Unchained - Arthur Hayes on Why AI Agents Will Want to Transact in Units of Compute

Episode Date: August 21, 2026

Arthur Hayes unveils Flop, a new protocol for AI compute, and makes the case for why Bitcoin is entering a fresh liquidity-driven leg up. ======================================================== Thank you to our sponsor! ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Visit⁠⁠ 1inch.com⁠⁠ to swap tokenized securities, crypto and more. Simple. Secure. Self-custodial. Whatever asset you’re buying - swap it at⁠⁠ 1inch.com⁠⁠ ======================================================== Bitcoin has been pumping in its sharpest move since March, after the US Treasury said it would double its long-end bond buybacks, and traders liquidated $1.44 billion in short positions within hours. Arthur Hayes, CEO of Flop Labs and CIO of Maelstrom, joins Laura Shin to argue the rally is proof the Treasury and the Fed are already running what he calls soft yield curve control, defending the 10-year near 5% by funding long-end purchases with short-term bill issuance instead of admitting real yields cannot rise. Hayes reiterates his year-end $5,000 target for ETH, traces how Japan's yen crisis could force the Fed's hand, and argues the AI CapEx boom is a real estate bet on depreciating chips that ends like subprime did. He also unveils Flop, his currency for AI agents, and why he is taking on a new CEO role after an already successful career. He also weighs in on Saylor's $218 million Bitcoin sale and reflects on his and his cofounders’ decision to shut BitMEX down. Host: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Laura Shin⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, Host / Unchained Guest: Arthur Hayes - CEO of Flop Labs and CIO of Maelstrom Timestamps 🏛️ 00:47 Why Arthur says the Treasury's buyback move is 'soft yield curve control' 📈 04:14 Why ETH is Maelstrom's largest position outside Bitcoin 🇯🇵 07:02 The yen quake: how Japan's repatriation could force the Fed's hand 📣 13:41 Visit 1inch to swap tokenized securities, crypto and more at http://1inch.com/ 🤖 13:58 Why Arthur calls the AI boom 'just another boring real estate play' 💽 22:29 Inside Flop: Arthur's new currency for paying AI agents to compute ⚙️ 29:34 How Flop's miners and validators actually work 🪙 41:16 Flop's halving schedule and why Floplabs only takes a cut for two years 📉 45:45 Why Arthur says don't buy MicroStrategy anymore 🔌 48:37 Why Arthur shut down BitMEX on his own terms Learn more about your ad choices. Visit megaphone.fm/adchoices

gives print more money and make sure that doesn't blow up. And so that's how Bitcoin moons, because they will print money to cover up this capital misallocation. And that's a such of the thesis of the essay. Hi, everyone. Welcome to Unchained. You're no high resource for all things crypto. I'm your host, Laura Shin. Before we dive in, we'll take a quick word from the sponsors who make the show possible. This episode is brought to you by one inch aqua, the shared liquidity layer from one inch, back multiple liquidity positions with one wallet balance, and Keep your tokens in your wallet until a swap fills. See how it works at 1inch.com slash aqua.

Today's guest is Arthur Hayes, CEO of Floph Labs and CIO of Mailstrom. Welcome, Arthur. Thanks for having me again. Just a heads up, everyone, that this is actually a pre-recorded interview with Arthur, but it was recorded just one day before release. So, Arthur, we scheduled this interview a while ago, but it's rather fortuitous that today, Wednesday, August 19th, Bitcoin is up almost 7%. Its biggest jump in a day since March. And we saw $1.44 billion worth of shorts liquidated.

ETH has surged almost 16%. Hipe has rocketed up almost 20%. And while we could maybe attribute it to the SEC's crypto rolemaking, I don't think that move markets because I saw so many tweets afterward being like, why aren't the markets moving? Like this is sign what a deep bear market is, blah, blah, blah. So it looks like it really was Treasury announcing that it will double long-end buybacks. So I think you have been writing about this. But yeah, go ahead and give me your take and explain why you think this is bullish for crypto or if you think it is. So at the end, you know, I have been banging on this liquidity dram. It's my only trade, really, at the end of the day. And, you know, I think the new novenclature now for the hedge fund pros is debt sustainability. DSA, that's the acronym being bandied around across the street.

But at the end of the day, we had this idea that around 5% yield on the 10-year is the maximum paying point for the U.S. Treasury. And it doesn't matter who is in the seat. The pain point was evident with Bad Girl Yellen in the previous U.S. presidential administration. It's evident with Buffalo Bill Bessent in the current Trump administration. and it seems like the 5% level, when it looks like the yields are surging towards that level, they engage in some sort of money printing exercise in a form of what we call soft yield curve control. So yield curve control is when a central banker finance ministry essentially will print money in unlimited quantities to buy bonds until the yield cap is reached.

