. There's enough money around. And we're dealing with money industry. Even the money that went there still flows on the blockchain.

1:04:02Alex Thorn:Increasingly. Well, thank you so much, CZ, founder of Binance, for coming on Galaxy Brains.

1:04:07CZ:Thank you for having me.

1:04:08Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at Intangible Coins. Follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research. And don't forget, if you like Galaxy Brands, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time.