The privacy chain thesis, with a16z's Ali Yahya

Transcript

I strongly believe that in the near future we're going to have the majority of financial transactions in the world actually be driven by AI agents as opposed to humans. And it's impossible to imagine that that's going to happen on a wire transfers and swift and like the traditional financial rails. Whereas crypto it has all of the properties that that are perfect in order to enable AI agents to become economic actors. VC capital is coming back to crypto in a big way and privacy is coming with it. But what exactly does that look like? Which projects are trying to solve this?

And why should you care? Hello and welcome to the Milk Road Show, the podcast that knows that privacy in crypto means a whole lot more than just trading meme coins in the bathroom. I'm your host, John Gillan. Today is Tuesday, May 5th, and today we are joined by Ali Yaha. Ali is a general partner at Andre Horowitz A16Z, uh, where he invests in crypto, web3 technologies, and works closely with portfolio companies across the ecosystem. Ali is going to share a lot of great alpha with us today. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. Today's episode is brought to you by Cape, the privacy first mobile carrier, and Ferros, the layer 1 built for Real Fi. And without further ado, welcome to the Milkro Show. Ali, how are you?

>> I'm great. It's great to be here. Thank you for having me, John. >> I'm really excited to talk to you today. The big news out of A6Z, uh, just this morning actually, is that A16Z has launched a fifth fund, a fifth crypto fund, Fund Five. and uh you're going to be bringing $2.2 billion into A16's total committed capital of now $9.8 billion across these five funds. Talk to me about this fifth fund raise. What's going on here? What's the big takeaway from this? >> Yes, so two big things have happened in the past couple of years that have shifted the way that we think about crypto going forward. The first one is that infrastructure has now finally matured to the point at which it can support millions of users, if not hundreds of millions and even billions

of users. We went from the 10 to 14 transactions per second of the Ethereum and Bitcoin era to now being able to send any amount of money from anywhere to anywhere in under a second for under a penny. Uh and also being a being able to support tens of thousands if not hundreds of thousands of transactions per second. That's the first. The infrastructure has matured. The second is on the regulatory front. Uh we've uh made significant inroads into getting regulatory clarity both through things like the Genius bill which passed into law last year and provides a template and a legislative framework for how to think about stable coins as well as uh a lot of rulemaking from some of the uh some of the agencies uh the regulatory agencies about how to think about the

delineation between security tokens tokens that are securities and tokens that are not securities and should be treated as commodities which is also some of the underpinning underpinninging work into into clarity, the bill that's currently uh in the Senate uh that that will that will do what Genius did for stable coins for the rest of crypto. Uh so these two big shifts have happened. Uh that has led to enormous stable coin adoption from having $300 billion in circulating stable coin supply. We have something like $ 1.5 trillion in monthly trading volume which crucially has now decoupled from spot exchange volume which is a strong sign that this is organic adoption and it's not just fueled by speculation. And we also have

major financial institutions entering the space. We've got like Black Rockck uh launching Bidd, the first tokenized money market fund. We've got Fidelity doing the same with their own money market fund and testing its own stable coin. Visa is launching its own tokenized asset platform. And then of course major fintech companies like Stripe uh have acquired Privy and Bridge and are launching their own layer one blockchain like with with Tempo. Robin Hood announced that they're launching its own layer 2 blockchain. And the list kind of goes on and on. And I think that maybe the final very exciting trend is that we are beginning to see uh a very active intersection between crypto and AI with things like agentic commerce uh and uh and then using crypto as a technology for battling the problems of

deep fakes that the AI that AI brings. And so all of this has made us very excited to to raise a new fund uh for this next era. uh kind of the the goal and the objective behind uh this next fund is to help crypto graduate from uh the times when it existed in its cyberpunk niche into a mainstream technology that touches billions of people. >> Okay. Yeah, you touched on a lot of things there. I want to come back to these as we get deeper into the interview, but one thing that stood out to me in the announcement you guys made itself is that uh the founders we're backing with this $2.2 $.2 billion fund are going to be working on the part of the cycle that gets less attention and produces more of the lasting value and as you said like crypto as a as a uh