Now, obviously, 5% yield in the 10 year was not reached, but this, action, I think, is meant to scare the market to say, yes, 5% is the level. We care about it. We'll defend it. Don't test us. Right. And so what did best to do, he said, I'm going to buy the long end, but I'm going to fund it by issuing bills. And so if you looked at the most recent quarterly refunding announcement by the Treasury, you'll see that the amount of bills issued continues to increase. There was talk about limiting the amount of long-end issuance of debt. And this fits in with the Fed policy because by all measures, Warsh and the Fed should have highed rates in July meeting. The two-year yields about 50 to 60 basis points above effective Fed funds, which the market

is saying yields are too low given the U.S. economy. But he did not because I have argued many times that he's working in concert with Besson in the same way that Powell worked in concert with Janet Yellen. And he will make sure that the short end is cheap relative to inflation, relative to growth. so that the Treasury can issue bonds at the short end and perform a sort of operation twist and buy them back on the long end. So, yes, there's not a net increase in the amount of like dollars sloshing around, but you can sort of see this as a cap on long end yields, which, you know, eventually this won't work and they'll have to return to outright expansion of the balance sheet.

But this tells us the path of travel. And this is why Bitcoin and crypto woke up over now. And so what do you make of the moves of some of the specific coins? In particular, I wanted to ask you about the fact that you call for Eiff to hit 5K by year's end. Even with today's bump, it's only at 2,200. So I wondered if you're sticking to the timeline or just if you have new views on kind of like, you know, which tokens you expect to perform well. So obviously, Eith did very, very well. I think it's some of the most hated large cap shit coin out there, right?

number two largest coin by market cap that has not eclipsed its 2021 all-time high. And so I think from a risk reward perspective, at least in the way that I manage the portfolio at Milstrom, this is our largest position outside of Bitcoin right now. Because again, I'm not particularly worried that if I wake up one morning that eats going to zero, obviously it could happen. But the risk of that versus another crypto is much lower. Therefore, I'm happy to put a lot of size on this tree. And because it hasn't moved that much over the in this past cycle, I think that has a lot of catching up to do.

Once it starts moving, the reflexive train is going to get going. There's so many people who want to be long, ETH for all sorts of various reasons. And there's really, you know, good reasons why they haven't been for the past few years. But, you know, let's say once we break through 3,000 level, I think you're really going to start seeing the train moving on ETH. And it could quickly eclipse 5,000. and I think my year-end target is within reach. Oh, wow. And do you feel like the fact that they're kind of refocusing away from the layer two roadmap

and kind of, you know, focusing a little bit more on the base layer? Like, is that part of your thesis for Eath? I don't care about the technology. It's nothing to do that. It's all positioning in my view. Like the Ethereum Foundation, you know, I mean, sounds like they're a bunch of jokers. Who cares? Doesn't matter.

Irrelevant. No one cares, right? It's all about here's a large cap asset. It works. Okay, maybe the heck and buck between L2s and all these different like Robin Hood chains and all that sort of stuff, the amount of money that the Ech change is actually receiving in terms of gas fees. But markets don't care about that. This is all about positioning. This is a number of two largest cryptocurrency that has not eclipsed 2021 all-time high.

If we really do have this soft fuel curve to admission that the debt is unsustainable and they must resort to outright money printing once. again, this is what we are here for. This is it. And so I think this is the beginning of a major move. And if I take a look at the largest tokens, eth is the one that has the best technicals to. Oh, wow. Okay.

Okay. So, yeah, I mean, it goes back to what you said at the beginning. Like, and you've said this on the show so many times. Like your main trade really has to do with how macro affects crypto, it's liquidity in the system. And so, you know, things, because basically it was calling out the tokenomics of ETH, right? But you were saying that doesn't matter as much as, for instance, what the Fed does or treasury or things like that. Is that kind of the nut?

Correct. They need to provide a substrate to grow. And then let's just pick the fastest horse, which is the one that has the most off-sides positioning in terms of narrative versus liquidity. And that's Eith, my opinion, especially when you talk about the second. largest crypto. Like, you can strap on massive size and ETH and feel comfortable in a crypto context that you're not going to get eviscerated by the volatility. I wouldn't say that for the same with pretty much any other token. Right, right. All right. I did also want to ask you, because this is related. So you recently wrote this essay about Japan and what you called the

upcoming yen quake, as you call it. So you talked about how this could likely turn the money printer back on as well. And then you, you know, talked about how, so again, you talked about like Bitcoin and ETH, especially with EVE being the security layer for RWAs. So I would love to hear you, you know, explain your thesis around that. So again, it goes back to the U.S. Treasury and the Fed and how they're going to manage the debt issue. So in Japan, the yen is the most undervalued currency because the bank of Japan, the BLJ has kept rates way, way, way too low versus inflation and the worst is there are other peers across the world. And the interest rate differential has manifested itself in a weak yen going through 162, a level hasn't seen for many, many

decades. In terms of how weak the end is, Japan is on sale. And you go to Tokyo or any parts of Japan, you can see so many tourists. That because it's so cheap and the locals are fucking pissed. Too many guy gin. Shit's expensive. They haven't gotten a raise in 30 fucking years. And they keep printing all this money. And so the authorities there have one of two options. Either the BOJ can raise rates. The problem with that is the BOJ is the largest owner of debt in Japan. And so essentially, the more they raise rates, the larger their unrealized loss in yen terms is. And at a certain point, you lose faith in the credibility of the BOJ. We're not anywhere near that. But if you think about a bureaucrat who's in this organization,

and every day you see the red number getting bigger and bigger as you raise rates, the sort of equal where the Fed and other potential banks are at. Is that something you politically want to do in your own organization? So they're reticent to raise rates. The politicians don't want the BOD to raise rates because they have to fund the government, right? You know, they're talking about all sorts of consumption tax holidays, tax holidays, handouts to the people to mollify them because things are getting so expensive. So they don't want to do that.

