Unchained - Asia Edition: Mining, a Crypto Yuan and the Two Main Reasons the Chinese Are Interested in Crypto - Ep.102

Episode Date: January 15, 2019

In this wide-ranging episode, Eric Meltzer and Dovey Wan of Primitive Ventures describe how Asia is weathering the crypto downturn: how have the low prices affected miners, how has this affected Bitmain's prospects for an IPO and how, despite a ban on crypto exchanges, Chinese crypto users have been trading. We also discuss more broadly how crypto projects and startups differ between China and the U.S., how crypto is upending Silicon Valley's dominance, and how differences in regulation are affecting entrepreneurship in the space. Plus, Eric and Dovey address whether or not the surveillance state is motivating Chinese interest in crypto. Thank you to our sponsors! Tokensoft: https://www.tokensoft.io Microsoft: https://twitter.com/MSFTBlockchain CipherTrace: http://ciphertrace.com/unchained Episode links: Primitive Ventures: http://primitive.ventures Eric Meltzer: https://twitter.com/wheatpond Dovey Wan: https://twitter.com/DoveyWan Binance was more profitable than Deutsche Bank in quarter 1 of 2018: https://www.ccn.com/binance-surpassed-germanys-biggest-bank-deutsche-in-profitability/ Bitmain and Huobi layoffs: https://www.scmp.com/tech/blockchain/article/2179513/chinas-cryptocurrency-giants-bitmain-and-huobi-plan-lay-offs-amid Hong Kong regulators reluctant to allow crypto firms to IPO: https://www.scmp.com/business/banking-finance/article/2178747/hong-kong-regulators-say-ipos-cryptocurrency-businesses-are Report that China wants an "orderly exit" from crypto mining: https://qz.com/1174091/china-wants-an-orderly-exit-from-bitcoin-mining/ Chinese op-ed on why the People’s Bank of China should consider a yuan-pegged cryptocurrency: https://www.coindesk.com/pboc-op-ed-pushes-use-case-for-yuan-pegged-crypto-stablecoins Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, Laura here. Before we dive into today's episode, I just have a few quick announcements. First, today, we're relaunching the unchained and unconfirmed websites. Both podcasts have new logos and a more unified look. Plus, we've got a beautiful podcast player on every episode page. The website looks amazing. Definitely check it out. Go do it right now. Unchainedpodcast.com and unconfirmedpodcast.com will both get you to the right destination. Thanks to Zach Swinehart for doing such a great job, to Daniel Ness for helping to transition to the new site and to the past guests who also helped make it happen by sending in all their headshots. Second, with the new website, we are now able to offer one of the most requested features, transcripts. That means we have transcripts for every episode of Unchained going all the way

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the newsletter. The first edition drops this Friday. Don't forget, the URL is Unchained Podcast.com where you can see the new logos, read transcripts of Unchained, and most importantly, sign up for my weekly newsletter. And now on to this week's episode. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin. If you've been enjoying Unchained, pop into iTunes to give us a top rating or review that helps other listeners find the show. Within months, cryptocurrency anti-money laundering regulations go global. Are you ready? Avoid stiff penalties or blacklisting by deploying effective anti-money laundering tools for exchanges and crypto businesses, the same tools used by regulators. CypherTrace is securing the crypto economy. Considering using digital securities as a way to grow in 2019, Tokensoft's trusted platform provides the security and compliance tools to leverage blockchain technology and enter new markets with confidence.

Visit us at tokensoft.io or on Twitter at Tokensoft Inc. Do you have an idea for a blockchain app but are worried about the time and cost it will take to develop? The folks at Azure have you covered. The new Azure blockchain dev kit is a free download that gives you the tools needed to get your first app running in less than 30 minutes. Learn more at AKA.m.m.m. Or by following them on Twitter at MSFT blockchain. The topic of today's episode is the crypto scene in Asia. How is it faring during the crypto winter? Here to discuss are Eric Meltzer and Devy Wan, founding partners of primitive ventures. Welcome, Eric and DeVie.

Hey, Laura. Thanks, Laura. It's great to be here. Before we dive into questions about Asia, and there is a lot to discuss there, let's quickly discuss your backgrounds. Can you each tell me how you got into crypto and came to start primitive ventures? Why don't we start with you, DeVie? Yeah.

So I was born and raised back in China and I moved to U.S. to pursue my master degree at Carnegie Mount University at age of 20. So I worked at eBay for like four years as a product manager and like move on to like traditional venture investment. Like back in venture, I've been doing like blotching investment, fintech investment, AI investment and like got into crypto when I was doing like blotion investment. And I remember I met Mer. So I remember I met with Eric like just during the Zcash time. So that was like back in early 2017. And like, Aaron and I, we were, we were, like, both the community board elector for Zcash.

And so, like, that's how we get to know each other. And we hand out quite a lot. And, like, Eric became my, like, crypto buddy. And so we literally just, like, talk every day. And, like, afterwards, and then so, like, we, so because I do, like, venture investment, like, there's a lot of, like, just a legacy problem. Like, say, for instance, it's very hard to maintain your, um, just asset liquidity. And like basically I have to hop between both a traditional venture and like crypto.

Like crypto is already 24-7 and so it's pretty tiring. And so like that's why me and Arabi were thinking like what about we probably just start our own thing. So I can be a full-time crypto. So like that's my background. And for your venture, you were at Danwa Ventures, right? Yeah, that's right. And just describe who they are. Oh, yeah. So, like, like, Danwa capital has to be, so like, it has been a pretty, like, major Asian background venture from that in Silicon Valley. And so I think at the top, our AOM, so like the Danhua, so like the total AOM was over, like, half a billion. And so it is actually backed by some of the very top strategic money, like Alibaba, Baidu, Tencent, etc.

So that's why it has been like a leading force of this Asian investor. So in the valley. And Eric, what about you? How did you get into crypto? And if you have anything to add about how you came to start primitive ventures? Yeah. So I went to college in China actually also. I was at Peking University.

And I'm also Jewish. And so I guess those two things kind of conspired to make me really excited about Bitcoin. And so in like 2013, I was, I was interesting. I don't understand. Yeah, let me elaborate. Okay. So here's, here's the background there. Because I guess my interest in Bitcoin, I think, is a lot more political than a lot of investors.

And what that comes from is, you know, as a Jew, I read historically about how when the Jews had been oppressed in various countries, really the first thing that happened, kind of the predecessor to a genocide was people's financial assets would be frozen. And so, like, every Jew has some story about how their ancestors had to flee with basically just the clothes on their back. And so when I heard about this form of digital money that was completely outside of government control, I thought that was an incredibly exciting thing, really from a political perspective. I wasn't that interested in the tech. And to this day, I really don't think the tech is something that new. It's kind of more of a recombination of existing, interesting stuff. And then going to China kind of further reinforce that because China has these super strict capital controls.