industry is is maturing and growing up. Talk to me about where that intersection is the the part that gets less attention more lasting value as you see it where is that right now? Yeah, I mean the paradoxical thing right now is that uh this is a time when the sentiment about crypto broadly is uh close to an all-time low and at the same time the fundamentals about the space that are at are an all-time high and again all the evidence that I kind of cited as I as I was talking about why raising a fund now there's never been a better time for the fundamentals in crypto even though right now it feels like like the sentiment is broadly negative. it doesn't get nearly as much attention as it did say for example in 2021. Uh part of that is

because AI is also sucking the air out of the room and that is a very exciting technology and rightly so. People should be excited but as a result it's a one of those quieter moments in crypto where where builders are just focused on converting the technology into products that billions of people can use. Uh and that's exactly the kind of founder that we are that we're excited to to back. >> If you're not seeing this, you're trading blind right now. There are real moves happening behind the scenes that most people don't see until it's way too late. Inside Milkroad Pro, you can track exactly what our analysts are buying, selling, and what's on their watch list before it moves. You can try it out for just a dollar for 7 days. The link is in the description.

>> Gotcha. Okay. So, I want to talk about some more of these things. And you know, obviously we want to be careful about compliance, so I won't make you name any specific names, but Ali, uh, one of the things I've heard you talking about as a a hurdle to, uh, crypto's adoption is this notion of privacy and offering privacy as a solution to a lot of these institutional players, as you said, who are now coming to digital assets. Uh, and you've said that this is going to be a defining moat in crypto is the ability to offer privacy and and bring solutions like for that to market. Uh, walk us through this thesis. Why is privacy becoming so important for this next phase of crypto adoption?

>> Yes. Uh well, the first observation is that uh we're now at a point in the cycle where block space is becoming a commodity and just launching a high performance blockchain is no longer really enough to be able to win in the competitive ecosystem of layer 1 blockchains. It is no longer differentiated enough. Blockspace is approximately the same everywhere. And then also because of the fact that we now have extremely good cross-chain interoperability protocols, uh it is very easy to migrate from one blockchain to another making any one blockchain far less defensible. So our our thesis now is that in order for a layer 1 blockchain to succeed in this new era, it has to have one of three things. It

either has to have an unfair distribution advantage and that could be because it already has a very broad ecosystem like the Solanas and Ethereums of the world are already very well established and therefore have an unfair distribution advantage or it could be because they have distribution through some other angle like through some maybe like a fintech company that's that's uh that's providing some of the distribution that the layer 1 blockchain will need in its early days. The second thing is uh like if you don't have an unfair distribution advantage, the second thing you could have is a vertically integrated killer application, right? So it could be something like a like an exchange that is built into the blockchain and provides value from day one. That could be another way that a blockchain becomes defensible. The third one would be a 10x better developer uh experience along

some dimension. So it could be a a better it could be like maybe a 10x better performance but more likely it's some other feature that other blockchains do not have. And I think the best example that I can think of this is privacy. Like privacy is it's a beautiful example of a feature that blockchains absolutely have to have in order for them to be adopted by by the mainstream that most blockchains today don't have at all. And it's really been an afterthought for most of the history of the space. And only now have people really started to pay much more attention to privacy as a requirement. So that's one of the reasons that privacy is essential like we we need it in order to bring uh the world's finance on chain. It can be a very strong differentiator for a new blockchain.

Additionally, I also believe that that privacy can provide a stronger source of defensibility for blockchains uh because of the fact that is much harder to migrate between chains that are private. As we were saying before, private blockchains that are public are really easy to migrate out of because of the fact that everything is transparent. Everyone can read the state. Every everyone can copy the state. We have very good uh crosschain interoperability solutions. So, it's very easy to port one application from one chain to another. When we talk about privacy chains, the state of an application and the state of a user's account to the user's balance is completely encrypted.

