#36 - Arjun Khemani

0:00Welcome to the Network State Podcast. And so Arjun, you are 22? I'm 19. You're 19. Okay. So 19 means you were born in 2006. So you were born five years after 9-11. The financial crisis, you were only like two years old, right? So, you know, with video games, people spawn into the battlefield in the middle of, you know, like a MOBA, you know, everybody's shooting at each other. And there's like this giant thing and someone spawns into the middle. And so I think of you kind of people, the Gen Z types, as spawning into the middle of this totally chaotic situation. And I just want to tell you, it wasn't like that in the 90s and the 2000s.

0:41I don't know what your perception is, or maybe you perceive this chaos as normal. I mean, I was born with a lot of things that I take for granted, right? Were you born in the U.S.? Where are you? India? In India, yeah. Okay, yeah. So, you know, for as long as I remember, I know having a computer, smartphone, kind of, after a while. um so what's your spiel give your life story you're zcash guy now but what's your give your spiel sure so um you know i was a pretty normal kid i would say when i was up to like 13 you're still a kid but go ahead yes fine fine um until around covid uh when i was like you know doing whatever teenagers would do play fortnight you know um and then covid hit and then i just like where were you then in india in india okay how come you have an american accent you have a global accent international okay just talking to a lot of people okay um so i um anyway coveted and then i just started reading a lot of books like the beginning of infinity nival's book nival the nivalman act um and then i just started questioning a lot of things i take it for granted um and just like started questioning the meaning of it all right uh like when i'm in school like um i don't want to be just growing up studying engineering like everybody else and you know uh you know how the Indian mentality is.

1:57There's nothing wrong with studying engineering. No, no, no, for sure. Yeah, yeah, yeah. But, you know, that kind of lifestyle. It's like, if it's only a canalized path, you want to have some options. Of course. Yeah. So, anyway, I got completely radicalized, I guess, I'd say. And then... You got woke? No, exactly. No, no, no. Yeah, yeah, yeah. No, you got, well, you got enlightened. Enlightened. Right, good, good. Go ahead. Yep. And then I, you know, when it was time to go back to school, because when I was online school, I would just like mute the site and then, you know, write for my blog, write on Twitter.

2:28But then when I had to go back to school, I was like, this sucks. I'm out of here, right? So dropped it out of school, worked on AirChat for a while, and we sunsetted that, you know, I guess a couple of years ago now, and then sort of got involved with Zcash. Great. Okay, so let's talk Zcash, right? So the Zcash network scene. Okay. So my view is there's many problems that Zcash solves. Some of them are obviously privacy, simplicity, quantum resistance, quantum resiliency, let's say. Up to some certain point. Up to some certain point, right? And it has at least a roadmap for resiliency, right?

3:10And like Sean Bowe has a good post on this. And then scalability of Atachyon, right? And then it's also got some degree of lindiness or what have you, given that it's been around for 10 years. It's got a good security track record. It's got a good exchange integration, community, all that kind of stuff. And Zcash is interesting because Solana guys like it. Metallic likes it. I like it. Novel likes it. And, you know, it's something where I think we can build a coalition around privacy. and you've certainly experienced this yourself. It's funny to say, like how does the youth think about privacy and so on and so forth, right?

3:50I'd love to hear your thoughts and I'll give it a thought. I would say I'm like, I don't hang out with a lot of people my age, right? So I don't know the, like what like regular people my age think. But for me, I think privacy is super important. Like I don't dox my location anymore. You know, I used to when I was a kid. Right. Didn't really realize. The downside of it. Yeah, yeah. But then now, you know, you um especially with ai being able to recognize where you are exactly um and uh you need that on chain i think because you can't have freedom without privacy uh and if it's like every transaction you make is just broadcasting your entire world to the public um or you know where you are what you're doing uh i don't think that's the world that i want to live in so yeah and i think a lot of people don't fully understand that point um if you're under surveillance you're not sovereign yeah and uh one way of putting it is um if every move is being tracked for example you don't have the advantage of surprise you can never launch something uh you can never have private deliberations you don't have the room to make mistakes uh anything you do can and will be against you and so and so forth right and uh you know there's um another way of putting it is what does privacy mean?

5:08Say, arguably it means local files and local data. So that's also the same as what sovereignty means. It means privacy is private keys, is private property is not online, like almost decentralized and local and individual as opposed to communal and shared and public and whatnot, right? So that's a sense in which sovereignty is privacy, is locality, is security. It's creativity, right? Like, I'm not going to be creative. I'm not going to be myself, my authentic self if I'm always being watched. I would think knowledge creation and wealth creation just comes to a stall if everything is surveyed all the time.