And so I had a bunch of Chinese friends that wanted to move money out of China. and they would have to, you know, find 20 friends that could each send $50,000 in order to move a million out of China. And that also just drove home for me. Like, it was kind of ludicrous to have our money in the control of a central government. And so that got me, both of those things kind of got me really into Bitcoin. But I didn't, I wasn't that interested in crypto as a whole. I kind of just thought Bitcoin was like this one-off really cool thing. But the other coins that were around when I first got started, like if you actually, if you went and looked at coin market cap in 2013,

they were almost all complete garbage. They were just obvious scams. There was mega coin and feather coin and all these ridiculous things that have since died. And so I didn't think of it as an industry by any means. I just thought it was this kind of cool thing. And then way later, I bought some Bitcoin back then. I held on to Bitcoin.

I would read Bitcoin talk obsessively. But I didn't, again, I didn't think of it as like a sector. And then in 2017, I started seeing things that were actually interesting. And so like when Ethereum and Zcash and these other points started coming out, and the exchange infrastructure really started getting built out, it appeared to me that this was actually going to be a thing. And through kind of a crazy series of coincidences, I ended up joining an investment firm in China called INB

that's founded by this really interesting guy named Li Saulai, who to this day is one of the biggest holders of Bitcoin. And so I worked with them for a while, became a partner there, and ran an early investment fund at INB. And that's how I met Dovi. So, DeVie and I were doing very similar kind of early stage investment stuff. And I think the two of us are similarly picky. If you look at like, you know, I think DeVie and I have more in common with like

hardcore crypto skeptics that hate all crypto than we do with like crypto ultra bowls. And that like, you know, 99% of the stuff they hate, we hate too. It's just that we think there's sort of a 1% kernel of things that are like the absolute truth and are super amazing. And so it was really refreshing to meet someone like that. And like DeVie said, we ended up just talking constantly. and we co-invested in a bunch of stuff. At some point, I was like, well, I mean, if we're going to be co-investing this often,

we may as well just have a fund of our own. And so that's how primitive got started. So the reason I wanted to have you guys both on the show is because I feel like you are both pretty steeped in the crypto world across regions. And the last time I did a show about Asia was actually quite a while ago. It was like a year and a half ago. So I was really curious. to know kind of where things have been going over there. And so just in really broad strokes,

why don't we just start with kind of like the big picture? How would you characterize the differences between crypto entrepreneurs and the crypto projects and teams in Asia versus the rest of the world? So, I mean, something that Davy and I think about a lot is that like a crypto is inherently global, right? There's no sort of built-in restrictions in terms of where you can participate. And so as a fund, we look really globally. And what we found is that the stuff that we like in Asia and the stuff that we like in the U.S. is completely different. And so in China, a very high percentage, a distressingly high percentage of projects, I think of as outright scams. And if they're not scams, they're just really uninteresting stuff. But the sort of centralized infrastructure around crypto, so like the

finance, the Hwobie, the OK exchange, the U.MD, these kind of guys are, in my opinion, like an order of magnitude better than the U.S. counterparts. And so if you compare, pair like, you know, Binance to, not to pick on anyone, but like, you know, Poloniacs or something. It's just the team is incredibly competent. Their execution abilities off the charts. And so what we found is that we do, we look at and do a lot more like equity deals in China that are for kind of crypto-associated companies. And then we do a lot more actual cryptocurrency deals in the U.S. where I think there's kind of more sort of old school cypher punk like a cryptographer talent. And I'm so curious why, oh, go ahead, Davy.

Yeah, right. So especially for just crypto entrepreneurs. And like one thing we, one thing like specific in China or just Asia. So Asia in general is so because we found like all this application, this essentialized application are really good to use there. And I think that's probably partially because of the whole fintight thing is pretty advanced like back in just back in China. So here in the United States, and people are still paying with plastic and vital billions of paper checks every year. But, like, everything is cashless. So if you ever go to Beijing, Shanghai, just that people just use AliPay or, like, which I pay everywhere. So I think the centralized application or centralized fintech infrastructure is way more advanced there. So that's why there's a lot of talents and entrepreneurs and this traditional fintech founder who are converted to like crypto founder. And so that's where we find like the two talents that belongs to that specific layer of applications.

Is that why you think that they differ in that way where kind of like the startups and the infrastructure as you described it is more advanced and interesting in China? versus here. But then also on the flip side, why do you think more of like the decentralized protocols and stuff are more interesting, those projects are more interesting in the U.S.? I think like if you're an entrepreneur who are building for like a centralized application and so you have to be really good at user acquisition, like user acquisition in the sense of like at like a consumer level.

And when it comes to like a protocol layer, so when it comes to like a protocol layer, so when it comes to like a pro-collar like projects. And so like like the like the like the like the first set of like clients like quote and quote like clients are more like developers. So you are basically targeting two different groups of users out there. And so it's a complete different scale. So I think like that's why that sets them apart like to so to a certain extent. Huh.

There's something else that Duffy brought up a while ago that I think we should mention, which is just, you know, if you're working in crypto, you're working on a technopal that's fundamentally anti-government. And you're working on a technology that has a ton of, you know, regulatory risk. And so you kind of need to be someone that's extremely comfortable with being a pirate. And we've noticed there's more of those people than you would expect in China. Despite that, there's, you know, there's kind of not the crypto firepower that we would want for, like, these protocol level projects.

But in terms of, like, you know, a CZ and Hei type of team, like you have at Binance, where, you know, they're just going to go ahead and do this thing. and if it works, it's fine. And if it doesn't, you know, they'll live in Singapore or something. And we've actually, it's been slightly, you know, a bummer for me because there's been definitely projects in the U.S. where they approach me with something that I think is really cool. And I'm like, well, but like, you guys are U.S. citizens and you're under U.S. regulatory regime. And what you're trying to do is just not going to fly in the U.S.