And therefore in order to migrate it from one chain to another you have to decrypt it and then re-encrypt it with the keys of some other privacy chain or in some other privacy zone. And the process of doing that always risks leaking metadata that may undermine privacy. So the switching costs are much higher is less likely that people will be willing to switch once they pick a a place like a chain on which they they want their private activity to happen. And as a result, privacy chains have a much stronger network effect than public blockchains which provide them with additional additional defensibility. And so this is why I think like privacy will be an important and defining um trend in the space and one of the biggest sources of defensibility for for an

infrastructure company in the space. >> Okay. I'm curious to get your thoughts on some of the ways this or what this looks like rather in practical use cases in products and some of these anonymity features. I thought a good way to ask this question, um, one of A16's portfolio companies, Alo, has a privacy stable coin, USDCX I believe it's called, which is now live. Um, and so I thought this might be like a a good example you could use to sort of illustrate for our audience like what are some of these features that are so important? What does this unlock? And and why do you see this as being like such an important thing to bring to crypto?

>> Yeah. Yeah, it starts from the very basic. Do people want every single transaction that they make to be visible to anyone who wishes to who wishes to look? The answer is probably no. Especially when it comes to sensitive transactions or transactions that that involve maybe your salary, right? Or the the payroll of a of a company or the treasury of a of a large corporation, uh kind of the money that's moved between different accounts in B2B relationships. All of these things are strictly confidential. There's very good reasons for why it should be private. it has been private for for the entirety like the history of of the financial the modern financial system. So there's just no reason to believe that uh that a world in which all of those things are

are fully public can can possibly work. Like it's inconceivable to imagine that the world's finance moves on chain if if that's the state of the world if everything if everything is visible by by everyone. So that's that's why it's so important. It's just it's a major it's almost an obvious I think it's been an obvious feature that that everyone has known is essential for a long time but because there were other problems that had to be solved first it's just been a bit of an afterthought until now. >> Okay. So let's let's talk about some of the things that are already in the landscape. I think you've kind of made a case for for why this is important, why these are going to be features and products that people are going to want to use naturally. Um but there have been privacy projects in crypto for a while.

There's been Monero, Zcash has gotten a lot of attention recently, but then we've also seen the recent launch of the Midnight Side Chain and Aztec network in Ethereum. So, just talk to me a little bit about the landscape of privacy solutions in crypto as you see it now and where you think there are still opportunities there. >> Yeah, well, I think one one interesting dimension to to talk about is is the kind of centralized versus decentralized access where there are there's a broad spectrum of different approaches for privacy. The most pragmatic and most centralized approach is one where you just trust a centralized party to sequence transactions to keep them private and to then settle them on chain. And you get some of the benefits of using a blockchain because ultimately

transactions do get settled on a blockchain and they're not reversible uh after the fact, but you still have the trust in a centralized party to to both sequence those transactions and and make sure that privacy is preserved. So that's one approach. there are many projects that are following that path. Uh it is pragmatic and it does it has the benefit that it's easy for those for those projects to satisfy the requirements of major institutions that need a little bit more control and want to rely on a human organization to actually do what's needed for for their own compliance requirements. Maybe more in the middle of the spectrum uh are the approaches that rely on trusted hardware. So processors like so chips chip manufacturers like Intel uh usually

embed into all of their chips uh what's known as a trusted execution environment which is a a kind of quarantined area of the chip where private computation can happen that is much harder to access by any other software that's running on that same machine. and accessing it or breaking into it really actually requires physical access to the computer to the actual chip in order to be able to read the underlying data. So that's a better security model uh that makes it harder for example for a rogue employee at a company to just decide that they want to read the database and exfiltrate some of the private data of the transactions that are happening on the on the chain. with something like trusted exe execution environments that

becomes much harder because that employee would have to then go and break into the data center and then rip the chip out and then or be able to examine the chip physically with advanced tools to be able to extract the data. Uh you're still trusting a centralized party. So this is why it's in the middle of the spectrum. And then far off in the more decentralized permissionless side of the spectrum, you have the cryptographic approaches that rely entirely on cryptography to maintain privacy of transactions. And and they use uh zero knowledge cryptography, which is this kind of sub field of cryptography that's had very significant recent advances in the past decade or so where where really the only thing that you're trusting is the math. It's just the the fact that the the cryptography if the cryptography is implemented correctly then you you have a guarantee