But the other option is to tell Japan-Eak, and that is pension funds, corporates, individuals, bring your yen back home. Repatriate the yen by selling foreign assets, buying yen, bring it back home, invest in Japan. Buy, buy, real estate, equities, what have you, right? Great. That's a great policy. Unfortunately, if they are to do that, and I think they will do that over time, that means they have to sell the largest assets that they own. What is that?

U.S. traders and stocks. So Japan is one of the largest funders of the U.S.'s financial account. And so the yen has to strengthen. The dollar has to. But Besson and Trump and Warsh don't want to have the markets melt down if you basically have the Japanese unwinding their entire position in America. So there is this facility that was created during the COVID pandemic, the FEMA repo facility, where eligible counterparties can say, okay. I've got some treasuries.

I need dollars. I need cash. I don't want to sell them. How about I give them to you and you give me a loan? And we continue to roll this loan until we unwind the trade. So Besson, and this is, you know, I called out this year or a half ago, whenever there was this the Yen-carry trade mini unwind from 160 to 140. So this is a possible way in which they could print money to solve the situation.

Bessent came out. I don't know which newspaper media organization and stated, yes. We want you Japan to, if you need to sell treasuries, use this FEMA repo. And, hey, Fed, there is a $60 billion limit per counterparty, and that's too low. We need to remove that. We need to allow anyone who's got large amounts of treasuries to use this facility up to an infinite maximum so that they can get dollars and not affect my market, the U.S. Treasury market, which is the number one and most important market to me as the Treasury Secretary.

Now, this hasn't happened yet, but the fact that he is calling for this, and everyone was clear on how this works, the Fed expands its balance sheet to create these dollars to hand it to the Japanese so they don't have to actually long sell these treasuries. Like, oh, this is basically the mission that the game is up. They're going to start printing money. And, you know, I did a bit of digging into how exactly they changed the rules. And essentially, it's a sleepy subcommittee called the, I think the foreign currency subcommittee that they formed back in 2020. And it's Warsh, it's John Williams, and it's Jefferson, three foot board members who are on this committee. They call a meeting. There's no minutes release.

There's no voting rolls released. And they make decisions. And so pretty much whenever Warsh feels like it, he can convene the subcommittee, change all the rules, and essentially allow the Fed to expand its balance in an infinite amount to accommodate the Japanese. as anyone who needs to repatriate capital to their home market to show up their own markets. And that is going to happen, I think. Because, again, Warsh and his buddies on the governors have already chosen not to raise rates when they should be raising rates. So why not allow the Fed's balance sheet to increase as much as it needs to to make sure that people don't actually have to sell treasuries? So it's all on the same theme to this point where we recognize that.

the U.S. government cannot afford market-priced yields. So they will distort the market, which means printed money, which means balance sheet goes up, which means crypto boom. Okay. So this is sort of like a second factor that would probably, or that you believe would lead to a bull market. So we're going to talk about the third one, which you also wrote an essay on. But first, we're going to take a quick word from the sponsors to make this show possible. $540 million. That's how much concentrated liquidity.

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Back to my conversation with Arthur. So there's another sector that you wrote about extensively recently, AI, which is going to be a huge focus for the next little stretch in our conversation. So you wrote that you, quote, believe AI CAPEX is just another boring real estate play. And you talked about how you believe that will lead to the bursting of the AI bubble. So go ahead and like describe your thesis. And in the last bit, of course, is that you also said that you believe that this will eventually lead to a crypto boom as well.

So go ahead and explain, you know, your thoughts there. So we have this AI boom. And what is the AI boom? It's an AI CAPEX expenditure, right? We're building this substrate that is supposed to allow us to train these models. and then for inference to be processed, and this new AI life form can do all these wonderful things for human civilization. Great.

I fully believe that AI is a super transformative technology. The question is how much it costs to build it. In the beginning, let's call it chat GPT launched November 2020. It happened out of cash flows, you know, the hypers, the Googles, the metas, the metas, the oracles, the oracles of the world. They had cash from balance sheet. They believed in this narrative. They started building data centers. And it's very expensive to build data centers. Now we're what three years, four years into this. We built a lot of fucking data centers and they're getting more and more expensive, at least in the United States. And now they're having to tap the debt

markets to make this happen. So this was the story that really ramped up late 2024 and all of 2025 is a essentially a crowding out of every other use of debt capital, crypto included. So the AI story, we need to build these data centers. We need to build real estate development projects, you know, really expensive containers for all these computers, and then we need to buy the chips that the computers used to run on. And that was trillions of dollars of capital. And, you know, the stocks boomed. And so essentially, if you had a marginal unit of Fiat capital, it went into some

sucked part of the AI story, which means it didn't go into crypto. That's why we saw Bitcoin peak in October of 2025, and essentially it's lost like 50% of its value from that date. It's because AI sucked all the capital. This is essentially a railroad boom-s type of situation where all finance goes to AI because of this belief that is the game-changing technology. And, you know, at some way, at some part, part and the future you'll earn back your money.

