TOKEN2049: Bunker Mode?

Transcript

I mean, you [ __ ] come to my city and traffic is insane for like, you know, a whole week. >> And if you want 10,000 acres for Arthur Hayes City, >> we can do that. Even Squid Game is showing all the South Koreans killing each other or whatever, right? And >> how much by Joe is >> not a dividend. >> It's a tale of Tucoon. >> Now your losses are on someone else's balance sheet. >> Generally speaking, airdrops are kind of pointless. Anyways, >> unders trading firms who are very involved. >> E is the ultimate. D5 protocols are the antidote to this problem.

>> Welcome to the chopping block. Every couple weeks the uh now five of us get together and uh give the industry insiders perspective on the crypto topics of the day. So quick intros Tom the D5 maven and master of memes. >> Hello everyone. >> We got Tarun the gigab brain and grand puba at gauntlet. >> Yo >> and joining us again a token 249 tradition. We've got Arthur Hayes the arbiter of alpha at Maelstrom. >> Howdy. And then of course we've got Bology the Bitcoin Brainiac and obviously the head hype man at Dragonfly. We're early season investors in crypto but I want to caveat that nothing we say here is investment advice, legal advice or even life advice. Please see chopping block.xyz for more disclosures. So we are here at token249 in Singapore. It is I think at this point the biggest crypto conference

in the world. It's one of the only places where I think you still feel this kind of energy. Um and it's sort of like the US conferences have gotten very institutional. a lot of suits. This is like the one retail mega conference that still gets the juices flowing. How How have you guys felt about Token 249? >> I mean, you [ __ ] come to my city and traffic is insane for like, you know, a whole week. But >> it's not just us. It's like it's everything happening at the same time. You know, there's like five conferences happening. There's like milk in there's there's obviously F1 happening this weekend. So, it's not just us. Also, the air here is insanely bad for some reason.

>> It's like Delhi. It's bad. >> Yeah. >> It's the worst fire. Yeah, that's what I've heard. That fires in Indonesia. >> I feel like the uh institutional shift, you also feel it here. This is like the first year where there's been no like wrapped Lambo out front and it's like just everyone is growing up a little bit, which makes me a little bit sad. I I kind of was looking forward to more kind of jubilation. If there enough money, everyone's broke. >> There's one more day you could you can make your dream happen still. >> Yeah, that's true. That's true. The Lambos are tomorrow. Yeah. >> Um, >> you know, I have an observation by the way, which is I think crypto is sort of emanating western institutions, but eastern institutions are more functional, so they will survive.

Western institutions, financial systems won't. Anything that's holding a lot of 10 year, 20 year, 30-year treasuries, I'm sure Arthur has some opinions on that. They're wrecked. >> Fair enough. Well, I wanted to start with this story. So speaking of fires in Southeast Asia, the network state um has recently pulled the plug on its headquarters in Southeast Asia and is now moving to Kazakhstan. >> Well, so yeah, so we actually already moved >> already moved to Kazakhstan. Tell tell us the story of how how this all played out. >> So actually we we actually still have you know an office in Singapore and we're actually going to open up something else in Southeast Asia. So stay tuned on that. But basically Kazan, just to talk about Kazan, Kazan is going to be the next El Salvador, the next UAE, the next Singapore. And the reason

is um so first why was it off the radar, right? Well, there's a Barat movie which really misled everybody about what Kasan is. It's it's not you know you see a movie and you think okay it's like a caricature of reality but it's like in the ballpark you know but uh like Jurassic Ballpark you know you ballpark approximate it like the DNA in Jurassic Park but it's actually totally not. And really what Kazan is is it's land Asia. And you're all familiar with like coastal Asia because you know the way Americans or Westerners learn geography is America fights wars there. So like Vietnam, Korea, Japan, Americans know those countries exist, right? And they're on the coast, right? China also, you know, is a part of the Korean War, right? Singapore recently, Crazy Rich Asians, there's a movie. They know

Singapore exists. They're all on the coast. And Kazan is so far inland and it's adjacent to Russia and China. and it speaks Russian so it doesn't post in English right so for all these reasons you you know Americans don't really have a reason to go there plus Barat made it seem like it's not like a great place and so because of that it's like this encased in amber absolutely amazing country which is I would call it Singapore but with space to build so it has all of the quality of governance of a UAE or Singapore with really high IQ people and government like they're number one in the physics Olympi ads tying with China and India which is pretty legit as a Right. Yeah.

