Unchained - Why Crypto Buybacks Are 'the Wrong Way to Allocate Capital'

Episode Date: October 14, 2026

ARK Invest's Lorenzo Valente says quantum fears and the Ledger hack are speeding up the death of self-custody, that Ethereum has to pick a lane, and buybacks are “crazy.” ======================================================== Thank you to our sponsor! Put your crypto to work with Nexo: earn daily interest or borrow funds against your assets on one platform trusted by more than 10 million clients. Find out more at https://unchainedcrypto.com/go/nexo-podcast-sn. Geo-restrictions, eligibility and terms apply. ======================================================== Quick favor: We're deciding what Unchained does next; new shows, stream times, what's worth paying for.⁠⁠⁠⁠⁠⁠ Our listener survey⁠⁠⁠⁠⁠⁠ takes five minutes, it's anonymous, and I read the write-in answers myself. Everyone who takes it can enter a drawing for a free year of Unchained Premium or Bits + Bips Premium. Open through Sunday, October 18. — Laura ======================================================== Justin Drake warned that ECDSA, the cryptography securing Bitcoin and Ethereum, could break before Q-Day, in the worst case "in months, not years," and an attack on Ledger devices sold through a third-party reseller has led to about $100 million in losses. Lorenzo Valente, Director of Research, Digital Assets at ARK Invest, says both threats speed up a trend ARK already saw: self-custody is slowly dying. He tells Laura Shin why ARK favors a barbell of exchanges that own the user and infrastructure like Solana, Uniswap, and Aave, and why he would point a first-time Bitcoin buyer to an ETF. They also cover Satoshi's coins, why Ethereum's L1 accrues so little while Robinhood makes millions, and why he calls the buyback craze irrational. Plus: ARK's tokenized venture fund, Cloudflare's agentic commerce plans, and why Binance has never swapped out its USDT despite earning no yield. If he's right, crypto's next wave of users may never hold their own keys. Host: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Laura Shin⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, Host / Unchained Guest: ⁠⁠⁠⁠Lorenzo Valente - Director of Research, Digital Assets at ARK Invest Timestamps 🔭 01:27 Why Lorenzo says crypto investing is moving from '0 to 1' to '1 to 100' 🧮 08:41 Justin Drake's ECDSA warning and why RIAs keep asking ARK about quantum 💸 16:42 Nexo: Generate daily interest on your crypto or borrow against your assets at https://unchainedcrypto.com/go/nexo-podcast-yt 🏋️ 17:31 The barbell: why Lorenzo favors exchanges and core crypto infrastructure 🪙 24:34 Satoshi's coins and why Lorenzo is less worried about Bitcoin's quantum fix 🔐 26:28 Ledger, Bitget, and why Lorenzo sees 'nowhere to hide' in hardware wallets 🍔 30:11 Ethereum's 'franchise model' and why Lorenzo says L1 value accrual is broken 🔥 38:04 Why Lorenzo thinks crypto has gone 'crazy' over token buybacks 📈 45:17 Why ARK thinks tokenized equities could pass stablecoin supply in 3 years 🤖 51:04 Cloudflare, AI bots, and why L1s are still orders of magnitude too slow 💵 54:05 Why Binance never dropped USDT, and what that says about Tether and Circle Learn more about your ad choices. Visit megaphone.fm/adchoices

I made the point with Robin Hood is like Robin Hood was making several millions of dollars a day. And basically, Ethereum-based layer was accruing $100, like literally $100 to $200, right? Hi, everyone. Welcome to Unchained. You're a no-hyped resource for all things crypto. I'm your host, Laura Schitt. Thanks for joining this live stream. This episode is brought to you by Nexo, the premier digital assets wealth platform, earned daily interest on your crypto or borrow funds, all through one platform trusted by more than 10 million clients. Find out more at nexo.com. Geo restrictions, eligibility, and terms apply. Before we get started, I want to ask you for something. We're making a bunch of decisions right now about unchained.