And so there's just, we can't fund this because, like, it's not going to work in the states. Oh, you know, I thought you were going to go in the opposite direction with that statement. And I thought that Dovee's point was that the fintech firms had done well in Asia or China because, oh, sorry, that is that because the fintechs had done well, that that's why these like start-ups, these exchanges had done well. But that something decentralized is really different. And I thought where you were going with like being anti-government was that people in the West are more used to doing that. And that's why they're, you know, more, I guess, developing more interesting decentralized protocols.

but you see it the reverse. Yeah, I mean, it's really, I think it's really nuanced. So like, the nuance that I would try to try to explain is that like the Chinese infrastructure firms that are flourishing, they're doing so outside of China. So it's Chinese teams, but they're not dealing with Chinese regulatory risk because they don't have Chinese fiat channels. And so it's kind of, there's some kind of interplay there. And then the other thing is, you know, the general, I think sort of Chinese developer profile, I would say is much more sort of authoritarian. and unwilling to challenge authority. But then you get these occasional teams,

not to come back to Binance, but I think they're really amazing. And the other big exchanges in China as well and a lot of the wallet projects where they're just, it's kind of, you know, whether you love them or hate them, it's sort of like the Travis Kalanick Uber model where they're like, look, we made this thing that we know people like. And maybe the regulation doesn't fit yet,

but like we're just going to keep doing this and people are going to love it. And eventually the regulators will come around. And I think we've seen sort of, less willingness to do that in the U.S. Yeah, I will urge people, if you haven't yet to listen to my interview with Cizzi. I also think he's pretty amazing, but Binance is just like an incredible story. You really need to listen to that podcast if you don't know the story of Binance. So one other thing that was wondering, so now we, you know, we've discussed the difference in

the entrepreneurs. Do you think that, like, investment in the two regions differ? Like, do you see that Chinese investors kind of prefer certain things versus investors in the West? I think like when it comes to specifically on Chinese investors or just at firms that's based in mainland China. And I think so we have to categorize them into something like different. So we have like pretty good friends out there like NGC like at BG and like a few others out there. And I think, like, their preferences are very much similar as, like, what we have. But I think there are probably, like, hundreds of, like, different other, like, VC funds or, like, crypto funds out there. And, but, like, they're actually not even a fund.

So they're just, like, simply, like, a syndicate. And so, like, that's what we have seen, like, in, like, 2017 and, like, early 2018. So, like, hundreds of, like, such funds, like, pop up. And, like, many of them, they're, like, extremely short term. And so, like, the whole fund cycle is, like, so it's only one year. And like many of them are like just pure, just like, pump and dumpers. And so most of them are just like trading centric.

And so they will help you to do market making. So they will probably do, so they will like probably do like all this at pungsy design with you. And so like they're like most of them are like looking for just a short term return and just a short term liquidity. And I think like we have to categorize of those like not their legitimate funds out there. and then like some of those are like relatively so like just like some of those like good ones out there. And one thing I've realized about the investor profile is many of this like investors. So they don't have any just like product building experience. Like many of them are not working in like tech industry at all.

And so some of them are former, you know, like amateur trader of like crypto. So buying Bitcoin early on and just like get rich overnight. And like many of them so they would just like like. So they will probably try to invest their existing crypto and then into something they can just keep the multiple going. And so that's a very common mentality that I have seen in the whole Asian landscape. Wow. Like meaning they, so they form these sort of temporary groups, these short term groups, and then they just, I mean, like these protocols or these tokens, you know, whatever the projects are, like they, would take a while to build, but they're trying to get a profit within that year?

Yeah. So it's like probably like a few weeks. Oh my God. Yeah, well, I mean, I would add to that by saying that there's this kind of this shadow ecosystem of like extremely shady projects in China and extremely shady funds. And so you'll have these projects that are, in my opinion, just like pure garbage. And they'll offer to their friends who are running these kind of like pseudo little mini funds, these huge discounts with some form of lockup. And then they play this kind of musical shares game where the token gets released.

It gets, you know, they pay some listing fee. They get listed on some exchange. And then the funds that were in early all, you know, make two or three or whatever, 10x, depending on what the situation is. And then they just rinse and repeat. And so what happened is when, you know, during the massive bull run in 2017, they were able to do that pretty successfully. And then when the market turned much less bullish,

they found themselves holding on to a bunch of, you know, just pure garbage tokens that were made by teams, in my opinion, really in bad faith. And so a lot of those funds, you know, because what Dewey mentioned, they have this extremely short time cycle. They're just, they're screwed. I mean, they're in a lot of trouble because they're holding assets that have no inherent value. They have no one to sell them to.

And their LPs, you know, want their money back in two or three months. So I think we're going to see kind of just the way we've seen in mining and the way we've seen in projects. Like when the market turns sour for a while, all of these kind of amateurs and scammers and everyone, you know, get washed out. And I think we're going to see a lot of washout of that kind of fun. Okay. Yeah, let's hope.

One thing that I wanted to ask you was I've spoken to both of you before, and I noticed that I've seen or heard you both call the advantage that Silicon Valley VCs used to have. You've called it an unfair advantage. And both of you said that you think that's changing now with crypto. So what do you think that advantage was before, and how do you think crypto has changed that? So I think in the past, like the huge advantage, and I think this advantage still exists to some extent. And by the way, I mean, the reason we use the word unfair advantage is just almost like a term of art in startups where like if you're investing in a team, you want to ask them, like what's the advantage that they have that no one else can access? And I think for Silicon Valley VCs, the big thing was just there was this huge network effect where if you were a Silicon Valley startup, everything you needed was in the Valley.

Like all your hiring was going to happen in the Valley. All of your future fundraising was going to happen on one, you know, on Sand Hill Road on like one street in Palo Alto. And so if you were a very well-connected Silicon Valley, BC, you could approach entrepreneurs and tell them, you know, we're well-connected to all your potential customers. We can help you hire. Your future fundraising is going to happen with people like us. And then crypto came along. And in crypto, the ecosystem is much more global. And so if you're a project, you have to care about like miners, which are mostly in China. You have to care about an exchange ecosystem that's truly global, but also has a very large China presence. many, many of these crypto teams are hiring remotely in Eastern Europe, in China, in Singapore, and in the U.S. And so if you're an old school, you know, Sandhill Road VC, you're actually going to be at a pretty big disadvantage because when a crypto project approaches you, you really can't offer them very much.

And I think crypto projects are starting to wake up to that, where in 2016, 2017, a lot of these projects were really excited to get, like, you know, the big name, brand name VCs on board as investors. And then they realized that, like, the value. you add being promised just wasn't being delivered because these people just they're not really in the right position. They're not connected to the right people. And you're starting to see a lot more, you know, specific crypto vehicles. A fund that we like a lot is this paradigm. And so paradigm was like Matt Wong left Sequoia and partnered with Fred Ersom and this guy Charlie Noyes to do a fund

that's specifically going to be crypto-focused and that will hopefully establish these connections. And so I think, you know, that's going to be a trend and that it is really just the global nature of the ecosystem that sort of eliminates that advantage that Valley VCs had. Yeah, and for people who don't know, Fred Ersum is the former co-founder of Coinbase who left in, I think, late 2016. Debbie, were you going to add something? Yeah, because I think the traditional venture business has been very regional, or at least that started as a very regional, so, or like, started as a very regional business.