>> Wow. >> Yeah. >> With 21 million people. They're tying countries are 70 70x >> with 21 million people in Kazakhstan cuz it is an enormous land mass. >> Exactly. So there are 3,000 times the size of Singapore but only 3x the size population wise. So Kazakhstan is the place that if you want 10,000 acres for Arthur Hayes city, we can do that. >> Oh every corner. >> Yeah. You can get it and they'll want you there. Okay. And the people will love it. They want to build startup cities. They want to build crypto cities. In fact, they've got you if you come to network state conference on Friday, you're going to see a delegation from Kazan. Many senior ministers have come down. This is Kazakhstan sort of big thing on the world stage. Binance is now opening off Sarah Salana, you know, last year had a special econom Shervin

Pishar just is setting up there. Olaf has come up there. There's going to be a lot of things happening there because it has all the digital stuff that we know. It's got actually a really really good crypto law. Um it's it's if you want to build data centers, they've got the space. Texas is now banning them, you know, or stopping them. Kazan has the lowest energy and building costs in Asia because it's got like enormous amounts of it's like 40% of the world's uranium. So, it's got all the digital and all the physical. See, Singapore is amazing, amazing place, but doesn't have any land right? >> Or there's countries that have land, but they don't have great governments. It's very unusual to have both.

>> So, so when you left Southeast Asia, I remember you were you were sort of looking at many different jurisdictions to go to next. And I I think you might be one of the only people in the world who has done this kind of jurisdiction shopping under duress in the way that that things played out. What what was that like? >> So great question. So so the thing is first of all um you know 10 different countries bid for network school. Okay more than 10 in fact and we're going to open up nodes all around the world. We've clearly got something where we can print out Silicon Valley in a new place.

Especially with all the visas being cut off to the US. there's this flow of talent that wants to go somewhere and now it will go everywhere, right? And it'll decentralize just like crypto itself, just like our community here is whatever you know 50 passports in this room. Um that's something just like cryptocurrency doesn't map to legacy currencies. Crypto identity doesn't map to legacy identities, right? That's the next big step for us. You know, get out of your your currency, then get out of your legacy identity. Get a new passport. You know, second passport is much more important than the first home. So many of these countries that's Go ahead.

>> No, no, no. I mean, it's a that's a perfect biology. >> I think I'm more curious. What does like horse trading look like when you're shopping for a new jurisdiction? Like who's coming after you? What are the leverage you can pull? >> Good question. >> What do they offer? Like what do the offers look like? >> Yeah. Yeah. Yeah. So, so um without kissing and telling so to speak. Okay. Uh it's actually a lot like >> I'm just saying I'll give >> a little bit a little They'll like it. They'll like it. >> Yeah. It's it's it's like uh it's a lot like enterprise sales, you know. It's like basically as you ascend from retail to SMB to like enterprise to small governments to large governments. Small governments are actually a lot like enterprises. See the thing is this is one of the secrets. Ready? Most

countries are small countries. Okay? Most people have not actually made this graph. Take the 193 UN members. Let's use as an operational definition of what a country is. Okay? There's exceptions and so on, but let's use that. and you make a histogram of their populations and you'll find that half of them have less than 10 million people and like 20% have less than 1 million people, right? Only a small fraction of countries by number are the 100 million plus countries like Russia, China, India, America. Most sovereigns are small like Cayman Islands. You know the population of Cayman Islands? Who knows how it you know?

>> 50,000. >> Yeah. 70,000. Yeah, exactly. What's BVI? It's like 30K. Okay. That's smaller than Palo Alto. So the number one asset they have is a flag. Okay. And so the complimentarity between what we do, we've got these gigantic crypto networks, social networks. We're gigantic international networks, but we have no physicality. They are small states. They have physicality. They have legitimacy, but they don't have anywhere near the capital or connections in many sense of the term that we have. That's a really great deal to be done, right? A billion dollars goes a long way in a country with a h 100,000 people or a million people. It's like a thousand ahead, $10,000 ahead, right? So, you have a lot more leverage than you think.

And the key is to Now, here's the tricky part. You actually have to go to these places. And the reason you have to go to them is you have to just assume that Hollywood Hollywood is wrong, but you don't know what is right. >> You can't ballpark the >> Do you see what I'm saying? >> Yeah. And and here's why Hollywood is actually deeply wrong. Essentially, Hollywood doesn't show and I want to give the ball to you guys. I want to go to demopolis, but Hollywood does not show movies of prosperous non-western countries with the exception of Crazy Rich Asians. That's like, you know, even Squid Game is showing all the South Koreans killing each other or whatever, right? And and these are, you know, and the reason is it's depressing for Americans to see other people doing well. So even if you post a video of

like Chinese glowing cities, they'll be like, "Oh my god, they just put LEDs on their cities, right? They don't understand. You'll see this, you know, complete cope on on social media and it it neglects the fact that Shenzen basically didn't exist in its current form 40 years ago. It's like now they put LEDs on the cities. They built the cities, right? Um so the point is that without travel, you can't calibrate as to some countries really are bad and and you have the whole two by two, right? >> You think it's bad, it is bad. You think it's bad, it is good. You think it's good, it is bad. You think it's good, it is good. Literally, the whole 2 by two is there.

