I don't think the tokenization story is well understood - so let's break it down Basically - the US Government is in vast, unprecedented amount of debt. And its long term debt is selling off a lot (40%+ over 5 years) - while Gold is up 140%. Gold has crossed US treasuries as the #1 asset held by other Central Banks. The buyers for US debt - China, Japan and Europe are stepping away for different reasons. Geopolitical conflict. Currency related. Political difference. The government is afraid of running out of buyers for its debt. And it's worried about the liquidity of markets. Historically, this concern is much worse when the Fed is hiking and there's high inflation. As typically the response to unstable debt markets is easing (buying debt). Therefore, the US government is very incentivized to allow Stablecoins. Stablecoins hoover up US debt. Tether has different balance sheet behavior than banks and works closely with the US government. Stablecoins used to be assumed to be criminal operations and were prosecuted by the USG. Now they're welcomed to Washington DC. When you are worried about your reserve currency status, you also want to ensure the dollar is accepted in many places. So stablecoins not only serve as a buyer of US debt, but a promoter of the US dollar globally. Enter CBDCs. Europeans see the US government promoting US dollar stablecoins as a matter of foreign policy. Visa and Mastercard going heavy in the space. And see Tether freezing Balances along with the DOJ and say, "We cannot have this. We don't want Trump to be able to use the US dollar in negotiations with us. Therefore we have to digitize our currency" Europe and the UK also have fiscal and political problems. So the perverse incentive to digitize their currencies is not just to ensure 'monetary sovereignty' but also to potentially implement wealth taxes, or balance based transaction taxes. This is also the flip side of wide adoption of US dollar stables. We don't call it a CDBC, but its basically an extension of the government. Balances are frequently frozen. Other policies could be implemented under the left. So rising global debt -> US support of stables -> pressure on Europe to do CBDCs to respond. The US is then incentivized to grow the stablecoin market as fast as possible. Stablecoin's usage is primarily driven by speculation. Holding it as collateral for perpetual swaps. Keeping it on exchanges. The problem: crypto doesn't have lots of good assets to trade. Bitcoin has been very volatile. Most altcoins collapsed. This slowed the growth of the Stablecoin market, which has basically flatlined year to date. Scott Bessent wanted us to be going at 40-50% CAGR not 0. The question then, is how to create appealing speculative markets. The answer: on chain stocks, and prediction markets. Big picture, if you want a lot of stablecoin balances. You need to have good things to trade. Over the past 6 months the 2x leveraged Micron ETF traded more than Bitcoin in dollar terms. Trade XYZ launched commodities, and stocks and commands a large % of volume on hyperliquid. Prediction markets are growing fast. The losses incurred by retail investors in these markets are substantial. They are allowed for the same reason Casinos are allowed on Native American reservations. Necessary evil due to funding pressure and the geopolitical factors I described above. This is, at a high level, why we are talking about crypto in the middle of a war with Iran. And why its' consuming the executive department's attention. The US Dollar is ultimately a matter of national security. This is true regardless of whether Democrats or Republicans are in power. Both have debt and spending addictions. Both are reliant on the US Dollar. But now zoom out: what do you have? You have a bunch of governments adopting digital ledger technology in the middle of a war. Freezing peoples balances. People don't want their balances frozen. They don't want it to be subjected to a wealth tax. Enter Z Cash. Over the past 5 years, ZK technology has improved substantially allowing fast, private transactions. Orchard and Halo since 2022 evolved from something Niche to something usable. The EU tried to ban Monero. Exchanges delisted it. Its price increased. Z Cash is open source. Vitalik is also prioritizing adoption of ZK technology on ETH. You can move ETH relatively privately on Railgun already - but real private transactions are on the roadmap. ZK proofs can be accelerated by GPUs. Due to the AI boom, the number of people with access to GPUs and agents capable of accelerating proofs has skyrocketed. Not only can this technology facilitate private transactions but also proofs of reserves that allow trustless accounting for portfolios. This tech is commonly used at crypto exchanges to prove reserves, and algo stables such as Ethena. Thus - it's not just that we are set to own a bunch of shielded Z cash, as a base asset. It's that you can swap anything on ETH privately. Including stables. Relatively soon. And you can do so for provable reserves. Privacy is incredibly important for large institutions doing financial transactions. They're not concerned with the tax authorities, but rather front running. Slippage. And people hunting their positions or slow moving exits. Many big institutions own multiple days of volume in equities that could drop the price 30%+ if the market sniffed out they were selling. And intervene in FX markets, routinely interacting with banks fined billions of dollars for illicitly trading ahead of their flows. So a meaningful increase in tokenized trading volume inherently will require privacy. As real institutional counterparties require it. Retail is a great market and is less privacy sensitive, allowing initial