And, like, Silicon Valley has been the center of, so has been the center of technology innovation over the past few decades and like the whole ecosystem is complete right because we have been saying that like the whole bay area or like the second valley has been a stack like yeah in like south part of the bay area is the infrastructure Cisco Intel and Vida and so like moving on to like the north of the bay is San Francisco where like all the application is happening and I think like I think when it comes to like crypto like everything is very very Scattle. And ever since the early days, and China and, like, Korea has been, like, major players in the crypto landscape. Like, the topic changes were started. And, like, I think,

like, most of them, they are, so they are still operating back in China. And, like, most of the biggest and mining operations are, so are also, like, ran by Chinese. And there's also other thing I want to mention. So it's about the drive. And then, like, also it's about the desire for, like, social mobility. That's one thing that's very obvious in South Korea. When it comes to South Korea, like, South Korea, like, first of all, like, South Korea has a very strict, like, capital control as well. And then, like, because it has a very high demand and very, very low supply, and so, like, that's how the Kinchu premium comes soon to exist. And then, like, also that, so, and then, like, also that Kimchie premium kick off, like, a wave of, like, crypto hype. So,

among the local Korean citizens. And then I think, like, the hype of, and token investment and also like the very strong drive and desire for like social mobility. And then because there's like illusion that you can be overnight millionaire, so back in Korea. So that has become like a social phenomenon. So both investing and like doing crypto startup has become both the Chinese and Korean version of also both the Chinese and Korean version of American Dream. And so that's one thing that's probably lacking in Silicon Valley right now because like they'll, so I think most of the value entrepreneurs, so they're relatively philosophical and idealistic comparing with like Asian entrepreneur, like who are definitely more like

practical. And then like the whole hype, so like the whole hype behind crypto has so has like propelled that. I wanted to ask you about so actually, before we move on, I did want to note for listeners who don't know what the kimchi premium is, that was this period, especially during 2017, when due to, like, restrictions on where you could trade, demand in Korea drove the prices up sometimes, I think, to like 30% higher than they were on other exchanges. Is that roughly what it was at the peak? Pretty much. Yeah.

Which is just insane, you know, for coins. like Bitcoin and Ethereum and stuff like that. So does the Kempty premium even exist anymore? So I think it's down to less than 1% now because everything has to be more on this equilibrium and because of better liquidity. Okay. Yeah. I do know that I did hear some other podcasts and other people that are a little bit more

trading oriented, talk about how I think some people. would like try to talk to their friends and relatives in Korea to see if they could like take advantage of arbitrage opportunities. I do not condone that behavior. However, that is I think what was going on back during those days. But just under curiosity, why do you think, because I, as far as I understand, in general, I think there's just much higher trade volume in Asia than in the West. Why is that? So in general, like the trading volume, um, I, I, I think like trading volume because just like exchanges are there, right? Because like a career has like three biggest exchanges out there so they can accept like FIA. And so like that's why the FIA on RAM channel is like pretty sufficient there. And then China before the ban, such as before the ban last year, like most of the major exchanges can also accept R&B. So like that is like the FIA. And so like that's why the FIA on RAM channel is very smooth. And like even after the bank, like everything just like quickly move on to Ali pay or WeChat pay as the over-the-counter's.

Like because the digital payment is already pretty advanced. And so as on as like we can transfer money on Vichet and so I can have your address. And so we can actually do like just over-the-counter transaction using this like peer-d-peer manner. I think like that's why probably like that's one of the reason why the trading volume is, larger in general, but in Asia. And then I would, I would, I would add to that. Okay. So I would add to that that, you know, when I first moved to China for college,

I was at a cafe and I saw like this, you know, middle-aged woman with her computer open. And she had, well, looked to me like a Bloomberg terminal open. I mean, it was just really advanced, like trading interface. And she was day trading Chinese stocks. And I was like, huh, that's like, you wouldn't really see that in the U.S. And it turns out, like, in China, tons of people are really active. And in some cases, very skilled day trade. And so there's a lot more, I think, just like amateur traders in China. I think the structure of

their markets is a lot more retail focused, especially with like the Chinese domestic stocks. And so you had this huge pool of people that were used to trading pretty speculative assets. And so when crypto came around, they were like, they were really into it. They traded it very heavily. Yeah, I think like there's interesting. So there's also very, very unique market structure like back in Asia. So if we compare it, like the dot-com bubble. And so, so compared to the dot-com bubble versus like the crypto bubble. And so there's things not too many investment bankers out there, like just as sell-side-by-side

agents. So here in United States or like Silicon Valley for specific for like crypto products. But like there are tons of like such channel or just like selling agent back in Asia. And so in just in Korea, Japan, China or like Thailand just all over. And like people tend to to have like crazy love into financial products. And so like those financial products are like either insurance or like high yield product or like shadow banking products. So there are so many of those just like average a mom and pop. And so like they're all buying to that.

And so like usually it can be like a shadow banking product like which is not very, very common here in the US. And like many of like those agents. So they're actually selling like crypto products comparing with this like regular financial or just as shadow banking products out there. And I think that's one of this very unique, like, marketing back in China and, like, Asia in general. Hmm. One other thing that I was curious about, though, is if you were saying that a lot of OTC crypto trading is happening via WeChat and AliPay, those are surveilled platforms, right?

So, you know, obviously there is this ban on Bitcoin exchanges and investing in ICOs. So could trading on those platforms or investing via those platforms, could that put people who use them at risk? So there's actually like a certain risk out there, like, especially like the government. They have been rounding all this like monitoring, especially on crypto transaction. But like if you are, I think if you're like careful enough and just like the amount is like small enough, it's relatively hard to be caught. But I think there's definitely like risk exposed to, um, get. your banking account being free stuff like that. And so, like, many of my OTC friends has been, being through that before.

But I think in general, like, if you're just, like, doing, like, consumer level and just a small amount, like, peer-to-peer transaction, like, it should be fine. Yeah, I think, I think that's, I think that's accurate. I think also, the, you know, the actual, the situation on the ground is that it's illegal in China to run a cryptocurrency exchange that has fiat, but it's actually not illegal for me to sell use some Bitcoin for RMV if like the two of us are just friends. And so that's, you know, it's unclear whether there might be some other kind of weird risks associated with that. I had a friend who did a pretty small OTC transaction and then ended up getting basically a police summons

that said, we think you're involved with money laundering. And she went and it was fine. But I guess what happened is that like somewhere in the chain of either, I forget whether it was the Bitcoin transactions or the fiat transactions, some money that didn't have a good origin ended up in her account. And they froze in her account like Debbie said. And it was. kind of it was a hassle. And she ended up, it was fine. Like, she didn't get in trouble or anything, but it was pretty scary. But yeah, but it's, it's just like a really weird, like as an American, the idea that a transaction that I'm doing on an app, that the government would have some insight into what I had done. Like, that's a weird thing to me. Although I guess, that's of course,

that's of course happening in the U.S. as well. Right, right. But I guess it's happening if you're using, I guess what I'm saying is, because like a chat app, right, it's different. from if you're using like a financial app. Well, but I mean in the U.S., the governments have full surveillance of every chat app as well, except for maybe single.