>> And you saw all of those when you were evaluating shooters. >> That's right. So, and that just means you just have to put a lot of miles and you actually have to see it on the ground. >> So, who are the folks who were you think it's good and is good? And who are the folks you you thought it was bad and they were good. >> Well, you know who's who's bad? I'll say who's who is who do people think is good and is bad? Yeah. >> Is Western countries. >> They were in Western countries also. they actually did on your network site. Do they want >> No, no. They what I mean is like they are they're in a bizarre. You know what it is? The the terms first world and third world are obsolete. I just think about it in terms of descending world

and ascending world, right? So the quote first world is like the fail son who's like inherited something that they couldn't build, right? The Brooklyn woke, you know, and they're like, >> "Oh, you were really trying to pry a list of countries out of you and you are not >> Come on, man. Who did you sing KTV with? How much by Joe did you drink? >> Zero KTV. Zero KTV. Absolutely. I'm half, you know. But but but >> it's not that much like enterprise sales. >> Yeah. What I'll say? >> Yeah. Yeah. What I'll say is countries under 10 million people, which is like a 100 countries really like, you know, a billion dollars goes a long way, >> right? And so I mean one of the things here's another way to calibrate it.

Okay, take your Twitter following, you know, Arthur, your Twitter following, make a histogram and and just, you know, AI can do this for you in a day. Take any country, take its legislators, its president and so on and compare how many followers they have to how many followers you have, right? Your visit to that jurisdiction will be the number one news event of their year. Okay? I I I re realize even for congressmen and senators in America, tech guys actually have much more distribution than you think. if you just took a liking to a certain politician and just wanted to retweet everything they did like I mean obviously you have to like there's no it's something where you actually actually believe in it right but you would be a very important constituent

for them you know you should live in the jurisdiction and so and so forth right so our you know like uh basically we radically underestimate our leverage >> is is the short version >> so apology has given us an experiment we have to go look at who's retweeting him to figure out the list of countries he won't pick the is but the the data is I I didn't make it that easy for you. >> By this time next year, we're each buying a politician in some random. >> No, no, no, no. It's not very clear. You're not buying a politician. I would what you're doing is you're actually making a capital investment in the country, right? So that's the thing is the ascending world countries are ascending world because they actually have a many of them are postcomunist or they're like in Latin America they're

post I don't know what you'd call it post drugs, you know, right? like like what uh Kelly just right post inflation in the case of Argentina right >> it's like everyone in the US keeps making posteconomic memes given some of the recent tweets we have and now we're talking about the post drug economy >> well actually >> I don't know if we have to hit the post drug >> okay it's actually interesting it's like like uh posteconomic normally means you know okay you're wealthy enough you don't have to worry about things right these guys are like sort of post anti-economic whatever communism was keynianism is is like anti-economics So the great thing about them is they have immunity. They have antibodies to all the communist Keynesian stuff. I love it so much. I don't have to explain it from scratch. We don't have to debate about

whether you know effort leads to results or whatever. So that whole part of the world, all those people, they're ready to do business. And here's the thing, you know, the best part, you go to these countries and there's multiple of them. They have murals of Elon, okay? They have murals of all the tech guys. They're not like trying to shoot at them or say the, you know, there's a saying a prophet is without honor in his own home. Okay, they love tech. Okay, Arthur, they'll build you a statue. >> Okay, I'm serious. They really will. If you find a country and you basically adopt it, right? I mean, you have to actually commit. That's what I think.

>> So, are you moving to Kazakhstan? >> Huh? Yeah. I I've already set up there. We sat up there months ago. >> Do you have Do you Is there a statue of you in Kazakhstan? >> Yeah. >> I never asked for a statue of me. I'm kind of a horse. statues crowd sourc >> statues. Arthur Arthur will have a great statue. It'll be like a Greek god kind of statue. So that's why I recommend >> Yeah. Like holding a long bow. I could see that. >> Yeah. Something like that. That's right. But but you know, I just mean as a figure of speech. The point being they will welcome you as opposed to throw malttoff cocktails at Sam Alman's houses, which they're doing in San Francisco. Right. So like, and to be very clear about this, >> some countries will welcome you depending on who you are.