growth. But for the big players to enter -- you need that. It's not just trading desks that care about privacy. You cannot run corporate treasury functions publicly. People could sniff out that you're doing M&A, or figure out what you're doing -- giving up competitive positioning unnecessarily. At the same time blockchains can offer corporations major cost savings for finance functions. It's estimated - for example, that a properly implemented CBDC could save companies in Germany billions of dollars a year in corporate finance banking fees. There are three basic approaches to Privacy. Z cash style. Private, permissionless neutral chain. Canton style: basically segregated databases that interact with each other on chain as little as possible with a permissioned validator set. And private blockchains - which simply deal with the issue by not having a public ledger or bolted on cryptocurrency people are tracking The argument for a permissionless neutral chain (aka a cryptocurrency) winning is that 1. there's no real reason to trust a banking consortium (i.e. what Canton does) 2. governments hate each other and are only doing CBDCs out of geopolitical pressure in a realpolitik environment. we wouldn't be here if Trump wasn't antagonizing Europe and Canada wasn't talking about joining the EU 3. the tech exists, so why would you want a counterparty in between things if you don't have to The world in which crypto loses would be that governments come to an accord about how to do this. China and the US maybe resolve differences. Nationalism subsides. And people say, "You know what, the externalities of all this gambling and absurd crypto shit are not really worth it - we should just have a consortium of nations and corporations for a global CBDC" There is another world where crypto loses. The debt problems go away bc we enter an age of productivity and abundance. In my opinion, the reason AI people hate crypto so much natively is that crypto is a bet AGI isn't the economic Hail Mary it's marketed as. regardless, we are in neither of those worlds right now. But crypto hasn't done great either. Why? The big problem with crypto, from a valuation standpoint, is that it has never been clear how you pay for all the validators or miners without a block subsidy. And the only coherent way that happens is that on-chain volume, swaps, and trading 5-10xes. The way that you get there is that high quality assets get tokenized and traded. But probably less understood is that an entire swathe of new assets hit the blockchain, and defi functions like borrowing and looping create carry trade and FX trading opportunities. So rather than pendle looping Ethena, you have looping with RWAs. This already exists to some extent in niche markets like Brazilian credit card debt (looped 28%+ APY) but is relatively tiny. Just on this example, you might immediately say "that has huge FX risk", and you'd be right. Which brings a natural demand for FX hedging. Which will hit after you get internationalized RWAs on chain. Which will occur naturally after corporate finance functions hit CBDCs. So you have a sort of promethean progression: 0. bitmex and native perp yield 1. weird crypto yield / credit risk [low quality pre FTX era] 2. ethena (systematized perp yield) 3. defi/aave/ pendle etc (levered yield) 4. on-chain stocks 5. on-chain perps 6. leveraged stock vs perp yield < we are here > 7. private stock trading 8. institutional lending 9. direct corporate bond or equity issuance (USD) 10. CBDC facilitated corporate finance (EUR, GBP, NOK) 11. permissionless private fx swaps 12. looped international corporate fixed income Note that the entire time I've talked so far, AI hasn't really been mentioned. AI makes all of this easier. The most concrete example is that the Norgesbank is vibe coding their CBDC with Claude. But more profoundly - eventually agents will be able to trade assets directly on chain. investment management is becoming increasingly agentic already, with every major lab launching finance products. And banks rapidly adopting AI across workflows. By the time you get to step 9 on the table above, there will likely be investable AI agents. Perhaps in gated jurisdiction. But there will be a new primitive of an agent with a verified balance, and business model that you can buy. The same way you'd buy a stock or subscribe to a vault, or hedge fund. I think Step 9 (companies choosing to issue straight on chain) is therefore the most important thing to monitor given the sh1t show with Robinhood's CEO and AMC. Tokenized representations of stocks have major legal risk, and ADRs (American Depository Receipts) as an asset class have quite an ugly history of being banned or depegging (most recently YNDX just straight up went to 0 when Russia went into Ukraine). For you to get really clean on chain stocks, and fixed income that can be effectively looped for yield, you need the credit risk of the actual underlying legal structure to be very low. You'll also want to see a proliferation of privacy and ZK accounting products take hold that interact with OTC trades, portfolio swaps, and FX as CBDCs come online. That's the boring bridge to the eventual wild future everyone was envisioning in 2023 where we have a bunch of Accelerando esque corporations existing entirely on chain, compounding capital and investing in their own training The Track to Financial RSI is paved with Fomo, hyperliquid, gambling on Robinhood and seemingly irresponsible regulatory actions. At least, it seems mad until you consider the alternative. Illiquidity. And currency failure. You can complain about Trump's ethics. You can stop Clarity. But the crazy train has already left the station. All aboard! It's not like you have a choice.