I think like when it comes to, so like, so if you and I, like, once to transact crypto and like the only thing we're, like the only thing we are going to communicate over like we chat is probably just like the QR code. And I think like that's surveillance.

And so they would definitely try to labor like those like crypto relevant conversation. But, when it comes to, like, smaller amount, and so it's just fine. And then just like, holding crypto is actually legal. So it is actually not illegal. So, yeah, so, like, we don't know anything about, like, what is the, so what is the specific, like, just monitoring policy behind WeChat? But, like, so far, if you're just doing, like, small amount, like, it should be fine. So we're going to keep discussing regulation in a moment. But first, a quick word from our fabulous sponsors.

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China have helped your U.S. investments. Yeah, I mean, so I think there's been a couple of like interesting examples. But one of the big ones is really just like Davy, much more so than myself, is super tied in with the miners in China. And there's a lot of cases where, you know, U.S. projects that are proof of work based will want to do something that would actually be disastrous for them from a mining perspective. And so, like, recently, you know, Zcash has been discussing changing their mining rewards such that it's time locked so that the crypto that you get from mining is not immediately spentable, but it's sent to you over a long period of time. And W. was able to very quickly talk to a bunch of Chinese miners, ask them how they felt about that, and, you know, came back with the result that it's pretty likely that will be like a very strong centralizing force.

And so whether Zcash does that or not, who knows, but, you know, they can get very quick feedback from us on what the actual look on the ground is. There's been a bunch of other ones. We're really excited about this project called Handshake. People can check it out. It's handshake.org. But the general idea there is to have a DNS root zone replacement handled by a blockchain. And so you can do DNS routing of websites and then also have crypto if you want using these human readable addresses. And those guys also had a proof of work issue where they initially were going to use an algorithm. That's the same algorithm that Grin was originally using called Kuku Cycle.

and they decided to switch it to, you know, an algorithm called Shaw 3 in the hope that they would be very ASIC friendly and that they would have lots of people building ASICs. And we were able to give them some sort of inside info on, like, you know, exactly how they should implement that to avoid having a Chinese company that has already made ASICs for that, just be, you know, completely dominant in day one. So I think mining is a big part of the picture.

I think the other thing is, like, we have really close ties to a lot of the exchanges. And where that comes in is that, like, these exchanges, every day get an overwhelming amount of contact from new crypto projects asking to be listed. And they actually have a really hard time distinguishing what's a really truly solid project that they should just immediately list and that they shouldn't ask for a bunch of listing fees or anything weird like that. And then what's just kind of a marginal project. And so what DeVi and I, by virtue of the fact that like I said, we're just like super, super picky, we're able to go to our exchange friends and say like, hey, look, we're looking at this project.

We think they're really awesome. You guys should look at them too. you know, here's the contact and we can make those connections. So I think really the kind of two of the biggest pictures are the mining and then also the exchange side of things. And then actually just to circle back to the regulatory thing, I wanted to ask you because you can see, and I feel like this is affecting a lot of your investments, you can see how the regulatory climates differ across regions. How do you think that's affecting the development of crypto overall, like globally? Yeah. I mean, I think like what we're going to see and what we're beginning to see is there's going to be some

jurisdiction that says, you know, this thing is extremely disruptive. And like I said, I truly believe crypto to be, I think maybe anti-government is too strong over our dues. I think it's something that like massively empowers individuals over governments. And so it's kind of a scary thing for any government in the world to be like, yeah, we're totally on board with this. But I think what you're going to see is there will be some jurisdictions. And I think Singapore is a good candidate for that. I think, you know, Malta is doing some stuff in this department. And even some states within the U.S., like Wyoming has been extremely positive is going to see that, you know, having this infrastructure that's going to be

processing billions and billions of dollars of transactions is actually going to be something really valuable for them from a job creation perspective, from a financial perspective. And so they're going to start getting on board with that. And that's actually, that's why, I guess, I have a lot of friends. Naval Ravikant is someone who has this opinion, and I don't agree with this opinion. And the opinion is they're very, very worried that, like, governments are just going to unite and shut down crypto. And I think, you know, it's a legitimate concern, but why I'm less worried about it is I think there's this really interesting game theory where like if every other

government is like, yeah, we hate crypto, then there's a high incentive for some government to say, no, no, we love crypto. Come here. And, you know, pay our taxes on your incredible returns. And so, you know, finance made more money than Deutsche Bank in Q1. And finance has 200 employees. And I think Deutsche Bank has something like 100,000. So we're talking about very significant sums of money. And I think that's going to end up being very enticing to some governments. Yeah. I've already seen that happening. like, yeah, the likelihood I think that all the governments unite in one viewpoint on crypto is so low. But anyway, Debbie, what were you going to say?

Right. So because I think like, first of all, like, the modern politician, and so I think, like, their job is not to form consensus, right? So it's, so it's almost impossible, like, for, like, all these, like, major politicians, like, so to form a consensus, like, to shut things down. And, like, unless it's about, like, life and death. And so, like, that's what we're. we have seen about World War II, about financial crisis last time. But I think like crypto nowadays, and so it's just like not big enough for them to like think about like forming consensus as to like one entity. And then so like the other very interesting game theory is, I think like right now, US and China are in a very interesting historical moment.

And because like both in China and like US and we have this very strong mighty leader. And so because of them, and so they're, so like the strong-minded leader leads to political tension. And so when it comes to political tension and anything that China banned and U.S. will, so I think like U.S. will probably never ban it. And so like that's also like a very interesting game theory that can actually kick crypto survive. And then so like that's actually like the T-O-1 like sovereign states, right? And so when it comes to T or two, like Singapore, Japan, Korea, and so they're actually moving very fast on like curfying, regulatory playbook and license, qualifications, stuff like that,

because they have very strong incentive, like, to facilitate the whole industry and, like, see it as, like, a great opportunity when U.S. and China are in this, like, power struggle. So, and then, so because I'm currently actually in Singapore right now, and so I live in a building, and which is a very interesting, that so three other very influential crypto entrepreneur back in China, so they all relocate to Singapore. And so we literally just live in the same building here.

Right. So I think that's like one, a very major phenomenon that many of these Chinese entrepreneurs, so they're willing just to, you know, like give up what they have back in China and like move out to a state that's like more friendly and just like start everything all over. And I think like the survivability and just like sustainability of this Asian entrepreneur are just amazing. It's like just like cockroach level survivability. Yeah. Yeah.