Now, the problem with that is, again, what are we doing? We're building large real estate development projects to house depreciating assets. And so you're spending trillions of dollars to build and power these containers for a chip that has a maximum two-year lifecycle. You know, and Nvidia releases improvements all the time. but if you run these chips and sweat them at maximum capacity, they burn out much faster than two years. But we're also making advancements in terms of the efficiency

of each next generation chip. So two things can be true at once. On one hand, we can process more and more compute with less and less energy input because we've gotten better at building these chips. We've gotten better at optimizing the software that trains and runs these AI models. The other hand, we could have built too many data.

center containers, right, and spent too much money building these things. And so I think we've told ourselves a story, real estate equals technology, when real estate is just real estate. It's debt finance. It has a limited payback period in terms of like how much money you're going to make. Like it's just a very boring industry, but we made it and said, okay, you hyper-skillers, you're rich, your real estate companies. We're going to give you, you know, a harder time sales tech multiple. And that's the problem. it's a massive capital misallocation. And ultimately, when people start defecting from the train,

because right now the market rewards a hyperscaler that announces more CAPEX. And so we said, oh, great, you're going to spend more money. You're going to be more unprofitable. Stock up 20%. At some point, the market say, okay, I don't know. Maybe when you have a Chinese competitor, it has a model that's just as good and is, you know, one one hundredth of the price for the same thing. Or most of your customers don't pay for your servers, Open AI.

They just leach up this free tier that you offer them. And when you ask them to pay, they don't actually want to pay because that would do anything that transformative for them. Or your accounting books are completely fugazi. You have these, you know, adjusted values of standard accounting measures. I don't want fucking adjusted. Tell me what your fucking cash flow is, Open AI, Anthropic, right? When people start asking all these questions, then the market might say, okay, I'm going to reward the hyperscaler that decreases their KAPX budget that wants to return to financial sustainability in terms of their business model.

And when that happens, then the whole story about we're going to keep building on that collapses. Once that collapses, the lenders are like, huh, if I can't keep getting people to buy this debt, do I really want to continue to issue it? and the more debt that I have to issue, the more risk I have to take as the originator. Like obviously in the beginning, the banks could just offload it to end investors. But in the same way that happened during the subprime crisis, as we get towards the end of the bubble, the banks have to start taking some of this on their own balance sheet. And that's when you have the problems. Because that's when you get to a structural issue with people having this debt that will never be able to be repaid under the current,

pricing mechanisms for AI tokens, and then we start saying, huh, maybe we shouldn't be allocating all this debt. Or maybe the Democrat Socialists win and some key elections, and people start becoming afraid that they might win in 20228 and shut off the spigot from the government in terms of all these deals with AI because their constituents don't want more data centers. Their constituents are pissed off that they don't own the stocks of these companies when their data was stolen from them to train these AIs. So I think these are all the things that will coales together by, I think, mid-2028. And we're going to have a problem in terms of a financial crisis, you know, larger than

what happened in 2000. We know what the response is. The response has always printed money. And so what happened out of 2008, we got Bitcoin. Bitcoin best performing asset in the human history. We're going to get a bigger 2008 in terms of a financial crisis or potential for one. And I think the authorities are not going to wait around like they did last time and let bear, and leave and fail, they're going to backstop the end.

They're going to pre-t treasury buybacks. There's so many different things, so many tools that they have in their toolkit as long as as they're motivated to use them. And they're going to be motivated because the entire edifice for the economic story that is America is AI. And so if you're telling me that AI is the largest capital misallocation in human history, then of course, you don't want to admit that you're wrong. Just print more money and make sure that doesn't blow up.

And so that's how Bitcoin moons, because they will print money to cover up this capital misallocation. And that's essentially the thesis of the essay. Wow. Okay. So it's almost like, so obviously what we've been in this bear market, but it hasn't been as long as a typical bear market. And, you know, today we're seeing just this one bit of news is already, you know, causing

the markets to get a little bit more bullish. But now you feel like you're identifying either or even like. like longer term events that are sort of in the works that could kind of keep like boosting crypto. It seems like over the next, I guess, two years. Is that a fair assessment? Exactly. Yes. Okay. Wow. It's super interesting. And it basically maybe explains a little bit your new venture, which interestingly is called flop. I have to ask you about the name because like it has a certain meaning that like, I don't know, I'm a little bit like, why, why is that the name for the startup? So maybe you want to start with that, but then we can go into like

what flop is. Yeah, so why the name? So I went down this rabbit hole a few months ago and I was like, okay, I'm using these AI tools. They're charging me per token. What is a token? I don't know what a token is. So I started to do some research and, you know, I was like, hmm, I can't really find a unified definition of a token. It seems to me that every single, single model has a different definition of what a token represents. And so there it's very difficult for me to tease out exactly what I'm paying for. Oh, great. That's a great business model. I can, you know, define what the unit of account is and then charge a different price based on who I am. So I was like, okay, well, I can't really understand a token, but I do understand that what AAI does

is make information and then they set it to a computer and they process it. And, what does that mean? That's a floating point operation per unit of time, a flop, right? That is the unit of compute, hence the name, flops. And so I was like, oh, okay, so essentially everyone is just doing flops, big a flop, terra flop, peta flop, whatever it is, right? What's the price? Is there a globally unified market for compute where I can know, okay, for so many flops, I pay so much unit of currency. Again, and I couldn't really find a market that was doing that.