What we make next, when we go live, what we should be doing more of, and I'd rather hear from you before we make them than after. So we put together a survey. It takes just a few minutes. It's anonymous. And there's a box where you can tell me what we could be doing better. I read all responses. The link is in the show notes, or you can snap the QR code on screen, or go to Unchained Crypto.com slash survey. Thanks. Today's guest is Lorenzo Valenti, Director of Research Digital Assets at ArcInvest. Welcome, Lorenzo. Hi, Laura. Thanks for having me. Excited to be here. Yeah, excited to chat with you. It's a very interesting time in the industry where, you know, hopefully, I think, coming out of this

bear market. And you sit at this intersection of investing and frontier tech. Of course, being at ARC, it's probably one of the best known investment firms sitting at the intersection. And everyone's talking about how we're in this era of crypto adoption and how the previous speculative periods of crypto will at least be tamer, if not kind of go by the wayside. How are you thinking about it? What era do you think we're in and what's investable this time around? Yeah, it's a good question.

So just to Freeface, we're obviously more of a trad-facid manager and we have the ETFs. And so we were more like late-stage investors, I would describe probably. And so I think as we look at the space right now, it's going through, I think 2026 is going to be a pivotal year regardless of what happened with clarity. but I think it's definitely marking the end of an era in the beginning of a new one. And I think there's a few big trends.

I think we're seeing just massive consolidation in the industry, massive. You have like a record number of projects, protocols, applications that are just closing and sunsetting, which I think is good overall. I think from the investment side, the first kind of part of the era was more, you know, we're working in the pioneering and discovery phase. And I think the winners were really the ones setting kind of new standard or discovering or tweaking some of the primitives that, you know, the AMMs, the money markets, a lot of what built basically the successful protocols. I think that is changing right now, right? I think we've kind of discovered most of the primitives and things that we can do on chain.

And basically the second part of this era, at least for us, it's not so much about underwriting net new applications. protocols, but more so seeing, hey, the ones that are working, like, how big can they get? Right? Like, what are the modes that they have and how big can they get? And so it's not really like the zero to one part, but more like the one to a hundred, right? Like, which are the protocols, which are the companies that can grow kind of exponentially and that can continue to grow and merge basically with TreadFi? We'll talk about tokenization, which is a market much, much bigger than crypto. I also think it was most of the retail focused market. A lot of the, wins in terms of layer ones, applications, like pretty much any company, was mostly like a retail

facing product. And the people using the protocols and applications and products were more than DGEN's, like early believers in the industry. And clearly, like that phase of the market is completely, it's just ending, right? And I think now it's much more institutional and seeing like how we can onboard, you know, tread by institutions and people that are really like, the persons that will move real money and use cases that actually matter at size, right? Which is like payments, cross-border payments, trading, all basically adjacent topics around finance, which is, I think, after basically 10 years, I think Ethereum launched in 2015, it's kind of the core use case and best PMF for crypto right now. Yeah, and I did want to ask you earlier when you talked about how you're making assessments of companies and protocols that can go from one to a

What factors are you looking at? What do you think are the make or break characteristics for this next phase? I think one of the main questions is where does value accrue, which is kind of the big question in crypto, right? And I think now that we're merging with tradfi and tokenization in general and RWAs, it's a question like that is just even more important right now, right? Because you have some of these companies with big balance sheet with, you know, a very good technology that are integrating crypto.

And now basically the cost of integrating, the cost of developing with AI, it's essentially going to zero. Right. So I think a lot of the modes that we had in the industry in the last kind of five to 10 years, they're just not as powerful, right? I think one of the other things is, I think when we looked like five years ago, there was, you just didn't have a lot of crypto companies that were big, right? It's like they weren't like, you didn't have a lot of companies that were doing upwards of 100 or 200 or 200.