Like definitely. Yeah. So I think like that's my point on like regulation in general. All right. So let's move on to something that's been on everyone's minds recently, which is mining. How has this crypto winter affected the miners? So, okay. What in comes to mining, because like one thing.

thing we have to understand is for, so just like for all the P.O.W mining, just that proof of work, right? So when all the PUW mining, and so they have, so like, they have one thing that's difficulty adjustment. So when it comes to difficulty adjustment, which means like the difficulty is actually like a trailing indicator of the price. So when the Bitcoin price crash, so like the, so the Bitcoin difficulty level is not going to adjust. immediately. So it's always lack. So like which means like all the miners has to keep the same level of like hash power in order to so in order to like keep producing the block. And so like that's why a lot of like miners and like who are not very efficient or like who are not on a very

good like unit of, so who are not on a very good unit economic. So they will so they will actually be like washed out. Because like, if your blood reward cannot cover your marginal operational costs. And basically it's like, so basically designed by the economic as a miner, and so you are not going to mine because you will be losing money. And so there's a lot of this like turning off of the machine or just like, just like half the machine sell. So like have to, so like or probably just sell the machine at like a deep discount to some minor that can be more efficient.

So that has happened in the last couple of months. And I think like, so we can actually see everything's reflected on the total hash ray. So like if a lot of mine are turning off their machine. And so we will see like a hit on the hash rate as well. So I remember our hash rate right now is about like 40-ish. And so that's at least. So like from the peak, it was about 30 to 40% dropped. So yeah.

Yeah, and just to explain it for people who maybe aren't super familiar when DeVie was talking about the difficulty, essentially the more computer power that there is on the network, the harder it is to find a block. Like, the more electricity that you need to put into it, the harder the math problem gets. And that's because they want, the software was designed so that there would be a new block found roughly every 10 minutes. But, of course, if you have more people and more computer power on it, then you would just, find them more quickly, right? So instead, the difficulty will adjust to make it more difficult. But what Debbie's saying is the reverse has been happening where the difficulty is dropping, but it only adjusts every two weeks. And so during this period where the price has dropped, there are a lot of people who cannot keep paying the same electricity to try to find the block

rewards or to find the blocks to get the rewards. And so those people are just having to quit and maybe sell their miners. So do you think, because as far as I understand, I think also that whole cycle hurts Bitcoin in a different way, which is that many of those miners may also sell their Bitcoin reserves, which then further drives down the price. Do you know if that's happening? I think that has happening. So that has been happening for a while. And because for like every model of the machine. And so let's say if you're probably mining with the best machine, from like big man like s-9. And so like

S-9 has like a certain level of like price point that can like break even. So if you hit the break-even point and so you have to sell, so you have to sell the coin that you have mine and just like to cover your operational expenses. So like every model of the machine has like a different break-even price.

And so like the better of your machin is and like the lower the like break-even prices. And so like that's why we have seen a lot of this like, relatively outdated model. Like, say for instance, some early model from, like, Avalon, like, and, like, and, and then probably from Bittman as well. So many of them cannot just, like, cannot sustain. And so for, like, many of them, anything under 4,000, so it's actually hitting their

breaking even point. And so, like, that's why they have to just, like, keep selling or otherwise just, like, stop completely. Wow. So I'm glad that you mentioned Bip, Maine, because they've been in the news. apparently they're undergoing layoffs and potentially on a really large scale with rumors of the layoffs hitting more than 50% of staff. And this comes in this period after they file to have an initial public offering. So can you tell us what you know about the layoffs? Like,

do you know how many people it is, which departments, like any details you have there? So before we get into the Bitman stuff, I just want to add one thing about the mining issue, which is it's been kind of interesting to see that like, despite all of the negative stuff that Dovid just went over, which is all totally true. The coin has kind of just kept on chugging. And so there was this theory that, like, you know, what Dewey described with the difficulty adjustment and also selling of reserves that you would end up with something called a mining death spiral, where, like, as more and more miners abandon the chain, the difficulty level adjustment happens too slowly,

and so no one can mine. And so even less miners mine and it ends up just completely halting the chain. And we haven't seen that happen. And in fact, we've actually seen the difficulty level start going back up. So the difficulty level hit like a low. I want to say in early December, and then it's been climbing ever since. And it's the new difficulty adjustment that hit around December 31st was an upward one. So it seems like Bitcoin is actually pretty resilient even to these really extreme price drops

coupled with crazy regulatory action and a bunch of strife for miners. And so I think in the long term, it's actually pretty exciting for Bitcoin. It's just kind of like yet another thing that was supposed to kill Bitcoin and didn't. Yeah, it's things like that that remind me of how when I was first learning about it, and I just felt like learning about Bekoin was just blowing my mind in so many ways. And even all these years later, when I realized that it works, I'm just like, wow, like that's kind of amazing that they figure that out. I just feel like it's the longest game of, I don't know, just like something where you have to keep like a balloon afloat in the air or whatever. Like it just keeps going and it's kind of incredible. Yeah, no, no, I forget. I forget who said it, but there was some great quote about, like, Bitcoin is the only thing that works better in practice than in theory. I love that. Super funny.

That's great. So, so, back to Bittman, because that's really interesting. Yeah, yeah, that is so interesting. What's going on there? Yeah, so, like, all the things I know, so that's actually not confirmed officially by, like, Bidman. And, but, like, we have, like, so because the local, like, the local community is just so small. And so we have pretty much, like, know everything, like, even, like, before any of, so even before any official thing came out. So from, like, what I have heard, so the laid off is, like, definitely more than 50%.

And I think it's probably hitting, like, 70%. Oh, my God. Yeah. So, like, just to let you know about the total, like, like, the total employee number of, like, Big Man, like, before the layoff. And so it's somewhere around 3,000. So it's a huge company. And because that, based on. their IPO filing, I remember it is around 2,500-ish just based on the IPO filing. And so they

have been hiring like crazy, like even afterwards for a few months. And so that's why before the layoff is around 3,000. And so from what I heard is like their Beijing office, which is their headquarters. So it's going to be cut to 300 from over 1,000. And so they have like a Schengen office. So they have like a Schengen office. And so I think Schengen office is going to cut from like 800 to like 200. So like one specific department that's been hitting really hard. So probably two.

One is the BCH client department. And like the other one is like the AI department. And like the mining department, it has like two sub-office. And one is the mining pool. And I think like that has been reorganized to. somewhere to like 20 to 30. And so the other office is the self-mining, like basically like the whole mining farm.

And so that's something that I'm not clear yet. But what I heard is like they have like a major reconstruction of the whole like self-mining facility thing. And so I've heard rumored that so they might be spinning out. Because that one problem with their like current IC, so with their IPO account is majority of their mining income is very hard to put into this regular accounting. So regular accounting mechanism. And like Bigman has been investing quite a bit in like so in mining facility and like just

international mining farm in like Canada and in like all over the world. And so I have heard rumors saying that they might be spinning out and but I'm not sure yet. And but like definitely the Bitcoin Cash client team. And then also the AI chip team has been hit really bad. And when you say Bitcoin Cash client, you mean the software that's used to run Bitcoin Cash? Yeah. So like client side is like I think like the protocol team is okay. But like anything on top of that protocol, like say for instance like Bitcoin Cash wallet, like Bitcoin Cash API.