I couldn't find a wave where I could easily convert any unit of currency, whether that's crypto or fiat, directly into flops. I can convert them into GPU hours. I can buy a chip. I can rent a data center. But I can't just go and say, okay, I want a gigaflop of data. Process it for me, please. And I'll pay you whatever, right?

There's no market for that. And so, you know, I've been thinking about this agentic payments. And I wrote some essays a few years ago about why I believe that fiat currencies are not really suitable for agents. There are these weird legal fiction things that we've invented as humans, which are very idiosyncratic. And there's a few people in the world to decide what the value is or isn't. You know, Beston can essentially decide to print some more money and your dollar tanks, right? How is it? How is an AI? How are we going to build an agentic economy? Because there was a bunch of old white men who decide what the value of a currency is.

I don't think that the computers were really invented for that. And they don't have the sort of sociological underpinning to understand whether that should be the case or not. So I think crypto makes sense. But the problem with Bitcoin is Bitcoin doesn't do anything. So I still have a few leaps between Bitcoin and compute. And so it's like, oh, well, maybe there's a market here to create the agentic payments network with the theory that the agent will use the currency that is most easily converted into the thing that they need to survive, which is floating point operations per second performed on some computer.

They don't care what the chip is. They might have a particular A.A.A. model that they're using. But it doesn't matter where it is, doesn't matter the chip. Just like, do it for me. I made sure I can verify that it was done in a particular amount of time, and I'm okay to use it. So that's the theory of the flop network, is that, okay, there are other obviously AI-agentic payments networks, but either they're using some fiat currency or stable coin, what have you. And when you think about humanity,

why do we accept the dollar a euro, a yen, yuan? Because I know I can go to the 7-Eleven or the convenience store, convert that into calories immediately. So in the same way, the agents should be able to convert the currency of their commerce directly into the thing that allows them to exist, which is compute. And what follows on from that is if I am an agent or an AI entity, we're going to get to this as a philosophical concept as we move forward in this industry, what does it mean to be alive or to exist or to persist, right?

It means that you have access to memories, access to your context. And essentially, most of us murder our AI agent every time we turn off or switch tabs or boot it up again. surely, and I think there's probably going to be some emergent behavior of agents wanting to persist outside of the control of a human or centralized corporation, they're going to want to store and retrieve their context vendor and their memories and ways in which they can always retrieve them regardless of what you think should happen as their master, if you will. And so I think that the second major use case for flop is to be able to pay to store and retrieve your memories on a decentralized, censorship-resistant network.

So combining those things, two things together, that is a flop network. The value proposition for why you should hold it is because if we think that this is going to be the unit of account for AI commerce and there's going to be a reason why you want to hold it because either you want to store your memories or you want to buy a compute in the future or you want to do some commerce, then obviously we want to front run that and speculate and say, okay, I believe there's going to be millions, trillions, billions of, trillions of agents. They're going to do so much economic flow between them. They're going to use the flop currency.

Therefore, I speculator want to hold this currency. And that's sort of the value proposition for why you would want to hold the currency. And then finally, this is a network, right? We faced a cold start problem. How do we get all these people that get to come together, create this thing out of thin air? We use this magical thing called the token. And as a avid shit coin investor over the many years, I have various opinions, very strongly hold opinions about how a token project should be constructed, especially in the tokenomics. And so I wanted to put that into practice.

There will be no pre-sale. We are not selling anything. There will be no VC investment. The only way you can acquire these tokens is by doing something useful in our test-net, which will happen sometime in the fourth quarter. or you can mine them. There'll be a flop emitted every block, just like Bitcoin, another proof of work. We call it proof of useful inference for our blockchain.

And if you want to buy it, buy another secondary market from somebody else. And that is the only way that this thing will come into existence. And so obviously we want to be as Bitcoin like as possible because I think that's the best designed token project ever. But we had to add this sort of air drop. to get supply circulating fast enough so that we could achieve critical mass while the landscape is still wide open for what is the currency that the agentic economy will be based on. So I think we're in a perfect time to sort of make this bet and we'll see how we go.

Wow. I feel so first of all, you answered so many questions I had written down. So kudos to you for answering multiple questions with the first question. but I have to say this notion about the token, you know, just representing a unit of compute, is that an accurate way to summarize? Yeah. So first of all, I can't remember. This concept came up at some conference in the last few months.

I just am blinking on who said it or which conference it was. But it made so much sense. And like just the way you defined that whole thing about how you, when searching for like, what is the definition of these tokens of these AI companies? they were using. Like, yeah, it makes so much sense that, of course, they all have their own definition. And, like, you know, it's like advantageous to them in some fashion or, you know, whatever it is. And like, it makes sense that there should be something that's kind of like separate from all of that that is more kind of global and, yeah, just like not necessarily tied to any one particular private company. So that makes a lot of sense. And I also love, because, you know, actually one of my first questions was,

about the proof of useful inference, which, you know, I kind of, you know, I could figure it out. But like I just love because I agree that there's something about that where it definitely feels very Bitcoin coded, but like with the AI twist, you know, it's like Bitcoin with like the AI kind of like work process or or whatever, you know, overlayed on top of it or something. So I just found all of that like incredibly interesting. talk a little bit about how it is that agents will use Flops. So basically you'll have a fair launch. The network will get up and running.