million dollars of AR, for example. And so it was just much easier to compete, right? Because everything was kind of new and you can bootstrap something like in six months to a year. And now things have completely changed, in my opinion, where now you have huge companies, they're publicly traded companies, they have management teams, they have people that have building technology for 10 years, they have huge balance. And so obviously right now, if you're a stablecoin startup and you come and you see hey like we're doing this product in stablecoin like now you have tether and circle that are just like humongate huge companies they're compounding they're doing extremely well and so i think it's just like changed a lot right i think for the actual companies that were underwriting and we're looking at and see how far can they get it's essentially seeing how crypto can merge with rwAs and with off-chain assets right at arc like we've been studying like bitcoin ethereum layer ones and all these crypto assets for a year, we have a pretty good idea how big they're going to get in the next five to ten years. And so that kind of underwriting process is done, right? I think the bigger part

of the market right now and we'll receive like a lot of growth is just like stocks, equity, you know, obviously equities, fixed income, RDA is in general and all like new kind of asset classes like prediction markets, compute where we're spending a lot of times these new asset classes. Can you use crypto technology and on all right crypto primitives to unlock like even more value for this asset classes, which is kind of order and magnitude's figure. So those are kind of the questions that we're asking ourselves right now. And even I think a lot of companies that have been super successful right now, if they're not able to make this transition, I think we'll get kind of run by other companies. And so when you said cryptographic primitives, what do you mean? Because as I'm

sure you're aware, there's a lot of questions about cryptography right now as well. So before we move into all that because that's its whole, you know, ball of wax. What, what did you mean by that? A lot of the things that we've kind of invented crypto, like perpetual futures, AMMs, like uniswap, like those sorts of building blocks of what's been defy, basically like calling it defy, can you merge current defy with RWAs essentially? And, you know, can you, does your protocol or your company has like a realistic path to actually supporting some of those, like those asset classes? kind of the big question right now. Or is it going to remain like a niche? And look, there's still players, I think, that are going to be very big that support Ethereum, Bitcoin, and some of these

assets that are still kind of smaller. But that's one of the questions that we ask ourselves. All right. So let's now talk about what I alluded to a moment ago, which is we're in this very remarkable period where people are expressing fears that quantum computing could break cryptography. potentially even public key cryptography. I don't know if you saw that tweet from Matt Green. That was kind of disturbing. And Matt Green's a famous cryptographer. This all got kicked off last week when Justin Drake tweeted, quote, in my opinion, it is now reasonable to brace for the possibility that ECDSA breaks before Q Day. In the worst case, in months, not years. And then he wrote, by break, I mean fast private key recovery, e.g. in one week on available,

hardware, e.g. a large GPU cluster. Wow. How do you think about investing in this era when it seems like so many kind of foundational assumptions may no longer hold? It's definitely something that we're talking a lot about. And I think, you know, crypto's kind of a bubble. And I think sometimes crypto people think like, you know, institutions allocating money to the space. They're looking at, you know, what is the inflation rate of Solana versus Ethereum or like what is the revenue? It's like they don't know any of that. But like if you ask some of these institutions,

what they care a lot and we get a lot of questions and probably 70% of the question that we get from RAA is like wealth management platform and like people that manage money for as a professionals, it's questions like that. Hey, like what happens with quantum? Like are the signatures? Are they going to have to transition?

Like which blockchain is and like has a better roadmap? those are really the questions that they care about. I have to say that I find that impressive that they're that sophisticated. So kudos to them. Yeah, I think maybe because quantum is more of a general technology that they've heard also like in other fields, right? And so I think that's really the thing that kind of makes the headline, but they definitely know about it. And so I think that that's one thing that we hear a lot. For specifically kind of quantum and AI and the adjusting rate tweet, it's scary, honestly, right?