And just anything on top of that. And so they have like a separate team for that. And so that has been hit really bad. Do you think it's their ideological shift to Bitcoin cash that has caused these problems? I think that's definitely one of the reason. Because I know, like, Jayhan just said, like Jayhan bet on Bitcoin cash, like heavily just after the, like, after the initial, like, half fork. And so I remember they have spent over like $2.5 billion just in buying, Bitcoin cash. So like after the first like half work and so they have acquired a lot of like Bitcoin

cash from their Bitcoin position and but like they had been just like keep buying more like Bitcoin cash. And so that's around $2.5 billion US dollar. And so I think like they are really ambitious on just pushing out Bitcoin cash and on payment on on like pretty much everything. Smart contract payment. Yeah, because they were taking payment for their miners. in Bitcoin cash, right? Like you could only buy the mining equipment, yeah. Yeah. So they must have a huge amount of it.

And I'm sure the price of that is down. Yeah. Yeah, I mean, so one thing that I thought was kind of interesting is like when they were doing this IPO, I asked some of my Chinese like PE friends what they thought of it. And they had read through the docs that got leaked. And they were all like really shocked by the amount of Bitcoin cash on the balance sheet. And I'm like, I do, I do exclusively early. stage investment. So I don't really know much about this stuff. And so I couldn't, I couldn't have

like a really solid take on like whether this is normal or not. And their take was that it was insane and that it represented a massive risk to the company. And it seems like that that's played out. That like, you know, holding that much Bitcoin on the ballot sheet would be scary for a lot of these traditional investors. And so when they see someone holding this, you know, alternative asset that hasn't even proved itself in an enormous, like very relevant to the company amount, I think that was really scary. And I think they're right to be scared if you look now. It's really hasn't turned out well for them. Yeah. And according to one report, the regulators in Hong Kong, which is where Bitmain filed to IPO, they've indicated that they think it's too early for any

crypto company to go public. So do you think, I mean, it just feels like if they cannot get this cash injection that they were expecting from going public, what do you think the prospects are for Bitmain? Yeah, so because whenever like any just like bear market or just like any like nuclear winter and I think only the top player going to survive. And like even Big Man has burned a lot of cash. And, but I think they still have like decent bank role. And like especially after this like massive layoff. And I think like so I think they will have a decent control on their like operational expenses and just like general expansion. plan. I think like Bitman should be fine because they are the biggest like A-Sid maker out there.

Like they're like the biggest minor out there. And so as long as like they stay as the biggest one. So they should be okay. Yeah. I mean, so I would bet against, I would bet against Bitmain like disappearing as a result of this. But I think it's a massive setback for them. And I think it opens up competition where they have, there's a lot of like technical teams in China that are competing with bit. And in some cases, I think they actually have. a stronger technical team than Bitmain. But what they don't have is what W was mentioning, like the massive economies of scale with, you know,

foundries like TSM and all the supply chain stuff and all the shipping stuff. But I think at the point where BitMane faces this huge setback in terms of their cash flow and in terms of their asset balance sheet, it opens up, you know, a space for someone new to come in. And I think that's actually something I really love about proof of work, where it's this extremely chaotic, extremely tied to the real world ecosystem. And it becomes very hard for anyone to be a monopolistic power for too long. Like you just make one misstep and now you're out and now someone else has taken over.

And I think that's really valuable for the chain itself. Yeah. Yeah. I just going back to Duffy's comments, I just realized after I asked that about Bitmain that maybe one of the reasons that they are doing these massive layoffs is because they kind of get the, you know, they've taken the temperature and realized that maybe they won't get their IPO. And so this is their way of saving themselves. So I also want to ask something else about the Chinese government, which is I read this other report saying that the Chinese government wants to get Bitcoin miners to exit China.

Sorry, yeah, get Bitcoin miners in China to exit the industry. So do you know if that's true? And if so, do you know if minors are complying? Yeah. So as far as I know, I don't think so. Like there's still a lot of like just like mining operation. And so both like legally. just like both legal one and illegal one. And so I think they're still operating okay. Like the right now's problem is like not from the government. So it's like more about the just like economic in general because like the hydropower, just like the hydroelectric cost is actually not. So it's actually not that low back in China.

And many of these that Chinese miners are going to Russia, going to Ukraine, going to like the other part of the world and to find some like, ship electricity, like to further around, so to further around their operation. I think it's more economic driven, but not like garment driven. Yeah, I totally agree with that. I think also the other, like everything, I mean, it's so much more nuanced than the general media reports. So like there's not, in China, there's not like a ban on mining. What there is is if you're on the national electricity grid, they don't want you mining. However, a lot of miners have their own electricity. I mean, so we know some folks that used to be gold miners and they have their own hydropower and

their own coal power that they were using to power a gold mining operation. And they now switched like half of that over to mining Bitcoin. And the government doesn't probably doesn't even know about that and certainly doesn't care about it. And so you see like, you know, when people say the Chinese government, I think very rarely is that an accurate phrase. And what they mean is like, you know, the province of Hunan's government or like, you know, the central government or whatever, but it's not a really a monolithic organization. And there's this great phrase in Chinese, um shan gao huang de ys like uh the mountains are hot the mountains are tall and the emperor is far away and so like in lots of places in china like what the central government says is not necessarily

what's going to happen immediately um and i definitely like i don't think there is some like big i don't think there's some like big push from the government to get rid of miners and um because just like checking on my recent conversation with one of my big minor friend and um and so like he's actually considering like buying some major dan just some buying the den out there and just to produce like his, so like his own hydroelectricity. So I, so I definitely don't think that people are like moving out because of like Arm and Ben. Yeah. Okay. Well, because yeah, I mean, I guess so I, you know, like I said, I saw that report that they were trying to do that. And in general, I feel like in the West, we have this

conception that everything is extremely top down over there and that when the government wants to do something, they can do it, you know, just like, oh man, I was going to use a very unfortunate phrase. I was going to say they could steamroll over people to do that, but let's not think about that. So, but one other reason that I thought maybe they might have a motivation to do that is there's been this talk of a crypto yuan. Do you have any sense of how much of that is just talk and how much of that is like an actual intention of the government? So, like, first of all, PBOC, just the People's Bank of China. And so that is like the fat of like the fat equivalent. And they have been so because I have chat with some of their like inside of there. And so they're actually extremely knowledgeable about like everything on crypto and all the way from protocol to like monetary policy to everything. And so I think if they really want to roll it out and so they can probably do it tomorrow. And so. And so. it is not about feasibility.