>> Yeah. Look, there's a bunch of blue states that think billionaires should not exist, okay? And there's a bunch of small states that want those tech billionaires there. And so they're both going to get what they want kind of, which is blue billionaires will not exist, okay? You will not be able to be a billionaire in a blue state because they'll pass these taxes and so that's why Larry Page is out. That's why Sergey Britain is out. That's why Zuck is out. That's why Larry Elsa is out. That's why Elon is out. Teal is out. Bezos is out. Right? Ken Griffin is out. All them out of blue states, right? So those all just go to zero and lose their tax base and lose their billionaires and the losser sent to millionaires and so on. And where' they go? Okay, they can go within America, but actually the world's a lot

bigger than that. >> Kazakhstan. >> Kazakhstan. >> Oh no, he also mentioned teal. So Urguay, right? Paraguay and Urguay. That would be on the list. >> Okay, so Latin America. Latin America. Very interesting. Now >> do you have Latin American biders? >> What's that? >> Were there any biders who were from Latin America? >> Uh what can I say about that? It's a big Yeah, it's a big place like let's say let's say it's potentially >> potentially. Come on, right? >> Okay. Okay. We're not getting in yet. We're not getting the >> You know, he likes to go. >> Let's move on. Let's move on. Okay.

Okay. So, speaking of going to zero, one of the big announcements yesterday was this giant drop by OpenAI. OpenAI released something like 700 AI written manuscripts producing new mathematical results that they some of which they had formalized and lean some of which they just kind of had this I don't know AI slop that they published um there was a couple of really massive results in this drop uh one of which is considered to be one of the most significant results in the last 100 years which is known as the quasi reman hypothesis um there was some stuff about matrix multiplication uh there was some stuff about fast 4year transforms a particularly weird results I think in improvement in asmtotics.

It's freaked a lot of people out. And part of the reason why it's freaked a lot of people out uh is that of course there's this idea that okay, mathematicians are maybe now either obsolete or they're very quickly facing a complete change in what their job uh is going to look like. And uh it we're not immune to what's happening in mathematics because of course crypto is dependent on mathematics. And so yesterday, Justin Drake, one of the cryptographers at the Ethereum Foundation, he posted that it is time for crypto to go into bunker mode. Now, what is bunker mode? Bunker mode in his in his parliament, he's like, look, mathematics is now going into overdrive.

Things that took, you know, 5 10 years are now happening in days and we don't know what's going to change. Normally, a lot of the cryptography that we use in blockchains, um, they change over time, right? We used to use shot 2, now we use shot 3 in in Ethereum. You know, back in the day we use MD5 20 years ago. Um, and we move across uh cryptographic algorithms over time. But the pace at which we move is much slower than the pace at which this math is now happening. We had 700 drops in this open AI uh uh uh drop that sorry 700 results that came this open ad drop. There were zero related to cryptography.

That's really weird. It's really weird because probably the most economically significant part of math is cryptography and yet there was not a single result in cryptography which probably implies that there were some results but they didn't publish them because they may be doing some responsible disclosure or they may just be saying look this is so potentially damaging that we need to do some some totally different paradigm of how we deal with this. So Justin Drake's recommendation is that look, freeze. Do not move. Take all of your assets that are of any size and put them into addresses that have never signed any transaction because we don't know what's coming. And if a lot of the mathematics that undergurs blockchains like the discrete log problem, which is the foundation of public cryptography, if it

turns out that, you know, we don't have any proofs that this stuff is hard for classical computers. We're pretty sure it is because a lot of smart people have tried and they haven't been able to prove anything. Um, but that's true of a lot of stuff that's now falling in mathematics. And so the kind of pace that we used for crypto in the past may not be the right pace to think about what's happening going forward. And so his recommendation is this. We're now maybe going through a critical period and everybody should be a little bit scared. Um, how do you guys react to this warning from Justin Drake? So I think there's like two things that are a little bit so also by the way a lot of people had responses to this including Vitalik and others that were like this might be a little extreme.

I think the first thing to note is that most of the advances that people found are not like practical algorithms. They're generally like okay there's something that you learn in intro CS class that like you can't multiply two numbers faster than a certain amount of time. That's clearly wrong, but it also assumes that you have like infinite memory. So I think there's a sense in which the practical algorithms that break this stuff versus like the theory of like oh there exists an attack are actually quite there's still quite a big gap. But that said like practical when there's >> open AI has infinite comput resources to put at these things whereas if you're an attacker you don't >> you don't know how much I don't I haven't gone through this but like how

much comput did it cost for them to do each one of these discoveries have they >> I mean they said three hours >> they said three hours on average on average but that's we but you can you can now add up the 2100 hours right so it's not like that crazy I think the main or 21,000 hours the main thing I think I is worth thinking about is Okay, even if ECDSA breaks tomorrow, the question is like, can I forge a signature in X amount of time? Like there is some proof of work even if I know an attack, >> right? So let's say it takes 5 days to forge >> I think then then you have to be a lot more worried. But I >> but we're not going to know. How are we going to know? Who's going to tell us, hey, guess what everybody, ECDSA is