I mean, I think quantum, like internally, and I'm not the one specifically that has done the work on that, but it's certainly something that we see more like in the 10 to 20 years kind of forecast in terms of where it's coming. Now, I think what you've seen from some of the companies, like from some of the models like Open Ayanthropic and the discoveries they've made in such a short amount of time is just very hard to, you know, it's scary because like one of the discoveries was the Navierstoke conjecture, which was a millennium prize. problem. So it was one of the seven problems that, you know, people in the math community, like they win Fields Medal for discovering things like land. So it was really like a problem that has been around for centuries and very, very difficult. And so I think just with AI and the pace of improvement right now, it's just very hard to project yourself because I think when we talked internally like a year ago, we say, hey, like this technology is probably going to pull forward like two years. What we see in two years, it's going to pull forward now, basically. So what do you see

in two years that can happen now, right? And then like in the past six months, it's, hey, like, this technology can probably pull forward like 10 years. Like, what do you see? And like in the last two months, what opened in terms of opening in terms of 30 to 50 years? Because it's going to get pulled like now, basically. It's just like timelines that are very hard to imagine as a human being in terms of investments and thesis internally. So it's definitely scary. Look, I'm not a cryptographer, and obviously a lot has been said about ECDSA,

which is kind of the core elliptic cryptography that Bitcoin and Ethereum serves. But I think internally, we think, you know, self-gustody is just like a harder and harder sell in terms of crypto and kind of the core crypto ethos. We've been having this thesis internally that self-custody is slowly dying, and I think this is just accelerating, and we can talk about why. And I think it's one of the core reasons defy is actually not growing is because

we don't have anyone that's willing to self-custody. And so we're writing for the Robin Hoods, the Coinbase, and other applications, there's actually kind of onboard users. So that's number one. I think number two, the other thing that is scary is the solution to that, which is other sets of signatures that like they're not well known, they're not well tested, and people have very divergent opinions about it. And so that is also the scariest part where I think a lot of the layer ones that we build, Bitcoin, Ethereum and others, honestly, now they have such like an amount of governance. Like we ask the miners, there's onching votes.

Like this is the Dow, this the community. There's the users, the stakers. And clearly this, this seems like a topic where. you want like founder mode. You want someone to say, hey, we're going to make this transition, we're going to do this, we're going to use these signatures, and we're going to do this before next, like mid next year, basically. And it seems like, at least like my concern is like a lot of these will get,

we'll get, you know, kind of lost in governance and like, you know, votes and stuff like that. And so that's also the part that is a bit scary. I think other than that looks like there are solutions. Again, like I've said, there are other signatures. Like in the theater roadmap, they've been thinking about this for years. There are a lot of startups kind of helping on that. But I think AI is definitely a force now that is forcing you to basically think about the future,

not the future where we see in investing, which is probably like five years, 10 years of venture fund, but more like 20 or 30 years. And it's something that we've kind of never done. So yeah, it's scary. Yeah, we have a question from the chat. That's an interesting question. it says, why do people assume that quantum won't help crypto? Why don't people assume that there will be a quantum coin?

Quantum security is theoretically amazing. So I have my own answer to that, but I'd be curious to hear yours. I mean, I think it could help just like as they I. Like a lot of people are saying, hey, like this kind of fear about AI models breaking the CDSA, they're also going to help us create kind of solutions. It's true. I think the part where I'm not totally sure is just, we have a noise in crypto in terms of hacks, fishing, like,

while it's being drained yearly, that is like already in the billions of dollars, right? Like if you add like all the hacks and all the fishing scams and we can talk about what happened with Ledger, which was like more than a hundred million dollars, if you add all of this, like you have a noisy in crypto that is sizable, right? Like, I mean, North Korea kind of has a job out of it, basically,

where they steal like billions of dollars like yearly out of crypto, right? And so I just think, like, you know, maybe like the, we won't know exactly for sure when someone has kind of broken ECDSA or it's the QDA. Like maybe they'll just start kind of slowly stealing like within the noise of crypto. And unless you have a huge spike where you say, hey, like there's definitely something going or an address has stolen an amount that is really like an outlier. I'm just afraid that it's going to get lost in the noise, which is pretty constant or even. growing for some of the years. I agree. I think it could help. I think it depends a lot what the closed models do with the new releases, but you also have open models out there, right? Like, you guys have talked in some of the shows, and those can be used by anyone, right? And so

that's just harder to kind of control. Yeah, yeah. It's exactly that like somebody could in secret harvest a lot of stuff and then wait to attack. And so it's like the fear, the fearful thing will happen first. And yeah, later, maybe crypto can take advantage of quantum. But in the meantime, you know, there's potentially a bunch of projects that are going to be sitting ducks. All right, so in a moment, we're going to talk a little bit more about which companies and protocols are well poised to withstand the threat from quantum. But first, we'll take a quick word from the sponsors who make the show possible. What if your crypto could do more than just sit in your wallet? Nexto is a digital assets wealth platform where you can generate daily interest