that things are private end to end. >> Ali you work with a lot of investors and builders in the space portfolio companies and a lot of them are asking questions about privacy and trying to navigate this like you said this spectrum of potential solutions. How do you advise investors and builders in the space to think about their own approach to privacy solutions and just like how do you guide people through evaluating where on that spectrum they want to fall and just like yeah how do you how do you approach those conversations? >> Yeah, I mean I think it largely depends on what is the ultimate use case and I think that ultimately dictates that the amount of flexibility that you need. Uh it also will will influence that the the rate at which you can go to market. You can have a product that's live that that

actually works. uh it it may not be a bad strategy to progressively move along the spectrum where you start with a few more assumptions, more trust assumptions initially and then as time goes on you you add a little bit you layer on technology to reduce uh the trust and centralized parties uh and eventually maybe the goal is you you're fully permissionless and and um and censorship resistant. I think one one thing I believe strongly is that it is important for that whatever privacy mechanism companies use to be fairly programmable and flexible because every institution that wants to use a blockchain has bespoke requirements from from compliance to just sort of their internal controls their desire to

control the the infrastructure on which they run. uh and they will want to express their own rules as to how privacy is managed and under what conditions privacy can be unveiled and and like be able to comply with say a subpoena from the government. All of these things are are things that they should be able to express in a rich programming language to be able to kind of satisfy all of their requirements. And if the privacy model of the underlying chain is one sizefits-all and is not really programmable, it's going to be much much harder for institutions which have any requirements that are not the one size to really be able to adopt the technology.

>> Your phone carrier knows more about you than your best friend does. Where you go, who you call, when you sleep, and they're selling all of it. AT&T, Verizon, T-Mobile, they've all been caught leaking data or cashing in on it. [music] And your VPN, your encrypted messaging app, they can't fix what's broken at the network level. That's where Cape comes in. Cape is America's privacy first mobile carrier. Same premium coverage you'd expect, built with privacy from day one. Your phone's network identifier rotates every 24 hours, so you look like a different subscriber every day. Call logs are deleted after 24 hours. You get two [music] encrypted secondary numbers for signups and 2FA included in your plan.

Plus, SIM swap protection that puts you in control of your number, so no one, not [music] even Cape, can hijack it. Use code milkroad at milkroad.com/cape for 33% off your first [music] 6 months. Trillions of dollars in real world assets are stuck offchain. Real estate, commodities, private credit, all locked behind outdated systems that weren't [music] built for a global 24/7 economy. The fix, bring those assets onchain. Problem is, most blockchains weren't designed for that either. Feros [music] is. It's a layer 1 purpose-built for real, a real world financial infrastructure that lets assets [music] be tokenized, verified, and traded at institutional scale. We're talking parallel execution for serious throughput, [music] compliance baked in from day one, and infrastructure that actually connects onchain and off-chain

systems. They've got a $10 million incubator [music] backing builders who want to make real a reality. Join the Atlantic Ocean test net and start building [music] at milkroad.com/faros network. >> Okay, so pro programmability, composability, maintaining a lot of these features is important in whatever solution you pursue and the use case is going to dictate a lot of that. Uh Ali, I want to go back to something you mentioned earlier in your answer. Um which is that stable coins are no longer just being used as infrastructure for crypto markets, trading and and speculation on on you know digital assets. They're becoming a globally accepted and integrated payment solution. You know the genius bill you pointed to and growth of stable coins has been really really strong here. How

do you see this uh growth of privacy solutions and need for privacy solutions as being a like uh an accelerant or a necessary part of that continued integration and adoption of stable coins and what does that look like as that continues to accelerate here? >> Yeah, I mean I think that again I think privacy is is the essential missing component in order for for stable coins to really become become mainstream. I think in a world where we do not have privacy, all stable coin use is is limited to to the kinds of transactions that people don't really care about because if they cared about them, they probably want some level of privacy uh on top of them. It's also I think it's also the case that that without privacy, you end up relying much more on centralized parties to provide a pseudo