5:45Yeah, it's funny. One thing I used to say, sometimes people would tell me, oh, biology, China is going to just be the same as Japan, and it's going to run into a ditch like Japan did. But the way I'd point them to something is actually in the early, in 2017, actually, uh salzberger's paper n-y-t published something that said um that china killed a bunch of american spies in 2010 japan could never do that so that's why china that's another way of looking at it so you know i'll have to say very different national security sense but china's sovereign in a way that japan isn't because it could kill the spies because it stopped the spies obviously i'm sure america's killed chinese spies as well but japan would never be able to kill american spies never you know so japan is under surveillance and wasn't sovereign but china wasn't under surveillance and was sovereign, right?

6:33So the ability to actually be free of surveillance is actually, in a sense, to be sovereign. And the alternative way of doing it is to encrypt, not through violence like the Chinese way, but through decentralization encryption, which is the internet. Yeah. You recently tweeted, Zcash must scale. Why is scaling Zcash a moral imperative? Well, it's because, look, I love Bitcoin. Bitcoin's amazing. I don't never have a negative of word to say about Bitcoin or what Satoshi did and so on. But he developed it in 2009, right? 2009 was many generations ago technologically. You'd make different trade-offs potentially today, especially quantum has improved a lot.

7:14We know a lot more about blockchain scalability, obviously. We know about smart contracts, you know, obviously AI is out there, blah, blah, blah. So Zcash must scale just means right now, how does Bitcoin scale? Off-chain and other chains. that say off-chain, which say you load Bitcoin into Coinbase or Binance, and then within the internal Binance or Coinbase economy, you have a debit and a credit, and you can just send or receive at zero fees. And only when it's recorded out as a transfer out is there an on-chain transaction, right? So off-chain is basically database entries. And then other chains means you swap Bitcoin into something else, and then you send it on that chain, Solana or Ethereum or something like that, or USDC on Ethereum or Solana.

7:56And that's fine. You know, that does work. But many of my, you know, friends who are still, you know, like Bitcoin maximalists or what have you, I'm sympathetic to them, but they've basically been saying, oh, Lightning, Lightning is going to be there any day now for 10 years, literally 10 years of Lightning. And the thing about it is when you press them, they're like, oh, well, Lightning, you know, there's no public database of it because it's supposed to be payment channels between two nodes. And you go and you look into the details of it. Basically, the thing about Bitcoin is any address can send any other address at any time, any amount, without any setup at basically, let's say, standard fees, minimal fees, right?

8:40that anybody can pay anybody anytime anywhere any amount without any setup is a set of things that is all broken with lightning any node cannot pay any other node with lightning unless there's a channel or a route between them they can't pay any amount because it's constrained in a complex way by how much of the deposits are there they can't do it necessarily at any time because you have to have a channel open and channel close. And then the amount of money is bound in a complicated way by the deposits on the channels. And then what do you get out of all this? What you get is something where maybe if one party or the other party breaks a payment channel, then you could get the last transaction out or something like that.

9:26But the transactions are being recorded off-chain, which is why it's, quote, scalable. To make Lightning work, and the apps like Moon and so on and so forth that try to make like M-U-U-N and Wallet of Satoshi. So they're fine, like these guys. But basically, they end up essentially setting up a hub-and-spoke topology where it looks a lot like, here's Coinbase, here's Binance, and they've got a ring of customers around them, and they have a channel between them where they can do quick Coinbase to Binance settlement so that if you send within Coinbase to another Coinbase customer or within Coinbase to a Binance customer, Maybe Coinbase to Binance is, it could be off-chain, or it could be a very quick Coinbase Binance, like, you know, daily or nightly or whatever, hourly settlement, however they decide to do it.

10:12But if they have an agreement, they have a peering relationship, they can move it fast. This is very similar to how banks work, right? Banks essentially mean within a bank, it's fast, it's just a debit or credit in their system. And between banks, they use Fedwire or something, they do settlement, and they have a true-up where it's like the net credit, the net debit, and they just true it up like this, right? Right. And so the hub and spoke implementation of Lightning is really not, in my view, doesn't get you much over just loading in the Bitcoin and doing off-chain transactions and having a peering relationship between Moon and Wallet of Satoshi and Nostra and whatever, right?