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The link is in the show notes. Back to my conversation with Lorenzo. So there's been a lot of conversation about how different protocols and ecosystems and companies are facing different kind of levels of threat from quantum. You probably are aware this with Bitcoin in particular. But I was curious if you could just talk a little bit about how it is that you're thinking about the threat to different types of companies and protocols and which ones you're more bullish on. Yeah. So are we talking specifically about quantum? Also like AI threats to public key signatures and cryptography in general. Yeah. Go ahead. Talk about both. Yeah. So I think, you know, internally, like we've kind of discussed this. I think for us, some of the, so if you see the acts in the industry, which is something I was actually looking at the other day, you know, most of those are in kind of Asian exchanges and brokers and platforms, right? And so. So I think right now from a user perspective, internally, I think some of the centralized exchanges

are actually best equipped to deal with this, right? Because you need to be able to keep up in terms of research. You need to be able to have the best security setups. I think as we discussed previously, I don't think the net new marginal user in crypto, and I'm pretty sure of that, we'll want to use either like a hardware wallet or we want to self-custody through like a browser kind of wallet, right? And I think that has many consequences. I think the coin misses, the Robin Hoods, the people that really abstract the crypto complexity, they're going to onboard the net marginal user and they're going to be best equipped.

Just like same for the ETS, right? I think we were talking about this today. Like if I have a normie friend that comes to me and that wants to buy Bitcoin for the first time, I would probably recommend him an ETF to be complete transparent, which was not the case like, I think three or four years ago. And I think internally, even for people like myself, which I've been self-custodying for years, I'm actually thinking now of consolidating a lot of the custody that I have because it's just like so hard to keep up with what it's happening in terms of AI breakthroughs, quantum. And you don't only have that like even crypto product calls like closing, right?

Like I don't know if you know, you've seen this, but like abstract, which is a layer to is closing. and they're basically giving their users like a month to withdraw funds, which is completely nuts, like a month. Like, imagine you're in holiday, like in Australia for two months and you come back, it's like they should give at least a year or something like, you know, that makes more sense. And so I think from that perspective, there are just so many angles right now where you can either lose your funds or forget about it.

And so I think some of these institutions are actually like very well positioned to add more assets on their platform and to onboard. the next new user. And so I think from the companies, it's kind of the barbell strategy of what we think like crypto product calls and companies will do well. Either the ones that sit very close to the user that owns the user relationship,

like the exchanges, the brokers, or basically crypto-infra that is infrastructure and then that will get used by like a tam that is massive. Where you have multiple companies building on top of it, So for example, like the Solanas, the Ethereums, the Unisops, the Aves, right, where you basically have other companies or the morphos where you can build businesses on top of that infrastructure and where actually the time is much, much bigger where it's basically almost the entire world like in terms of addressable market, right?

Anything that sits in between where you don't have their user relationship and your non-core infrastructure that is basically used by a lot, a lot of people, whether it's trading, borrow land or custody or whatever you're doing, I think you're just going to have a very, very tough time, right? Because you're going to get squeezed in the middle of. So those are kind of the two types of companies that we're looking at right now. Oh, so interesting. And it makes a lot of sense. One question I did want to ask you about the hacks was you said that if a normie friend came to you and they wanted to buy Bitcoin, you would recommend they get an ETF. How do you think about the threat level to owning spot on an exchange. Do you consider the ETF still safer or do you consider