It is more about timing and about application and about, you know, like overall sentiment, et cetera. So I'm not sure like at what specific timing that like they were made a decision. But I think they have the full capability there to do it. And like the yuan. And so I remember like the PBOC like there's like, so they have like a research team. So they actually recently published like a paper. like talking about blockchain.

And so that's one of the most insightful paper that I have seen published by any Chinese player. And then one of the, so like one of the author of that paper right now is actually the chief economist of Big Main. So I think he joined, I think like he joined Bitman after he published that paper.

And then like also like there's one company and back in China. And so invested by Sequoia China, I remember. and I think also China Merchant Bank. And so they have been decided PBOC in-house blockchain engineering team. And so like the founder used to be working for Ethereum Foundation. So I think like the technical capability is so it's like definitely there.

So it's like more about like what are the specific application and like how to think to size the whole infrastructure. Because like the whole banking infrastructure back in China is kind of chaos. So it's, like, pretty chaotic that, like, Sifferenson, if you, so if you have saving on one, Sifference, like, China Merchant Bank. And so China Merchant Bank does not share the database with, so with the China Construction Bank. So I think there's a lot of this data synchronization problem that they have to figure out, like before they can roll out, like, the whole, just a digital cash or just a digital yuan.

But just purely from like cryptocurrency perspective, like, I think their talents and like just like competence. So it's like definitely at a pretty high level. So we're running out of time. But I just want to ask you guys one last question, which is I know that there are a lot of people in the Western crypto community who say that one motivation that Chinese citizens could have to use Bitcoin is to escape the surveillance state and things like the social credit system and whatever. How much do you think that motivates actual Chinese people, like who, you know, who use Bitcoin or trade Bitcoin?

Not at all. Not at all. I think it's, yeah. So like, nobody actually like care about that credit system at all. Like first off, like just like, first of all. And just that people will not associate cryptocurrency with that thing. And then people will only associate. And also that, that whole, that whole thing is like such an overblown, like,

it's almost like a fake news story. Like the Western, Western, Western, loves reporting on this credit system. And like no one I know in China even like knows what it is. Or if they do, it's like it's not very well integrated. Most people don't use it. It doesn't touch most people's lives. But it's just like really scary dystopian sounding thing. But wait, when you say it doesn't touch most people's lives, like, I mean, like you, you must know, for instance, if somebody goes missing, one of the first things investigators do is they look at their financial transactions to try to figure out what they've been doing,

where they've been, stuff like that. And so in China, where so much financial transactions happen in this cashless way on these apps that are surveilled by the state, like, don't you think people have an awareness of the So, so to clarify, what I'm saying is, is the, like, Sesame Credit, Social Credit score thing is an overblown story that basically doesn't exist. I mean, it exists, but it's just not a big deal. The surveillance state stuff you're talking about is totally real and totally exists and definitely does touch people's lives.

I would like those two things are totally distinct. But I would say like in China. Are you saying that Chinese people aren't motivated to use Bitcoin for that reason? Like they don't connect the two? No. Yeah. They're not. And it's just, I mean, they're not, A, they're not that worried about the surveillance.

And B, I mean, I would say from a factual perspective, Bitcoin doesn't get you, doesn't get you much in that regard. Well, yeah. Actually, it should be like Monero or C cash. It would be a bad idea to use Bitcoin. But even, but even, I mean, even even those things like, I think crypto is pretty. far from being a really robust payments layer. So actually, like, Devon I chatted with the folks who run Wechats or like run 10 cents fund. And one of the figures I was super curious about is like, what's the TPS, you know, the transactions

per second that WeChat sees? And I think, like, we're asked not to share the numbers, but it's, it's insane. Like, the amount of transaction volume that something like WeChat sees, especially during peak times, is like mind blowing. And there's no crypto system as of yet that's getting even close to that. I mean, the guys that I've seen that kind of have the closest chance of being an actual payment system or the mobile coin folks. And, you know, that'll be something where like it'll work as a payments network. If everyone in China adopted it tomorrow, though, it would collapse like all the other ones.

And so I think this idea that like people in China are, you know, jumping on crypto as a payments thing or as like a way to avoid financial surveillance is pretty misguided. But I do think what they are using it for is to avoid capital controls. And that's, that's the big one. I think like so, so there are two primary purpose of like using crypto. One is as an investment asset. People want to get rich, like simply asset. And then like second is just like moving capital out, just like moving R&B asset into crypto asset and then like further transfer to probably US dollar asset.

So like this are the two primary purpose that we have seen like Chinese people are using crypto. Yeah. I think I think so. I mean, I know we're running out of time, but I think sort of one thing that I think it's really important understand just from a sort of fundamental perspective about crypto. And I think it really informs Ndvi in my perspective on what's happening in China is that like all of these systems have to first function as a store of value before they can start functioning as a unit of account or as a medium of exchange. And so I think Bitcoin has done very well at becoming this sort of store of value use

case. And we're seeing that, you know, where a store of value doesn't mean you never transact. It means, you know, you're not buying coffee with this thing. But if you want to move a lot of money offshore to go buy a house in America or something, you would use it. And I think we're going to going to start seeing sort of the medium of exchange use case come about in like, you know, mid-2019, early 2020 when projects like Mobile Coin Ship, I think Stellar is looking into stuff like this. And I think we're going to start seeing that. But I think right now it's just it's not the reality on the ground. And so as a result, it's not how people use these systems in China or anywhere. All right. Well, this has been an incredibly fascinating discussion. I had a whole bunch

more questions for you. I think maybe I will see if you guys can just write a few answers for me, email for those additional questions and I'll put them on my website for people to listen to or to read. I'm so like when I started doing the podcast, I would often talk about the readers and then I have to be like the listeners and now I've like switched the other way. But anyway, so yeah, like I said, this has been such a great discussion. Where can people learn more about you guys and primitive ventures? So we have primitive dot ventures for the for the fun. There's not a lot of information there, but there's contact info if anyone wants to say hi. And then DeVie and I are both pretty active on Twitter.

So I'm Wheat Pond on Twitter, W-H-E-A-T-P-O-N-D. and uh w w you're w one right yeah just like just just my first name and my last name okay great well thank you both for coming on unchained thank you laura thanks for having us laura this was a lot of fun thanks so much for joining us today to learn more about eric and duffy check out the show notes inside your podcast player new episodes of unchained come out every tuesday if you haven't till ready rate review and subscribe on apple podcasts if you liked this episode share it with your friends on facebook twitter or LinkedIn. And if you're not yet subscribed to my other podcast, Unconfirmed, I highly recommend you check it out and subscribe now. Unchain is produced by me, Laura Shin, with help from

Rangling Gallipoli, fractal recording, Corinne Fife, Jenny Josephson, and Daniel Ness. Thanks for listening.