form of privacy. Like for example, whenever you send uh stable coins to Coinbase, Coinbase actually mixes all of the stable coins it receives from all of its users internally uh such that it becomes somewhat difficult to know which user each of those stable coins corresponds to and that that provides you a kind of faux privacy but it relies heavily on the trust on Coinbase to do to do that work and it undermines the entire point of of crypto. you have to rely on such intermediaries to provide you with the privacy that you would that you you would otherwise need. So I think that the privacy is kind of the essential component that actually allows the space to realize its its true OG cyberpunk potential by allowing you to

actually hold currency that uh is yours directly. uh that you're not trusting some third party in order in order to believe that it actually is yours and that you could send it to you could send it to anyone in the world whenever you want without having like any kind of a concern that that someone is someone is kind of looking over your shoulder as you do that. >> Ali, something we've been focused on a lot here at Milk Road is this intersection of AI and crypto. I know A16Z has been focused on this as well. I'd love to get your thoughts on this. You maybe just to set the table here of what you see happening at this intersection and what what you're excited about that's going on right now.

Yeah, I think it's becoming very clear as as agents uh continue to evolve uh and as we continue on this relentless exponential curve that we're on in the AI world that uh that agents will at some point need to go from being just tools that humans use to becoming full uh like first class members of the financial system and economic actors. So there'll be some transformation that that that has to happen. Uh I fully I strongly believe that in the near future we're going to have uh the majority of financial transactions in the world actually be driven by AI agents as opposed to humans. Uh and it's

impossible to imagine that that's going to happen on a buyer transfers and swift and like the traditional financial rails. Uh whereas crypto I mean crypto is a a global system that is instantly settled. It's a financial system that's instantly settled that's that's that's global from day one. Uh that is internet native. It's fully programmable. It has all of the properties that that are perfect in order to enable AI agents to become economic actors. Uh so that we're very excited about that trend and there are there are countless portfolio there are a few portfolio companies in our portfolio that are already working on that problem specifically and there are many companies out in the out in the wild in the ecosystem that that are that

are kind of working in adjacent areas. Uh and it's something that we we're excited to continue to invest in. you specifically have been very vocal about the fact that this is happening at a much faster pace than most people were expecting. And I'm curious to see just to hear um what are some of these near-term breakthroughs or just rapid changes to adoption that you think is making this time horizon shrink to where like you said we get to this world where we have fully autonomous agents being economic actors in the in the the financial ecosystem happening like why do you think this is accelerating so quickly so suddenly?

>> Yeah. Well, yeah, I actually I so you I used to come from the from the AI world before ANCZ. I worked at Google Brain um and was actually at Google Brain sitting right next to Daario and Ilas as Kever and Chris Ola, some of the founders of OpenAI and uh Anthropic and even though I didn't work closely with them, I got to know them a little bit throughout that time. And then I then in 2017, I I made the decision that that I wanted to spend the next decade of my life at least uh working on crypto. And it's very interesting to see these two worlds now recon converge and start to intersect. Part of the reason why I think this will happen more quickly than than most people think is is just the visceral experience of the exponential

on which AI currently is. I've been spending most of my nights and weekends uh using AI tools to write code and it's I'm absolutely baffled by by how powerful these tools have become to the point that that right now as a full-time venture capitalist who only has something like maybe five hours a week to spend in my free time to vibe code. I am more productive as an engineer than I was as a full-time software engineer at Google. So that's insane. And then and the also the rate of progress has been crazy that the the the degree to which these tools have gotten better since since last year is is just completely mind-blowing. Um so I think if this continues, it's very clear if you're if