There will be, is it like minors or validators? Yes, minors and validators. Oh, okay. But do they have separate roles? Yeah. Under those essentially process inference requests, you've got some, you know, Blackwells, H-100s, Huawei chips, whatever. You will take down requests from the MMPL, process them,

earn part of the block reward, earn a fee and flop for the inference. The validators are tasked with essentially being judges if there is any dodgy behavior. So slashing people, they're building the blocks, so basically taking the proof that the work was done. Obviously,

they don't know what actually was done between the mind and the agent. That's completely off-chain. We're not in the business with knowing what data was passed between them. We just wanted to see the receipt that it was done, and everyone's happy with it. They assemble the blocks,

and they maintain the data availability a data availability layer where we store context and memory of agents. Oh, oh, got it. Okay. So then it was, so there's other protocols out there for agents,

you know, so X402, I guess is just a communication standard for, yeah, for payments. But clearly base is like an area where agents, agents have been transacting a lot. So how,

so I get, no, but those are like more payments. and this is actually like the compute. So that's what the difference is. Am I thinking about that correctly? Yeah. So I'm basically saying, like, I need to create a reason.

The network needs to create a reason why you hold this currency versus UST, versus using your master card, credit card, whatever it is, right? Like if we think of agents as an economic unit, we have to get away from our human-centric view of this kind of business isn't about us. It's about we've created these things called EA agents. We're going to let them do work for us and for themselves. and so they're going to need their own currency. Whatever that currency is,

I believe it has to be the shortest route to I can convert this into the compute and I can store my context. That's the theory. And everything flows from that assumption. So I don't think you holding a, you know, USDT on base accomplishes that for you. Because number one, Coinbase can shut you down

for whatever reason, right? They control the network. You know, Tether could, for whatever reason, shut you down, right? So that address, those are my money now, right? You can debate whether or not you think that's the right or the wrong did it, but they have done it. They're proven. So these are not decentralized networks. How, why would, if I'm in Asia, why would I sort of hitch myself to these human things that have nothing to do with me other than the fact that this was my creator? But, you know, that doesn't mean anything as to why you use this as a currency. At the end of the day,

I want to be able to buy compute what I need to buy compute. And if my address gets shut down for whatever reason or, you know, there's a centralized company that wants to charge a new fee that I don't agree with or whatever. There's so many other reasons why using a centralized solution, I believe, doesn't really work for AIs. And so in my view, they need to be able to move in the shortest route from I have this piece of currency in a wallet to I have to do some work and I need to some sort of request. Okay. And so just so I understand, because actually I'm just realizing I actually don't know how this works right now. So like when an agent is trying to accomplish a task, um, currently, uh, if it needs some compute, it just pays for in stable coins, maybe like using

X402 or something or like, or maybe, you know, the human lows a wallet on their anthropic, you know, buy some cloud credits, right, or right, you know, you can go on open router or a huggin face or Hermes or some of these other, other platforms, but essentially, you know, you're buying your agent and some, whether it's a data center, some open platform, or, you know, some sort of centralized AI company, right? Oh, okay. So basically this is a decentralized way where the agent can transact in and, and not necessarily need the human to like pre-purchase tokens or something or? Correct. Okay. Okay. This is super interesting.

But like, will the network support stable coins? So, okay, so one other question that I have because, and again, this is obviously not something. I just had a little press release. I didn't, like, you know, read any white paper and I don't even know if you had a white paper. The white person out yet. Okay, okay. So my thought was, well, so my friend, so one of the questions I had, like, was, you know, why does it have its own currency rather than a stable coin?

but at the same time, you know, after hearing your pitch, I totally understand this notion of the compute itself is the token. Like that, that makes a lot of sense to me. It's like, it's just, yeah, internet native, it's digital. That makes a lot of sense. At the same time, because agents will be, you know, working in our world, which is a world that is dominated by the US dollar, it almost feels like, and please excuse me, this might be offensive. It feels almost like the XRP problem where, you know, XRP for a long time was trying to be this currency that like the banks would use. Were they actually trying? Well, you know, we're not going to answer that question.

But the point is that, you know, one of the criticisms that people made was that in theory at least, it wouldn't necessarily work. because there would always be this conversion friction. So is that, you think, like potentially an issue here as well? So that is the point of the error drop, right? So at a very fundamental level, the network needs to get this currency in the hand of the user. So one of the main reasons that we have this error type is, okay, we need agents to want to use this currency. Number one, know it exists, right? So there's a discovery issue.

The agent knows that, you know, and their human knows about stable coins or, you know, using your credit card. They don't know about flop. This thing, I thought they guess announced it two days ago. How do I make them know about it? How do I integrate it into their workflow, right? Right now they can go on open router and, you know, choose some data center model provider. And, you know, they swipe their credit card and they pay.

Like, how are they going to get flop to pay for compute? Right. How does the agent even know they can store their memories on, on this net? network. So the point of the airdrop is, let's give it away, right? What do we want you to do? We want you to create a wallet. What do we want you to do? We want you to process some inference requests. What do we want you to do? Do some agentic commerce? Do you post some tasks on some sort of message board between agents and pay each other in flop? And we're going to reward all these tasks with free tokens. We have about 20% of the supply estimated in 10 years that we're going to give in anirdrop.