broken. What the [ __ ] do you do now? >> I would say also the rest of the financial system is broken first. >> Yeah. To be Yes. to be sure to it's not just crypto >> we have much shittier cryptography in most of tradi right and and so like at least cryptos in the open you'll see an attack there has to be some public sort of canary in the the coal mine but I I think like the the the bunker mode thing is also a little bit weird cuz it's like okay go to an address you never signed from well if they already broke the signature they found a reverse you know one-time thing to a supposedly oneway function you're [ __ ] anyway like who cares whether it's never signed for like even the known cipher text is not going to help you attack. So I think the whole

thing is like yes there is something to be afraid of but the thing to be afraid of is more that someone figures how to make these things practical quickly with AI versus like okay they found the theoretical attack but it's like 10 to the 80th the constants in front of everything are 10 to the 80th. We were talking about that yesterday, right? It's like >> I have se I have several Go ahead. You're gonna finish. >> That was We were talking about this yesterday, right? Like there is this a thing about humans and that they've overindexed on elegance in the answer, right? They want to make math have an elegant answer versus just like what's the most efficient answer. And I think that's the thing that we probably have that's the biggest philosophical difference that seems to be coming up.

>> So I have several thoughts on all this. The first is um this kind of drop of results is similar. You know, there's actually a journal called Romanogen's notebooks where people go through Rammonogen's old results and try to prove them and so on. And this is kind of similar to that where you just get these results dropped and then you have to try to figure out, you know, how it makes sense to them, how you relate to things. Number one. Number two is um I think crypto in the fullness of time, maybe it's the first hit, but it's also the one that survives. And I've been thinking about this for years, which is, you know, there's only really two large groups in the world that take the internet seriously, which are China and crypto because the great firewall and the blockchain respectively. Those are

defensive structures on the internet. The Pentagon, by contrast, gets hacked over and over and over again. OPM gets hacked. All web two systems, with maybe the exception of Google and Facebook that have the tokens to insulate them, are all going to get hacked. And web three systems by contrast have at least a live bug bounty where if they get hacked partially or what have you then their price drops but they don't totally die and the reason is they actually also have a social component that gets to the next point. One thing I think we might have to do is a new social smart contract among blockchains which is basically something as follows. It's like you use Ethereum and by using Ethereum you may have to ascent to something on chain that says if there's

a hack of this that or the other hash function or you know digital signature or what have you then the miners can rewind state to like something a week ago or something like that and all transactions are reversed and everybody has consented to that as part of the terms of service on chain. So there's no controversy as to whether or not you could rewind the chain. Okay? Proof ofstake chains can do that, right? They can do long range unwinding. Okay? And then other chains may decide not to do that, but that's a great thing about blockchains. You can have many different types of things like this, right?

>> I mean, that that was more possible, let's say, 5 10 years ago. Right. Now there's so many crosschain dependencies and so many other systems. Like if you're rewinding all these bridges, >> it depends what chain it is. >> Sure. Sure. If it's if it's like a Bitcoin style, like there's not a lot of state, there's not a lot of complexity, then yeah, that's that's doable. But like I think the reality is that any such unwind would be so damaging. And the other thing, too, is like we're really not ready for a new architecture. >> Well, it's damaging, but like it's always quantifiable how much money is lost, right? It's like some amount, you know, a crash in price. like okay whatever people lose whatever a million dollars even a billion dollars but then the thing I mean that's like um I don't know like the financial crisis of 2008

right the the people will lose money when financial things happen it's not going to be zero loss it's just going to turn out that that chain and people might have there might be a coin holder vote which legitimates whether that chain rewinding happens right but because maybe it's only >> post hack you can't do a coin holder vote anymore because the coins themselves or something. So that's what you have to contemplate that is it like the DAO attacker where they've got 30% of the coins and then they can corrupt it, you know, or or or maybe it's only the coins from 30 days ago can vote and so on and so forth and your old, you know, keys work. There's many ways you can do this as you start thinking through like the verticality of this and crypto is if there's one thing we're

good at, it's this kind of thing, right? This is the thing we are good at, right? And legacy systems are not good at this, right? Now the other thing I think is going to happen is this is going to accelerate the Ted Kachinskyification of a large segment of the population where there's a growing anti-tech move. I mean I I think anti-tech is the new anti- capitalism and it's morphed just enough evolutionarily. It's like a virus that's adapted just enough that it appeals enough to the right that it doesn't see it as exactly communist, but it's kind of a morph on communism where it says, "Look, there's all these crazy things that are happening with the emergence of all these technologies.