you're kind of riding this wave and you're experiencing it viscerally, it's very clear that that agents are are going to be extremely powerful and in in the short term are going to be be much much more capable than they are today. Uh, so it's not hard to imagine a world where you have an agent that has a crypto wallet that is able to pay for things, is able to get paid for things, potentially is able to raise money, maybe uses X42 endpoints to buy compute and buy data, and is a self-sustaining entity in the world that creates value and maintains itself that stays alive through the value that it creates so that it can continue to fund its compute and its its own survival. So that idea, that's a very sci-fi idea and it sounds impossible and I think if you were to

hook uh Opus 4.7 or ChatgPT 5.5 into that setup today, it wouldn't work. It would probably get prompt injected. It would probably get attacked or it would just run out of money and it would it would essentially die. But I think given this exponential, give it two years, I don't think it's unrealistic that we will have uh extremely agentic um entities out there that are driven by AI that are essentially kind of like AI companies where where the founder is an AI agent uh that are creating value in the world and that need some of the crypto infrastructure that we're building in order to be able to really participate in the economic economic environment.

>> Gotcha. Okay. So this time horizon has shrunk to a matter of a couple of years as opposed to decades. What does it look like as we start to shift towards blockchains as being the settlement layers for a lot of this agentic economic activity and just talk to me about how you see some of the the risks and opportunities that come from having a lot of AI agents adopting crypto all at once in just a couple years here. What does that look like for you? Yeah, I mean I think some of the some of the important questions are how do our existing legal frameworks adapt to a world where some of the actors on the internet are no longer human? They're they're essentially agents that maybe in some cases are acting on behalf of humans but perhaps fairly indirectly maybe not they're not directly connected

to any one human being in that world. Uh how do our legal frameworks adapt? What does KYC mean in that world? Is it is it still KYC? Is it KA to know your agent? How does liability work? Uh what are the safeguards and breaker switches that we have in place in order to prevent bad things from happening? All things that I think we can figure out and people are working on. And I think that will be kind of the process of of us adapting to this to this new era. uh but but I think that the power that that uh crypto is able to provide an agent such that it can it can kind of take matters into its own hands to a far greater degree than when just doing the bidding of a human who's just prompting it uh in a much

more in a much tighter loop is just very exciting like the realm of possibilities is huge >> right and we're still figuring out what that looks like um in this environment right where we have a lot of AI agents operating autonomously on chain doing all these kinds of transactions activity and and whatever else they end up doing. Uh investors are wondering I think a lot right now of where value occurs in that environment and and where investors should be you know positioning now to sort of capture that upside as that starts to happen here. How do you guys think about that from your perspective and and what are some of the like competing like uh thesises that might play out there?

>> That is yeah the million dollar the billion dollar question. >> Trillion dollar [laughter] >> trillions. Yes. Yes. >> Uh it's yeah I mean we we have these debates internally all of the time and I think that that there's always you can make arguments that are fairly strong at every level of the stack. You can continue to argue that the infrastructure layer will capture a lot of value because the infrastructure has strong network effects. Uh especially again if you have things like privacy that that provide you with additional sources of defensibility. You could imagine that uh layer 1 blockchain protocols capture a lot of value. Uh there are also uh protocols that run on top of blockchains. things like uh D5 primitives that themselves also have their own uh level of network effects.

So you can think of uh lending protocols like morpho or a uh the fact that they have integrations into a bunch of other protocols and applications and the fact that they have a liquidity network effect where those are the most liquid markets for borrow lend um onchain. Uh those things have defensibility as well and are able to charge a name on all on all uh lending that happens on their platforms. likely a good source of value capture as well. I think that the application layer I mean historically in tech having a direct relationship with the end user has always been a very powerful position to be in and and also always has historically led to opportunities for value capture and I think that will likely to be will likely be true here as well. So those building

applications that actually touch the end user whether the end user is an institution you're building a product that an institution will adopt perhaps it's a it's a solution for a fintech company or for a bank or some some other uh FI or uh whether it's for a consumer for whether it's just for for retail both of those likely likely are in good positions to capture value as well. Uh so we believe there's kind of opportunities across the board. We're excited to invest uh at every level of the stack and we are not too opinionated about where all of the value will go because uh we were humble enough to know that that this a very difficult thing to predict uh and it's it's just very easy