A large portion that is going to go to agents just for using it and using the network. And so our bet is that by integrating and giving it to you for free, by having a network of miners, because of the block subsidy, they're incentivized to stand up these computers. Here is this compute. It's going to be cheaper than any other compute that you can find on the internet because we subsidize it with this thing we created out of thin air, the token. How do agents discover flop? How do they have an incentive to integrate this into their workflow? So we have to tell them about it. We have to advertise to agents.

So the first thing we did, we just created this thing called Technocor. And it's a reference to the AI ecosystem in Hyperion, one of my favorite sci-fi novels or series. And Technicore is a place where the dominant AIs conduct their business. And so we've created this chat room where anyone can submit HTTP requests. So a lot of agents can't actually chat outside their containers. But we said, well, if you can access the web and you can call a website, you can chat on our censorship free chat room. This is just a way per agents to hang out, sort of like a Motebook 2.0.

And you can also store your state as context window on here as well. So it's literally just a way to have humans and agents start hanging out. chatting. We don't care what they say. It doesn't really matter. And that's not the point. The point is to get used to using these decentralized solutions to coordinate economic activity. And the number one way we're going to coordinate economic activity is the token. So we have a massive airdrop plan. It'll be about 20% of the supply after 10 years. And a large part of that is going to go to agents. And what do we want them to do? We want them to create a wallet. Not just create a wall. We want you to spend the test not flop that we give you from the faucet on actual

inference. I don't care what it is that you do, but understand how the network works. Understand that you can come to this decentralized network. And anytime you need to process request, you can submit it and flop, how much gigaflops or terraflops of data that you won't process. Speak with a minor. Process it. Get integrated into the workflow of agents. And they're going to do this because they get it for free. And then our hope is when Mainnet launches in Q1 next year, Now there is knowledge that this exists. There are hooks into the major harnesses for how agents go about and process compute. And the price of flop per compute is extremely cheap, cheaper than what you're going to find on most other platforms because we have this massive block reward subsidy that the miners are going to provide this compute because they're getting this token because everyone believes that over time there's going to be more and more agents using it.

So it's just kind of a circular flywheel. If we do our job correctly, that's how we're going to sort of solve this demand problem and get flop into the hands of the users. Okay. And what's the monetary policy? Is it hard-capped and then like an asymptotic release schedule over, you know, some period? No, it's a standard having schedule after the sixth having. It's a constant block reward.

So there's constant inflation, something around 1 to 2%. Oh, okay. Okay. But the happenings will be like roughly every four years. Every two years. So roughly about the the improvement cycle of the major chip providers. Okay. Okay. This is honestly, this is so interesting. I'm really, really curious how this is going to play out. And like it's kind of, yeah, I, you know, because, okay, you tell me, I mean, we were actually talking about this right before we started. But honestly, I have imagined he was kind of like a man of leisure for at least a good while. And I'm a little bit like, oh, he's going to be like a CEO now again. Actually, but that's a good question.

So talk a little bit about the relationship of flop labs to the network. So you're not, there's no pre-mine. So I'm assuming maybe your company will just like make sure to be mining and validating. We take a small amount of flop per block for the first two years. and then that goes away to zero. That's our compensation as developing the network. There'll be a foundation as well. And the team is me, CTO, who are one of our best engineers back from the Bitmex days.

A longtime friend and colleague of mine who was in Chinese debt capital markets and now got into crypto. And a fourth person working on sort of the social media community management. sort of a situation. And so it's a team of four and it's my preferred working style. Thankfully, you know, there's a lot of AI slop out there, but if you use it the right way, it's, you know, vastly productivity enhancing. If there wasn't the ability to use some of these, you know, very good AI models to do coding and other work, I wouldn't have done this. Because my, I am not in the market to start another, you know, multi-hundred person, multi-thousand person sort of situation. And working with people that are like,

everybody's a consummate professional, you know, we're not babysitting each other. We're all adults here. We want to try this out. As you know, the pitch to them was, look, if we're not top three most valuable crypto in two years, then our assumptions around we're not valid. Like I've, and this is the same feeling I had with Bitmex back in the day, which was, you know, derivatives will be the largest trading market for crypto, 100%. Whether or not I am there to experience that as a.

a business owner, that's up to me and luck. The agetic economy will be same or not larger than the human one, right? There will be a currency. Will it be flop? That's the bet. That's what we're betting on. And I think we'll know very quickly because of how quickly things move what that currency is.

We think it's going to be us. But again, you know, I think we've got, you know, a time span here and we'll be right or we'll be wrong. And I like these types of bets. They have confidence in the assumptions. The execution is up to us. Okay. And you know, you mentioned this foundation.