10:46damis and and that's all fine and and there's a bunch of people who will basically give me some kind of argument like no it works or whatever and then whenever i poke on it it's always some hub and spoke thing under under the under the hood and it's not it's not like truly decentralized in the sense of you it's not like bitcoin where you can see it on chain anybody can pay anybody any time any amount without any setup blah blah right okay so what you really want is on chain scaling, right? Just blast the transactions on chain. What's funny is Ethereum actually learned the same lesson in a sense as Bitcoin.

11:22Why? Like, you know, and to be clear, again, I'm pro Bitcoin, pro Ethereum, like Vitalik posted that L2s kind of didn't work. And to be clear, a lot of the L2s are smart people. I think they will adapt and pivot. I've actually got a post coming out on this from L2 to App2. You can turn those L2s into app chains. And you have Ethereum for global state, you have your computer for local state, and then if you have like a decentralized notion, like an obsidian, use L2s for app state that you're syncing across computers. Like, you know, like your username of arjun.eth or biologist.eth is global, but the state that you're moving, if you're doing a file share request or something, that doesn't need to be global state, it can be L2 state.

12:03And then you have local app state. Fine. So leaving that though, the thing is, L2s were fine as a hack. They were more successful on Ethereum than they were in Bitcoin, like base and Polygon were actually quite important, are important. But really, the Solana model of just blasting events on chain worked, right? It's just easier, conceptually easier. You don't have to think about... I mean, blockchains are complicated enough without having to worry about like, oh, where's my coin? What chain is it on? It's easy to make mistakes on that. It's easy for users to make mistakes. You're forcing them to be aware of a detail that they really shouldn't be aware of or have to be aware of.

12:40And so Solana's model of just blast it on chain and have beefier hardware work. And that was maybe not obvious a few years ago, but that model worked. And it became also very clear that the value accrual is going to Solana and then an app on Solana is doing something Solana isn't doing. And so that worked, right? So now we have basically three levels. So that's Bitcoin, Ethereum, Solana in terms of scalability on chain, right? And so now the question is, can we go further still? So ZK, obviously there's ZK roll-ups, there's optimistic roll-ups. ZK is not simply a privacy technology, it's also a compression technology, it's a performance technology.

13:20And in fact, arguably, even though Zcash came up with the concept of ZK, the utility of ZK saw use more in scalability than it did privacy at first. This is good because scalability was immediately commercially important. You know that saying vitamin versus painkiller? No. No? like a you know a painkiller is it's maybe immediately obvious yeah okay you got a meat problem and you want to take care of it right and the vitamin is like possible upside right and you can argue but basically I know where you're putting it is like a painkiller is a must and a vitamin is a nice to have right like a like a you know a want as opposed to a need right so making more money required scalability so it was a must right And it seemed for a long time like people could do without privacy.

14:10Or rather, it wasn't as important as scalable, so people thought. But now we have all of these attacks on people for doxing locations and so forth. Where if you're in Dubai or you're in a low-crime jurisdiction, Singapore, if you're in El Salvador perhaps, and so on and so forth, you're fine. Those are going to be three very important places on the earth, in my view. Singapore, Dubai, El Salvador are the new Tokyo, London, New York. Even Miami is maybe... I think El Salvador has more upside than Miami because it's a startup state. I actually like Francis Suarez a lot. Miami and El Salvador will probably have an important relationship.

14:52But El Salvador is like a full sovereign. It can do a lot. It did deal with Elon recently. It has Tether there. These are big moves. So, Bikeli is like Bikeli Kuan Yew. those get you the Americas,

15:07EMEA, and APAC, right? It gets you all three times. It's El Salvador, Dubai, Singapore. And those, if you're doing, if you're setting up anything in crypto, I think you'd, or anything in tech crypto, those are going to be the three nodes. One thing we need to do, I should post this afterwards, like President Bacalli should set up direct flights between Dubai, El Salvador, and Singapore, El Salvador, and build an international airport. Do we all have them already? I don't think we have them. Yeah. Partly it's because South America, Latin America has been sort of locked off from the rest of the world, especially Asia.

15:36And lots of flights have to route through America. And to route through America, if you're not a U.S. citizen, you have to get a so-called, like, I think a C visa, transit visa. So many people who want to go to Crescimento in Argentina and they're Asian, they don't have a U.S. visa or something. You have to, like, go to the U.S. embassy to get a C visa for just a, like, it's a huge tax. You want to just fly from, let's say, India to Argentina. you have to stop through the U.S. But to even stop through the U.S. you need like a sea transit visa which means you need to go to the U.S. embassy and apply for a visa months in advance to jump on a flight so it takes away all spur of the moment it's like this enormous tax of time and energy you can get rejected for that visa it's often not awarded so having someone like El Salvador which can just route around that will be very important like an enormous amount of traffic will go there because Dubai and Singapore are these huge huge points anyway coming back

16:31So on-chain, just being able to blast private transactions on-chain, Solana-like scalability, Budzee Cash, is what I think Sean Bo may have with Tachyon. That seems simple, scalable, easy to understand. It's what a lot of people wanted Bitcoin to be. So yeah, that's how I think about that. What else will it take to be the official currency of the network state? There's no official currency of the network state, I think, because there's going to be a thousand network states. It's like there's going to be a thousand cities, startup societies, a thousand startup cities, a thousand network states.