custodied Bitcoin at a crypto exchange also safe? Yeah, that's a great question. So you've seen BitGed, for example, the crypto exchanges have an emergency fund, right? Obviously that they can use in these sorts of hack. And for now, it seems like the buy bit one, the BitGat one, they've been able to compensate users, right? But it does seem like this is something that happens. And I think actually for a certain set of companies like the exchanges, I think honestly, security and regulation is starting to be a bigger and bigger moat. I think internally five years ago, it was more technology. Hey, assets do you have? What can you trade? Can you trade options? Can you trade perps? And I think that part is kind of not commoditized, but I think a lot of people are competing

there. Now, I think if you're in exchange that you have a perfect track record of security, you've never had acts, for example. You have a set of licenses that you operate in a lot of different jurisdiction. I almost feel like right now, that's kind of the boring thing that is becoming a moat. If you ask me, Laura, like between spot Bitcoin on an exchange

or an ETF, the exchange matter a lot. Right now, if I had to custody in an exchange, I would definitely do a lot of research on what are the security setups, has there been previous incidents, how are they dealing with incidents?

Do they have an emergency fund? How big is the emergency fund? Those things start to matter a lot, actually. And I think for that, honestly, it seems like the U.S. exchanges have an advantage. They're just much more regulated. They're public companies. You have public balance sheet incomes. You just have a clear picture of the company that you probably don't have with some exchanges in Europe and in Asia. So that's probably the advice I would give right now. As for the security setup, like clear there are a lot of

differences between exchanges. I think that is going to get kind of consolidated. I assume like some of the US exchanges have teams that are thinking very, very deeply about this. So like, how does quantum affect their security kind of set up? How does AI affect their security set up? How are they going to transitions? How are all the partners that they have like custodians or exchanges and brokers that they work great? How is it going to plug into? And so that's definitely some of the research that would probably never have done like three or four years ago that now I think is just very important. It's so similar to like the Kelpdow thing, you need to ask questions about really obscure parts of the setup to have an understanding of what this true security threat is.

Before we, because we're definitely going to talk more about that, but before we move on, I did want to ask you about Bitcoin in particular when it comes to the quantum threat because obviously it has a sort of unique set of issues with like Satoshi's coins, also the kind of conservative nature of the community, even how decentralized it is. and how hard they sometimes find it to come to consensus. So I was curious what your opinion is on how well Bitcoin can face the quantum threat and what they should do about some of the dilemmas. I think as you said, the Satoshi coins make this case particularly different than the others. Like, there's been a lot written about this.

Should they burn the coins? Should they wait until the coins are moved? Should they use the coin to basically pay for tail emissions and miners? There's a lot of theories out there. Honestly, we've been having a lot of talks internally with some of the biggest players in the industry and also the core deaf team. We're in the kind of consortium with micro strategy and some of the other companies that are thinking about this. And I think internally, things have changed a lot from a year ago. I think people are much more in tune with this and they know that the problem is kind of real.

So I actually think I'm much more positive than a year ago. I think they'll find a solution before kind of Q-Day and there will be a transition. I don't know exactly what will be done with Satoshi's coins, but I think I've had to be, I think it was much more worried a year ago than today. I think people are aware of this and they're working on it. And there's actually solutions that are being drafted. And so I'm sure the community will arrive to a conclusion. And also, there are just more companies that are depending on Bitcoin right now than like two or three years ago.

Like, as I said, like you have the ATF issuers, you have the exchanges, you hire the devs, the miners. And so I think there's just like more people thinking about. of the problem and so somehow I think they're going to be able to find a solution in time. Okay, well, that's positive and reassuring. Hopefully you're right. So let's now talk about these additional hacks you alluded to the alleged one earlier. So obviously this one is, I mean, it's just, yeah, it reminds me of all these North Korea hacks that we've been seeing because you know, the issue here was a reseller was sold to a new company. The former owner, I saw this today, said on Twitter that he was forbidden to tell a community about the sale until

October 19th, which is next week. And so far it looks like about $100 million has been stolen. This is all from, you know, individual devices. So the other thing that was like, this is just weeks after the Bicket hack for $400 million. And that was a sort of similar situation. They were using this third-party vendor and allegedly DPRK is the one who had compromised that third-party vendor to get into BitKets machinery. So how do you think about these types of security issues in terms of how somebody can protect themselves against these types of situations, but also how the industry can grow into this era of so-called adoption when it actually feels like it's so vulnerable?