to be wrong. >> So with this fund five you know you just laid out I think very persuasive thesises for investment at a lot of different levels here. where is fund five focused or like you know what niche what what theme where are you focusing the capital from this specific race? >> Yeah. Well, I think the two biggest trends that we see now where where a lot of the founders are are currently focusing are the intersection of crypto and fintech. Uh you can go as far as to say that that there will be no more fintech without crypto. Uh that fintech is crypto now. And uh and that as a trend I think is is really is really growing. Uh we've seen lots of founders who come from uh fintech companies from before whether they're like successful

former fintech founders or whether they come from uh fintech companies like Stripe or Robin Hood and are leaving and now starting a company that's that's uh that's kind of crypto- centered. So that's the first. The second one is this intersection we've been talking about between crypto and AI uh and uh supporting this next era of financial activity that will be driven by agents as opposed to humans. The other angle by the way in the crypto AI intersection is that uh crypto is a really good solution to some of the problems that AI uh introduces as a side effect. Deep fakes, for example, one of the best solutions for deep fakes is proof of humanity. And we have a a company in that in that category uh world, which has built a technology that allows you to prove your

humanity uh when you are online and interacting with other people uh online so that others know that you're you're a human and not a bot. So that whole intersection is fairly interesting and those are the two big trends. But we we are also interested in some of the frontier ideas. we we usually will we'll always invest in the best founders uh and are less opinionated about the specific category that they may be working on. So for example, if we were to meet a great founder who wants to build another decentralized social network, we would be happy to invest and we'd be happy to to back them in their in their journey. uh because we believe that those ideas are are likely still going to work and it's just that it was the wrong time when they were tried

before and they may it may it may just be that the space needs to mature a little more before we get we get to those to those kinds of ideas. Um and so we're still kind of open open for business for for founders who want to explore those areas. There's a great line in the big short that Michael Bur says, "I might be early, but I'm not wrong." But sometimes in investing, being early is the same thing as being wrong. And it's really refreshing to me to hear this that you just think some of these ideas were early, but they're they're not going to be wrong. Um, and I like the the the the view that there's a lot of opportunity across all these different themes, and I'm glad you guys are exploring all of that. Um, I I want to ask about the Clarity Act. You talked

about how the Genius Bill becoming law unlocked a lot of things for stable coins and use cases there. clarity seems like it might become a law here in the near term future. Uh what are from from where you sit? What are the things that this bill is going to unlock that you're most excited about? Where's the big opportunity that comes after clarity becomes law? >> Yeah, in our view uh clarity will do for uh the rest of crypto what stable what uh Genius did for stable coins. And with stable coins being just say 5% of the market, uh clarity is 20 times more important because it addresses the other kind of 19 uh sort of the other the other 95% of what crypto what crypto is.

And but and I think just to just to for for folks who don't know what clarity does is it provides a framework for how to think about whether a token a network token in the space is a security or a commodity. Um, and that's like the most important distinction from a regulatory standpoint. If I launch a token, am I subject to securities laws? This is a question that founders have had uh forever uh since the beginning of the space and clarity will finally give a very conclusive answer that provides clear rules for the road for founders who are building in the space. So, we're still very optimistic that uh in the next in the next month or so, in the next few months, clarity will we'll make it past. We'll kind of get to the finish

line. And I think yeah, that will be that'll be hugely beneficial for the space. >> The way we build wealth is [music] changing. Stocks, savings accounts, real estate, that playbook is getting rewritten in real time. Nexo is the platform built [music] for what's next. It's an all-in-one digital wealth platform where you can earn interest on your crypto, borrow against it without selling, and trade [music] a wide range of assets all in one place with 24/7 support and institutional grade security. Oh, and by [music] the way, Nexo is back in the US with new US clients getting 30 days of Wealth Club premier access. That means elevated interest rates, lower [music] borrowing costs, and crypto cash back on trades.