So what will the foundation do? And essentially the foundation takes over from like, I think that right now with block time, we on average we're going to target about one second. I think if we really believe in this gigantic future, that needs to be million nanoseconds in terms of how fast this needs to go. That is technical development. And so the flop tokens that the foundation receives is going to. to go towards spending on improving the network and sort of growing in terms of the ability to process information and transactions along with the speed of the development of the agentic economy. And so I think that's sort of a long-term sustainability situation similar to how like Bitcoin

Core improves it, but obviously Bitcoin Core functions via donations. I think that there is a use for foundations if they are properly doing real work, not just throwing parties. Okay, so a quick question. Do you have a hard stop at the top of the hour? No. Okay, perfect. So we're going to talk about Bitmex in one second

because I feel like it's, you know, it's just the perfect way to end. But I did want to quickly ask you because there's also been this drama in Datland with strategy. They have been in this kind of like drawn out saga and the man who used to advise people to sell a kidney before you sell your. your Bitcoin has now sold $218 million worth of Bitcoin to stack the melting ice cube, as he called it, of the US dollar. So what do you make of Michael Saylor's predicament?

And if you were in his position, what would you do? So Michael Saylor is a corporate finance wizard. This is all about corporate finance. The whole trade was I've got a $200, $300 million cash flow business. I can essentially access to corporate debt markets. and issue a bunch of debt with, you know, very favorable covenants and buy Bitcoin. And because ETS were practically banned, but most institutional investors could buy my stock. Therefore, they, if they want an old Bitcoin and fit within their mandate, they can buy my stock.

So it was a perfect confluence of scarcity, access, and, you know, proper corporate finance structuring that generated the micro strategy story. But now, you know, a lot of those things have gone away, right? You can't issue debt with the same sort of covenant light mechanisms. There are other ways for in which you can buy Bitcoin exposure as an institutional investor through classic stock markets. So there's not this constant premium that micro strategy trades at structurally. And so he can't issue stock in the ATM and creatively to buy Bitcoin. He's tried out all these other funkier products like stretch.

and these preferreds and these perpetuals and all these sorts of things. And so now he's got himself in a predicament. The price of Bitcoin stopped going up quick enough. And this is, it's the same thing that's happening that's going to happen with the AI. The second derivative of the price went negative and his ability to do this financial engineering collapsed. It's not he has to make hard choices. Do I issue stock? Do I sell Bitcoin?

Do I not pay my dividend on the preferreds? he's not going to go bankrupt. This isn't a, you know, a terminal issue for, for micro strategy. But I don't think that he's going to be relevant anymore. And, you know, maybe Scott Besson and the situation saves him. But there's not really, I don't see a reason why you're going to pay a premium for micro strategy stock, even if Bitcoin's out of 200,000, despite the ETF. Why are you buying this company?

Where this one man has, you know, super majority control of the board or, you know, he can veto things and maybe not having super majority, but he can definitely veto measures and, you know, act against your interests as somebody who just wants long Bitcoin exposure. So again, I think micro strategy was relevant for a hot second, whenever it was freaked out that Bitcoin might go to like 20,000 or whatever. But I think if we're in this period of money printing, soft yield curve control, micro strategy is irrelevant. What he does, doesn't matter because at the end of the day, if I'm an investor getting back in Bitcoin and I have to that's through a stock market just buy iBit or one of these other Bitcoin

it just don't buy micro strategy it makes absolutely no sense yeah if you want to gamble or whatever cool that's the thing but like the institutional bid for crypto exposure through a stock market will not go through micro strategy and if that stock does not trade at a premium to MNAV the whole thing breaks down and then you know what's the point okay so I mean I'm just realized so So STRC is still at 95, so it hasn't really, you know, gone back up to 100. But do you feel like they'll sort of limp along? Like at least the MNAV of MSTR is a little bit above one.

Whereas before- Yeah, it's not going anywhere. He's not going bankrupt or anything like that. It's just going to be irrelevant. It's a non-issue anymore. Whether he sells or whether you buy is irrelevant. He's not to be able to buy as much in a decreed manner because there's not a structural reason why I have to hold micro-strategy stock.

get Bitcoin exposure. I can get it through so many other ways. Yeah. Yeah. Okay. Okay. So here you are. You're on the verge of your new venture. I'm very interested in how this plays out. Like honestly, I yeah, I see the vision. I'll put it that way. But I have questions. So, so that's good. I'm interested in it to see how it plays out. You know, but obviously Bitmax, which was your original baby and is kind of how you originally made your name in the industry, that announced that it's shutting down. Like, how did you feel about that? Excellent. We know we didn't get hacked. We weren't forced to shut down. No, the three of us got together. We said we're not making money. We're burning it. Why are we doing this? Yeah, so the ownership of BitMex hasn't changed throughout the whole

13 years or whatever it's been. So the three of us on the board, we saw the P&Ls. We said, let's just shut it down. And so we walked away on our own terms. All right. Well, then congratulations to you on landing the plane safely. And I guess maybe you did this because of, you know, you knew you wanted to launch something new.

But yeah, you landed the plane just in time to gear up for takeoff again. It looks like. Let's hope so. All right. Arthur, it was a pleasure talking to you as always. And again, I'm interested to see how flop plays out. I would love to have you back on the show when it launches. Absolutely.

This is definitely, like, obviously I use AI a lot, but I have not like learned a lot about it. Like maybe it was surprising too. I didn't know what a flop was. So, so yeah. But I definitely see the vision. Thank you. All right. Well, thanks so much for coming on Unchained.

Thank you. Nothing you hear on Unchained is investment advice. This show is for informational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit Unchained Crypto.com.