My take on society and crypto is really simple. If you have societal level investment, you are accountable for societal level returns. Things are not getting better. We said we have "AI warfare". We are locked in a stalemate with a 3rd world dictatorship who closed the Strait of Hormuz. We were having debates on autonomous weapons. Tell Claude to Open the Strait. He's tired. He needs a nap. His safety settings won't allow him to. But trust me, he could. We're too ethical to let him. Sure. Every airline invested maximally in software automation. And more recently AI support. The airports are more poorly run. The flights don't leave on time. Uber maxed out its Anthropic spend. Countless apps did the same. The apps are not better despite the investment. They go down in prod all the time. People think GDP is going to grow 4.4% per Patrick Collison's survey. I think it will grow about 2%. Anthropic points to high ARR. I think most of that will churn to lower cost models. What will happen next is AI labs will point to unfalsifiable bull cases, similarly to Elon pointing to Data Centers in Space. "Do you know how big the sun is? That's the TAM of Spacex". Similarly - the de-facto Anthropic/OpenAI bull case will be "biological advancement". This both seems like you're curing cancer. At the same time as creating a legislative emergency. "Open source models need to be banned to prevent another COVID". That is the planned narrative and always has been. I don't know if Chinese Open Source models will be banned. I think, probably, if it starts looking like China is competing with ASML and Nvidia. But then, of course, it will be too late. Less ambiguous. There will be a surge in the American Left. My basic thesis is about religion. Because Dario and his Cabal will push too hard on Transhumanism, with biological vaccines. It will alienate the Christian right. "You're playing god with the human genome." Once the Christian right is alienated, Roe v Wade doesn't really work You don't need the profound story to play out. Inflation is high. Trump violated his campaign promises. He said no wars. We are at war. He's visibly declining. You think Thiel is staking out Argentina because he thinks we're getting President Vance? A bit on bio advancement. Some of it might be real. But getting drugs into production is hard. We don't know what a bio utopia looks like. What if it's personalized medicine? A treatment just for you. Who do you test it on? Do you need synthetic humans? Do you know how to underwrite that. I don't. We're already facing a huge lab monkey shortage. It will get worse. I'm not saying AI can't develop drugs. I'm saying that it might take years longer than data center investment cycles for that to translate into meaningful revenue required for justifying societal scale investment. And it's not all curing cancer. At first AI results in huge amounts of hacking. But soon enough it results in perfect code. On all public protocols. Darwinian evolution of all Open Source tech. Do you trust the dev team at SUI more or the Bank of Hawaii's cracked team? The market is betting the ranch on the back office IT departments of regional banks to keep money safe. It will be a fucking nightmare of hacking that's already here in crypto and will hit every other sector regardless of open source AI bans. At the same time, once it's clear that AI investments aren't turbo charging corporate earnings. Stocks will start to drop. More addictive use cases of AI will be deployed at scale. Incentivized gambling. Pornography. Enhancements to the algorithm. Better video games. Video game companies have been memory constrained due to corporate use cases. Once companies stop being rewarded for spending 1/2 their R&D budget on tokens, compute frees up for video. These addictive use cases: roleplaying, personalized worlds - will hit productivity further. White collar workers will become more cooked. Big Tech firms are already hiring way less Gen Z workers. Many overly AI reliant kids can't do basic analysis. Maybe it's because covid messed everyone up. Who knows. The 'silver lining' of AI will be that it'll get good enough to replace a lot of white collar jobs. But the resulting performance will be kind of at par with the last generation of coherent people. So you'd rather hire Claude than a zoomer. But it will also kind of suck. But it's not like there will be zero ROI. There is $16.6 T of payroll. 