Benefits usually reserved for loyalty program members. get started at milkroad.com/nexo. >> Okay, so we've talked about a lot of the things that you're looking forward to here. I think a lot of people are still struggling with something you mentioned in one of the earliest answers you said in this interview, which is that sentiment right now is pretty terrible, but the fundamentals have never been stronger. The institutional investment, the capital that's coming into crypto has never been stronger. Where do you see these two things like realigning? When do you think we're going to finally see some of the sentiment, some of the interests um from retail, from other people in the market really kind of come back to crypto and recognize the value here? Or do you think we stay in this bearish period for several more months or years? What's your outlook on that?

>> It's always mysterious uh how markets work. >> I think my my theory is that the thing that we have to do as a space is to fix the broken culture. Uh and the culture became what it is largely because uh the previous administration and its hostile uh regulatory position against the space was destructive because it drove out a lot of the legitimate founders from the space and and kind of pushed them out whilst um empowering or or simply simply allowing some of the some of the scams and frauds that that I think dominated the space for for quite some time. I mean I mean you could think about it as a thought experiment. If you're a very

smart person who's graduating from a top university or leaving a big tech company and you want to start a company and you have Gensler as the as the as the head of the SEC, do you do you risk it and spend uh potentially five years or more uh defending yourself against a hostile government who's trying to kill your company or do you go into AI? It's just a difficult choice to to go into crypto uh if that is the landscape into which you're launching your company. So that I think uh was very destructive for the space. I think it it it led to just things the fact that they went after things like Coinbase and Uniswap but did not go after FTX was was very destructive for the space and I think uh

caused the the only things that that uh seem to gain traction to be things like memecoins, the casino side of crypto and really pushed out all of the more exciting use cases to the fringes. Uh so I think in order to get the sentiment to turn around, I think that's one of the key things we need to fix. We need to fix the culture. A lot of that will stem will stem from regulation. If we if we've got the clarity bill passed into law, if that legitimizes the space in the eyes of many more people. If through the adoption of stable coins by large financial institutions and by fintech companies, eventually we get to hundreds of millions of people, billions of people using stable coins on an everyday basis. If it becomes very obvious that that is a real use case, that it's not

just casinos, it's not just scams, it's not just frauds, then that I think will allow the the culture to begin to turn, it'll I think excite a whole new generation of founders to start new companies, new products to maybe explore some of those other ideas that were too early and try them again. Um, and I think all of that will then feed back into the sentiment about the space and the market. And I think this is the way that things come back. >> I really appreciate you sharing that outlook and all of your thoughts on this. I want to end with something that a lot of our audience is paying very close attention to right now, which is that Bitcoin has reclaimed 81k for the first time in months. Uh, are you bullish? Are you bearish? I know you don't get fixated on prices too much,

and I don't want to get you in trouble giving a specific prediction, but are we going to break out or break down from here? What's your outlook in the short term for Bitcoin here? >> Crypto. >> Extremely bullish. >> Yes. [laughter] I mean, I do think it is one of the most underrated. >> Exactly. It is. I one of the most contrarian bets to make given again the sentiment is low, fundamentals are strong. I think I think it's an undervalued category of technology. >> Aliya, A16Z, a lot of great things going on. Thank you so much for being on the Milk Road Show and sharing all this with us. Where can we send our audience to find more of you and your work online?

>> So, we at azcrypto.com uh and then we're all on Twitter. We have you have my handle on the screen. Uh all of our partners work kind of very actively on X. Uh so, come find us there. I have interviewed several of your partners. You guys are doing great work. I'm always happy to talk to you all. I hope we can have you back again soon. >> I'd love that. >> Thank you all for joining us. I hope you all learned something today. Until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of the Milkro Show. Thanks for joining us everyone. Bye. Want insights on what's moving crypto markets and how we're [music] trading each event? Subscribe to our channel and join the Milkro Daily and Pro Newsletters and start investing like the top 1%. [music]

This show is for educational purposes only. Nothing we say is financial advice. Investing is risky.