So I think on one head, like we just talked about like AI and the quantum thread, which is more like I would put it like mathematical, right? Like you have to kind of figure out the math. And now, like, as you said, like the Bigged and Ledger one, it's more on the UX, UI and kind of security, right? And it seems like the hardware wallet space, honestly, is such a, is very, very hard, right? Because there are so many supply chain attacks that you can do, either like data leaks. I mean, between, you know, between Trezor, ledger and cold card, like all the big wallet

providers basically they've all had like several problems like in the last two to three years right so it's like there's nowhere to hide honestly like from the user perspective there is literally nowhere to hide I think it's a tough space also Laura because it's honestly like this I don't know what the revenue pull is but clearly it's not a part of the industry that makes enough money to basically entice other big players to come bailed and kind of think about it right it's like a ledger has been around for almost 10 years and cold cars and Trezor are smaller players, and they're all smaller players thinking about this.

But the reality is like the hardware wallet is so specific to crypto. It's kind of the same problem with miners and A6 and Bitcoin. It's like they're produced solely for this. There is no overlap to any other kind of security problem of more like consumer or like finance that I think is just a place where it's very niche. You kind of have three or five vendors that have been around for 10 years. Nobody wants to get in the space because there's not a lot of money to be made. quite honestly, which is kind of the same with miners. And so I think it's just a space where

there hasn't been a lot of innovation. It's a very hard space to build. And I think it's very hard to monetize in terms of hardware wallets. Like, yeah, it seems like this problem in particular was pretty crazy where they're basically implant within the hardware wallet, custom hardware to be able to steal basically the seat phrase. And it was through a third party vendor in Malaysia that was approved, but it wasn't really ledger. And so I think all of this to the end is just so complicated to manage honestly, and they don't have time to do this. And so I think I come back to where I think

the marginal end user in crypto is, and I think it's going to be through kind of centralized exchange and other forms of custody, basically, than that are not like self-custody. Yeah, which is so interesting given the way crypto started and the whole movements that kind of launched it

toward the mainstream. So now let's switch topics because I notice you have been tweeted a fair bit about Ethereum this year. It sort of looks like your position has changed a little bit because you started the year saying, I think ETH is starting to look really uniquely positioned from a macro perspective. You cited quantum readiness, flexibility around upgrades or a few other factors. At that time, I think I agreed with you. Then in July, you tweeted about Ethereum's economics not being priced fairly, especially in relationship to, for example, Robin Hood chain.

And I was curious for your opinions now currently on both Ethereum the network and ETH the asset. Yeah, and there are two separate things. So I think it's good that we touch on both. I think from the network perspective, in terms of value accrual, I think it's pretty clear that where we are today, the value accrual is pretty broken. Right. I think imagining a world where Ethereum accrues several billions of dollar is just, very hard to imagine, if not clearly impossible, right? Because we have two things. It's basically the base layer is used to store assets. Not much activity is happening at the base layer,

so it doesn't produce, like it's not producing a lot of fees. And basically, activity has been outsourced to these layer twos. And frankly, like mainly two layer twos, it's base in Robin Hood. And like there are other layer twos, like lighter. But it's basically like five to seven layer twos that have like 99% of the of the activity and those fees are not is they're not accruing to the theory right like i made the point with robin hood is like robin hood was making several millions of dollars a day and basically ethereum base layer was accruing a hundred dollars like literally a hundred to

two hundred dollars right and so i think from a value crew perspective like it's pretty clear and i've written about this where if you have this franchise model where basically it's scaling through franchises, right? Like really base and Robin Hood. You can think of it as a McDonald's franchise, right? I think just the Ethereum Foundation and people around Ethereum haven't internalized it and they're not realizing, but growth is not happening anymore at the Ethereum layer one, right?