17:10But I think there will be, just like there will be a Solana network state, Ethereum network state, Don't Die network state, Coinbase network state, Binance network state. All these people have talked about, Telegram network state, et cetera, et cetera. There will be a Zcash network state. The only thing about Zcash historically has been that the Zcash people were so into privacy, they never talked about it. And also Zcash itself, for a variety of reasons, just, you know, most crypto things have a failure mode of being way too commercial and like too much get money now, too much, you know, like win, airdrop, meme coin, blah, blah, type of stuff.

17:50Once in a while, you have a project which has the opposite failure mode, or if not failure mode, because I don't think Zcash has failed at all, But rather, the reason that they haven't, like, they've been sort of shadowed by other projects is they were so academic, right? They were so academic. Like, you can overreact and be too non-commercial also, right? And it was good in a lot of ways. They nailed the cryptography. They were very smart. They were playing the long game, all that kind of stuff. But you need the right equilibrium, right? You don't want to be 2PhD.com. You don't want to be 2PhD or 2.com.

18:24You want to have the right synthesis. We're going to change that. Yeah, I think we're changing that. Right. You guys have Gen Z Cache. Yes, that's right. Tell me about that. Yeah. So I just thought it was a cool little... It's fun. Yeah. Play on words. So it's... Yeah. I think the idea is like, you know, a lot of things start from young people and then the older generations just like catch up, right? What are the five best Gen Z Cache videos or what are the best ones? Which ones did you bet? Well, do you remember? We did one with you. That's true. You know? We had the Z Cache Network State event here.

18:54Right. Yeah. Yeah. we did one with Hasib did a couple with Hasib the first one when Zcash was$30 the second one when it was$700 nice that's good he didn't buy well I mean I love Hasib obviously keep going I'm listening there's a few more interesting ones but yeah I think we want to ramp up start doing more so what is what are the themes of Gen Zcash the feed fun for sure we want to make it fun make privacy fun make it sexy, make it cool. And I think, yeah, educating, like, you know, you don't want to be like, you just want the user to know as much as they need to know. Like, that's why I love Zashi, right?

19:38Because Zashi, there's all these different shielded pools with Zcash that, you know, if you really wanted to dig deep, you could like learn all about them. And the other apps kind of force you to learn them. But Zashi, it's all just default into the shielded orchard pool, right? So as little information you need, but to use it properly, obviously, you're not leaking information anywhere. So I think educating about that, that'd be great. But one more question I had about, you were talking about Lightning and Bitcoin. Do you see a world where Zcash is sort of a complement to Bitcoin? It's a good question.

20:13Yeah, so the thing is, I mean, one thing to not underestimate is Bitcoin has an insane brand. Right. It has been, I mean, one way of putting it is there's a lot of people who are just now thinking about Bitcoin or whatever. And what they'll say is something like, Arjun, what kind of Bitcoin should I buy? Right? I'm probably, you heard something like that, right? So that is, another way of putting it is, for example, how many drone manufacturers can you need? I know Mach Industries, which is a small one. Yeah, but what are the big ones? Most people are getting DJI, maybe they can name Andro, right?

20:50Yeah, Andro. So you have to be really into it to be able to name like small ones. That's just probably a friend of yours. Exactly. So, but like to be able to go down the list of all the various drone manufacturers, it's like DJI is like Bitcoin, maybe Andrel is like Ethereum. It's a military drone, very different, but it's a drone manufacturer. And then like to know more than that, you really have to be in the space, right? So if you think about it that way, right? Like again, like most people, they name an AI, they'll name ChatGPT, right? And to be in the space to know Gemini and Claude, and you have to be really in the space to know like, I don't know, Sea Dance that just came out, this open model, or the Chinese Kling and whatever, you know, Kuen, DeepSeek.