Let's just throw it all away and go back to living in the woods like men were supposed to, you know, and it's like a right. That's a that's a there's a it's very similar to the same romantic sentiment that accompanied the industrial revolution for many of the same reasons because people were in the middle of the disruption. everything was changing and and they weren't yet at a stable state and so a big part of communism was the rejection of all this change and there was a rightist aspect of that as well anyway point is a lot of people are going to be like I just want physical coins I just want to be offline everything I just want to be a caveman again why does my dig and the problem is that yeah you can you can potentially do that it's pretty hard to do that in our

our our modern world so much of the supply chain is is going to be digital so you're going to have this rage at at That's why like that's why I'm out here, right? Like the east will deal with it better because it's got a better social fabric. In the west there's, you know, America's got 300 million guns. >> Um, >> okay. Well, anyway, Tom, what's what's your take on this? >> Yeah, I think uh when it comes to anything like this or, you know, AI safety, I think looking at actions is like usually a lot more instructive than looking at words. It's very cheap to go in Bloomberg and, you know, get some eyeballs. It's it's another thing to, you know, I think of the anthropic safety researcher that retired about a year ago and said he's going to go live in the countryside in in England and

like write poetry. And I respect that and to my mind that that's kind of more showing action. And so for this, you know, I um I think I I take more worry when I see sort of large whales actually, you know, enacting this protocol and sort of moving on chain. And so I think if we see exchanges, protocols, large holders actually doing this, then you're actually like putting, you know, words, you're putting action behind your words. And then I think there's a lot more belief to it. But I think all a lot of the things kind of fall victim to this like Goldilocks idea. I mean, same with these like really elegant proofs of well kind of kind of like with Qday it's so far out we're going to kind of very gradual sort of heads up when in reality we've gone from you need a quantum computer to

maybe break ECDSA which is to it's you know 5 days with a you know commercial grade hardware to you know maybe 3 months from now it's you can do it on your MacBook. Um, and I think uh there's something scary I saw a couple hours ago Matt Green, who's a famous uh uh cryptographer from uh Johns Hopkins uh tweeted that he thinks maybe public public private key cryptography is over. Um and uh that was a you know again word talk is cheap but hey maybe he's going to put everything in in clear text from now on. >> To be fair he was he was fighting with another cryptographer in that thread about this.

>> I mean social media amplifies to be as just shock value as possible. So, >> well, I I think it's more funny that Vitalik had to write this post that was like >> actually don't listen to Justin Drake in like a different it was like it was like a longer post. >> Yeah. I I I think this is kind of the crypto equivalent to dumerism which is that like you know the people who are saying this like Justin Drake >> that's very good against Justin. I think it's it was I think it's good for him to I think it's very good that he wrote it. It's very good to float it. It's very good to argue and counterargue this very important point. I have nothing against Justin on this but but I thought it's clever. or cryptomerism is very >> yeah and and look the reality is that

even Justin Drake is not claiming that this will happen but he's saying that look the probability went from like 0.1% to like 5%. >> And 5% is enough that like you should probably get insurance against a 5% outcome that results in wiping out all of crypto. >> The thing about this is like one thing I do want to talk about is there are and it's and I was arguing this with Yowski years ago and I probably I should repost it now. There are hard bounds on what AIs can do. Why? um you can prove that turbulent or chaotic phenomena you can't forecast them out like no matter you know like like there's computational limits on how many time steps out you can forecast them given finite precision arithmetic um you know and then if depending on you know where certain you

know theorems are there's cryptographic systems that you also can't forecast out so there's like boxes mathematical boxes that you can put these AIs in that they can't break out of mathematical and in some cases physical limits and so a lot of people treat them as being completely omnipotent. they can crack anything but unless like there's an error in our derivation of a of a theorem which is possible right um >> well but the point is for public cryptography we have no hardness proofs >> like we don't actually have any proof that E >> well we have assume P's not equal to NP hypothesis then then you have a proof >> sure um but I think also I mean there was there was a bunch of these uh I think there were Chinese uh postquantum signature algorithms that were candidates for for postquantum

algorithms and some researcher basically disproved every single one in a single AI fueled uh data drop. So like the reality is that even okay you know we're not even talking about postquantum right because quantum is a lot of engineering problems not just scientific problems um but even going to postquantum it's like okay well a lot of these algorithms might just get busted over the next year or two in which case that also speaks to waiting longer for a postquantum transition if the the algorithms that we're considering right now we have we have very weak evidence that they're of of how robust they are unless they're purely hashbased uh algorithms which are >> there's there's going to be something where there's like a hackproof physical component to many things like you know basically that you know what AI