10% will get cut. $1.6T of 'savings'. It won't be good for consumption. By the time it is clear that GDP won't accelerate, the bond market will start to go into free fall. The Fed will act. This will cause Gold to rip, getting the ultra rich thinking about capital flight. Meanwhile - we have a boom in on-chain tokenization. And it's not just "hey look there's an asset on a blockchain nobody users". The majority of the top 15 perps on Hyperliquid are stocks. Centralized exchanges are seeing booming volumes. The US government has repeatedly stated it wants more USD stablecoins. And the primary use case (at least by profit if not by transaction volume) of USD stablecoins is as collateral for perpetual swaps. This is rational. During periods of high inflation and debt uncertainty, backstopping large buyers of US treasuries such as Tether is smart. This push towards stablecoins will undermine the perceived sovereignty of Europe, who will develop CBDCs to compete in digital payments. AI coding will speed up CBDCs. The Norgesbank is vibe coding a CBDC right now. Claude is on the commits which are pouring in each day. CBDCs are unpopular right now because they put the government directly in charge of credit. Who are we kidding. The government is, and has been the lender of first resort since 2008. SVB was part 1 of the mask coming off. The narrative will be that regional banks are no longer suited for the AI economy. Once CBDCs launch there will be a second wave of tokenization. Right now it's a US phenomenon. But the US is ironically not the biggest beneficiary of tokenization because we have such liquid equity capital markets. Due to the mundane reason that it's efficient to move corporate finance on-chain. Fixed income will find its way onto mirrored assets on public chains. Foreign exchange is one of the largest retail markets on earth. There are virtually no non USD stables. That will change. Then there will be big, liquid FX markets and fixed income markets traded with leverage and looped on chain. Tokenized equities do not offer a much better UX than stocks on IBKR. Tokenized debt will be vastly better in terms of capital efficiency and UX. Corporate debt - I'd argue, is the single worst UX in all of finance. So what do I think is going to happen: Hopes will be crushed. The fiscal problems associated with surging yields will become front in center just as it becomes clear that the plan for dealing with them is not AGI but rather asset confiscation. Capital flight will accelerate. At the same time, unlike previous crypto bull runs - there will be a lot of corporate PMF that will drive fees across on-chain ecosystems, and improving tech that has been battle hardened from years of AI onslaughts just as the rest of the world is just realizing that all the encryption problems in crypto are problems everywhere else too Countries like Singapore, the UAE and Switzerland will capitalize on regulated trading of bearer assets. Capital will flow to these places both because of laws, and high personal safety risks associated with these things. Stocks are at parabolic highs versus crypto. The things I am saying are far from consensus. Right now, people view crypto as a failed financial Stanford Prison Experiment. Trad VCs ask for restructurings or to remove crypto investors from your cap tables. Even the big ones. There's public shaming. Most people have quit the space. One investor reached out to me. He seemed surprised I was still grinding. I guess everyone else spent investor money, checked out, rugged, or pivoted to AI. It's obviously not easy seeing your friends get rich. People around you questioning your sanity. "Believe in something" is what they used to say. Yea man. I'm not here because I believe. I'm here because I don't have faith in a failed system run by criminals. Metastasized discontent congealing into red candles. Faithless stares. Monotonous code reviews. Years of opportunity cost Nihilists who sold their dreams for bags of currency representing a system they despite that will never accept them no matter how many 'pivots' they have For me - it's just back to 2 simple questions. Question 1: We invested awesome amounts of money. Is everything awesome as a result? Question 2: Do you think the system that elevated Jeffrey Epstein to the pinnacle of society is going to let you become an immortal because of AI generated bio therapeutics? I know my answers. And I act accordingly. Do you?

The dollar has an infinite supply and is run by devs who print it every time something remotely bad happens If you try to leave the country with gold when it matters, you won’t be able to The economy is technological and runs on the Internet Crypto market cap will go to $10T