21:29And so, that's a useful way of modeling. Another example is like, how many Chinese politicians do you know? Xi Jinping. Exactly, right? Can you name Li Chang and all the other people in the... Most people can't, right? So, that's a good way of thinking about how people from the outside think about crypto. They just know Bitcoin. They just know like the one name in crypto is Bitcoin, right? That's what like insane... like there's a power law on brand, right? So don't underestimate that. That's like a huge, huge, huge, huge thing. So because of that, number one, and Bitcoin is just insane ubiquity and, you know, like all that kind of stuff, I think Bitcoin will be around and do well for a long time.

22:07Also, there's an aspect to being public on chain, like transparency and privacy are actually both useful things, right? And for Bichelli to be able to prove that he has this amount of Bitcoin reserves is actually useful for him at times, right? If he can secure the private keys, there's a sense in which Bitcoin literally does become digital gold, right? It's something where if you use it to actually show your proven reserves, and then you need proof of reserves and liabilities in general, because you know it's not just that you have 100 ,000 Bitcoin or 10 ,000 Bitcoin, but rather all the claims on them add up to this, right?

22:45That's like another level of it. But at least proof of reserve shows you have something. And so there's a sense in which it's possible because transparency and privacy are both useful features. It's kind of like immutability and programmability are both useful features. So Bitcoin is immutable and Ethereum and Solana were programmable. Mutability, like in the sense of if you Google mutable state, that's like a core concept in programming. That's like the thing that Bitcoin doesn't want to do that Ethereum and Solana must do. But it's like these are both valuable things, immutability and programmability, but you can't have them in the same package.

23:19It's like, you know, I want to drink water. I want a warm fire. I don't want fire plus water because they annihilate each other, right? So you need to have them separate as things, right? So it's possible that Bitcoin, just like Bitcoin and Ethereum coexist because Bitcoin is immutable and Ethereum is programmable, Bitcoin and Zcash coexist because Bitcoin is transparent and Zcash is private. And you may want to have proof of reserves, right? Does Zcash have T-addresses? It does have T-addresses. That's true. That's true. You can do that. but there's something also where the total sum of Zcash can't be proven as easily as the total sum of Bitcoin maybe there'll be some cryptographic technique that does that which is probably possible but it's not quite as simple as with Bitcoin where you just download the blockchain, run a verifier sum all the chain tips and you get just how many Bitcoin there are that was a troll that people used to run on Ethereum they'd say, how many ETH are there?

24:14and they can show a script that just showed how many BTC there were. You can't say how many ETH there are. You can say how many transparent ZEC there are. And certainly that's an upper bound. You can also say how many shielded ZEC there are. You can see how many shielded ZEC there are. That's true. But it's a little bit less... Anyway, people can make these arguments. It's like a little bit less trackable than Bitcoin is. And sometimes it's a feature. So anyway, those are the benefits of an older technology are ubiquity, brand, and perhaps transparency. And we shouldn't underestimate that. I mean, one thing that's interesting is when Facebook was in its early days, and Twitter was in its early days, people said, oh, Twitter is just Facebook status updates.

25:03Because Facebook, there was a time when it said like, Arjun is, and then you could type it in a box. I don't know if you remember that. It actually is before your time. It was like five years before you were born or something, like three years. But 2004 to 2007, you had that. Like, Bology is, and you type something in. And then eventually the Bology is went away. You just type something in those tests. It'd be similar to a tweet. But it'd be like, Bology is, it was an update of AOL Instant Messenger. AOL Instant Messenger, you'd say, John is asleep. And that was like your away message. Or John is at the office.

25:36So you'd tell people where you are, almost like an answering machine message. So answering the machine message became an ICQ or an AL incident messenger away message, became a Facebook status update, became a Twitter tweet, and so on. That's the evolution of it, right? So the answering machine became the tweet. That's not the only lineage, but part of it. Point is, people thought Facebook can do all these things, Twitter can do only one thing, therefore Facebook will just crush Twitter. It turned out that the simplicity of Twitter meant to just build a community around it, right? That's the other thing that Bitcoin has, just this gigantic community, right?

26:07hundreds of millions of people, right, are part of Bitcoin. And like you could say, for example, that, I don't know what's a good version of this, like, I don't know, maybe El Salvador is a better Mexico, but how many people are going to move from Mexico to El Salvador? Community has a stickiness also. Of course. That's not exactly right, you know what I'm saying, right? So, yeah, I don't know what the future holds, but I'm pro-Bitcoin, pro-Ethereum, pro-Salon, pro-Zcash because we're still in this very non-zero-sum mode for a long time. All the intro coin fights, I think there's a healthy competition and so on.

26:45But I think this could be Zcash's moment. Let's see. Awesome. Cool. Thanks. Thank you. Sir. Great. Thank you, sir.