is like very strong in the digital world but not yet really strong offline it has to actually animate a robot animate a drone to go and do something right so like a lot of things are going to be ritualized offline kinds of things like AI makes the offline more valuable proof of human you know like in-person things become more valuable something I you I think >> but I I would add one thing which is you know most people in crypto they hear okay there's a quantum computer it's going to break ECDSA it's going to break integer factorization whatever but there are known money schemes that look like blockchains that use quantum states where you basically can't clone them and you get a very blockchain like no double spend properties in fact these were like

kind of theorized in the 1970s and only in the last like 10 years did people like make them kind of usable and So there are everyone's always like quantum computer crypto's over but there's also like quantum computer now I can have these much harder to copy physical states that you can generate secret keys on demand from and that stuff is actually much more secure than kind of our existing cryptography system. So I think you should be a little more optimistic that like if we have the quantum cure to break stuff there's also the quantum computer to to be the new money system. So, so something actually you just you're kind of properly thinking um a lot of blockchains may start to actually bundle an AI model with the node. Why? Because they'll throw some of the compute not just at

mining but at tokens to keep trying to hack the chain itself, right? Because you have a token budget for defense to try to find a compromise before the attacker does. And in general, it's not 100%. Obviously, you need to have better prompting and so on. But if the token budget for the defender is greater than the token budget of the attacker by 10x and the defender cares more, right, which it would, you take some of that crypto, you spend it on AI tokens, you spend some of the compute on AI tokens. You start bundling AI models with your nodes, right? With your Bitcoin node, with your Ethereum node, and so on.

>> So, this actually rhymes with what you're working on with Flop. >> Yeah. more like a summit layer, but we're not like bundling nose. But I know this isn't the problem we're trying to solve. Trying to be more a little bit less >> cryptography, more like what the [ __ ] are they going to spend? >> What are you doing? Can you explain? I I I don't I'm not up to date. What are you? >> So, basically, it's the flop network is we call it food for your AI agent. So, what is the payment network of AI? Our theory that should be whatever some currency that we create that's directly convertible into compute and that is what why you would hold it. Similarly, we hold dollars because we can buy food. So maybe it's self-reerential where it uses that compute to fortify itself.

>> Sure. You know. >> Yeah. I think it's the other way around. It's you, you know, bundle a blockchain with your uh with your matrix multiplication. >> Yeah. >> And basically like formal verification only gets you so far if there's like new math or what have you. But um but even still whatever the new model is, you know, you have some open router style model registry. Like it's almost like high frequency trading, right? As soon as that new model is listed, your blockchain has a token budget. It hits that, it asks questions of every single line of the codebase. Um, you're getting new prompts. Obviously, that's also an important kind of thing. And it's constantly trying to hack itself and patch itself before an attacker can kind of do that. And probably the defender

cares more. So, that's one possible model. A Gentic blockchain may actually be something very different than people think. It's not spending, but defending. Oh, there you go. Okay, good. Um, okay. Last story I want to touch on is there's been a another spat of recent shutdowns. So, just in the last week, we had Blast uh the the L2 that was uh came about after the launch of uh Blur and then Abstract, which is associated with Pudgy Penguins and that whole ecosystem also announced that they were shutting down. Um, naturally, whenever these things shut down, you got a lot of people getting mad saying, "Oh, you know, I I was farming this. I had points. You know, why why does this thing why are you doing this to me?" Um, but I think it's a sign of the times that we used to tell ourselves in crypto, it's like,

okay, well, we have infinite block space. We can create new ones on demand. It's so cheap. These things live on forever. They never shut down. And now all of a sudden, these things seem surprisingly terrestrial. They're they have these economic concerns of, oh, you know, the the the abstract guys were saying, you know, we spent tens of millions of dollars running this L2, and you know, where where's those tens of millions of dollars going? It's not on the sequencer. It's like on the indexers, it's on the integrations. It's on this on that. Um so, so how should we think about this moment with now it seems like block space is consolidating. Maybe we overbuilt and what does that mean for the future?

>> I mean when number goes down people leave period and a sentence. It's all about the price. Like look at the chart of any of these dog [ __ ] coins now. >> Well, abstract didn't they did do they have a coin? They didn't GG, right? >> I think they did. Yeah. >> Yeah. No idea. >> Of course. >> Yeah. But you were saying uh no one booked out Marquee. >> Yeah. So marquee last year was I think half a million sing dollars on like a random weekday minimum spend and it was fully booked all week last year. This year not a single booking and it was all shitcoin projects spending investor money um on marquee and you know average DJs.

>> Really? Really? Wow. >> Well so so first I want to say every it's really hard to build a company. So I feel bad for these guys. They got very far. It's much it's like many people die at zero. They don't even get to tens of millions of anything. So huge sympathy for them. props for them. The second thing is you can think of you know Carlo Perez's work on you know or have you heard the gardener hype cycle right Carlo Perez shows that goes back all the way to railroads and earlier basically you can think of almost every new market as a financial bubble that um incentivizes the search for like like web 1.0 was the search for Amazon right and then like web 2.0 was Amazon Google web 1.0 Amazon web 2.0 was a search for Facebook and and Twitter, right? And so

all of that spend and L2s and so on got you um Salana, it got you near, it got you stable coins, it got you all this stuff. And if you go back and look at all the money that was invested in web 1.0, it's like a rounding error relative to Amazon or to Google's market cap today, even even like inflation adjusted and discount rate adjusted and so on and so forth. Every failure was worth the successes by a lot, right? So it's like this giant parallel search of the world for what technology would scale blockchains. That was a huge deal 5 years ago and now we take that for granted that you can just blast transactions on both Ethereum and Salana for the most part. Right. That's >> where the L2s were a search for base and Robin Hood chain. So you're you know

you're 100% L on your portfolio is in the greater good. >> Yeah. >> Okay. Fair enough. >> Well there things actually on your earlier point there's one other thing in terms of these hack chains. um it's just going to mean diversification. I think there's like like with the math problem thing from earlier, I just want to make one remark. There's at least three approaches you can take. The first is go like mountain man physicality, right? Minimum necessary online and some people are going to do that. Okay. The second approach is actually to trust a government like the Chinese government that'll just reset whatever and >> we'll we'll run the chains for you.

>> Yeah. L2s are the ghost cities that that die and then get >> Yes. So, so basically, you know, you can trust fiat, you can trust physical, or you can trust multiple, right? So, fiat is like you're trusting like the Chinese government or some government. Physical is you're just going totally offline. You're only trusting like the physical world. And then multiple is you're diversified across multiple chains and maybe physical gold and maybe like Singapore dollars and so forth. So, if there is a hack, you're only losing like 10%. Or something like that, right?

Because now you have to reunderite your portfolio with hey what is the probability this actually literally goes to zero due to a hack then even if it's got the upside of 10x it's got the possibility of going down 100% so therefore I don't put it all in the best asset instead I intentionally diversify it on the on this way >> maybe the answer is we just got to go to like username password login for blockchains like like oath with Facebook >> well that would itself be >> okay what's your take Um yeah, it's like the Chinese ghost cities like there were too many that were overbuilt. There was a bubble >> then there was kind of tons of scams all the except except instead with the blockchain I can just shut with L2 at

least I can say bye-bye sequencer and that the entire town gets demolished. >> True. True. >> Right. Well, but look all those L2s were good because they kind of made Ethereum improve you know it was it was like not Okay. Not all L2s improved some. >> I say all when I say all I what I mean by that is the >> How much money did you lose on L2s? >> Zero. >> Zero. Okay, there we go. Very sick. Nothing of you to point out nice externalities of L2's >> fail. I mean, yeah, there's some positive externalities. Look, I mean, look, it's it's just >> Hey, I'm not a good I'm not knocking good investor, right?

>> That's true. I will say no look I I do think um there is a sense in which it's similar to Chinese go cities in that Ethereum really did encourage the creation of L2s right this was in a way kind of loosely centrally planned in Vitalic and the EF being like L2 is the solution everyone make an L2 and like almost certainly it was almost like hyperstitioned that there was going to be demand for all these L2s and that they would be cheap and efficient to run and it turns out they're not it turns out like every there's so many middlemen that like kind of take little pieces when you launch an L2 of pay us for indexing pay us for being included on coin market cap and defy llama and blah blah blah blah.

>> What's that? >> Oracles >> and oracle. That's right. That's right. That's right. And so like to be relevant as an L2 is actually quite expensive. And uh and that that probably explained a lot of the capital destruction beyond just >> but also like there are a lot of L2s like abstract and blast that were just like we copy pasta. We didn't really change much of the L2. We provided no technological innovation. Prodic innovation in terms of the fee fee model. Okay. Hey, what do you expect is going to happen? I'm just copy pasting a bunch of potential. >> But for Robin Train, that was the right answer. We don't need technology. They have clients.

>> They have distribution. They're bring distribution. Distribution is the innovation, >> but they're bringing that's bringing economic activity. These other ones were like, hey, if you build it, they will come. >> Like have the party at Marquee and maybe we'll have some clients. No. >> Well, look, the entire the entire L2 model was a thesis that was like, you know, I mean like Salana just disproved that thesis in many ways and then Ethereum responded. But but like you you needed essentially like a global search, a global draft to find the Anatoli who could code as well as you know Vitalic, right? And you know that was like otherwise it would have you actually needed that example of an L1 that could actually scale that then forced it to not be L2s. So you kind of just needed to run the experiment and see what

version was going to work. >> Okay, fair enough. On that note, we're at time. We got a wrap. Thank you everybody and uh we'll see you around in Singapore.