And so I think just ETHI-The acid is just, you know, it hasn't done very well because I think people are starting to price that. I think number two is tokenization is just changing the whole, the entire market and structure, and I think also people are not realizing where if you see like the tokenized equities and the trading volume, it's basically all happening on Solana, base, and Robin Hood. And so internally, as we think, okay, what is going to grow the most like in the next two to three years and we think it's going to be RWA's?

Like I do think Ethereum, the asset is going to continue to grow, but it's going to be most like I think the winner is going to be RWAs. If nothing is happening on the Ethereum base layer and all the activity is happening on base, Robinhead, and other layer twos, like, I don't see why Ethereum L1 just doesn't become just a layer where you post proof, right? Like where it's basically a DA layer where Ethereum base and other layer twos, post their proof, which is literally what happens today. And then you have like kind of, I think 50 to 100 billion worth of stable coins and Ethereum, obviously, which, you know, if you fast forward, like, you'd imagine, like, some of them being pulled into, like, the layer two's if most of the activity happens there, right? I think if people think that it's the opposite way, like, because there's a lot of assets on Ethereum L1, it'll pull the activity.

But, like, the net new user doesn't care about, you know, that took a bit of fun, like, you know, that is issued on L1. Like, they want to trade the circle stock. They want to trade Nvidia. And that is happening on base in Robin Hood. And so I think there's just like a dichotomy here where Ethereum needs to choose exactly what is its strategy. Right? And that's not happening on Solana because everything is happening at that base layer.

But I think they should just embrace this and say, hey, we either want to scale the L1 and we're actually going to make efforts to have activity. We're going to scale the throughput and we want applications to be here. Or we fully become a franchise model where we're going to support the L2s and we're going to support them in a better way, but activity is going to happen at the layer two level, right? And we're going to try to accrue more volume and kind of change the economics. I think right now it's just playing both games and not very well, basically.

And I think the overlap between the users that you have right now and the Treadfi OG users is just very small actually, right? And so I think the NEN user doesn't care much about what is happening on Ethereum Mo-1, which was kind of the same thesis we had, with Bitcoin and Bitcoin Layer 2s. We just saw, like, in terms of the demography of, like, people that have Bitcoin, they're, like, why 45-year-old people that were early in tech, like, in the 2010, right? They're not the same people that are going to want to bridge Bitcoin to an L2

and then stake it in Defi and do weird stuff and, like, take risks, right? And I think the same thing is happening on Ethereum and in crypto in general with RWAs and this kind of new set of users, basically. If that makes sense. I think like one of the kind of ironies, really, is that the value accrual or the thesis around activity and the value of Ethereum, that worked during the NFT era

because people wanted NFTs that were on the Ethereum L1 and those NFTs were considered more valuable. And it's so interesting because the reason for that was literally just about status, which is so funny. Like just having an NFT on the Ethereum L1 gave it some extra special sauce, we'll just call it. And so it's sort of ironic because it's completely not like there's no like logical or rational. Like you can't put that into a tokenomic system. You know what I mean? but that was like the one time when actually those lined up and benefited Ethereum.

Yeah, I think it's hard. Look, we're also like pretty, like, we're also very humble. And when I say this is it's, there's a non-zero probability, I think that some of these layer ones actually don't make any money and become like very, very valuable networks over time. Right. Like if you look at Bitcoin, Bitcoin will never do like you can value Bitcoin on like discounted cash flow or EV2. like multiples because it doesn't make any money, right? And I'm not saying that you can have like something very similar to Ethereum because I think that kind of non-programmable store of value,

you probably can have like, you know, 10 layer ones playing in that field. I don't see it impossible a world in five to 10 years where there's probably like $5 trillion worth of assets on Ethereum and Ethereum is not making a lot of money. And Ethereum is still very valuable. Like if the asset is valued like very properly, I think it's a very small probability. It's probably one that I don't want to bet on, right?

Like I'd rather have a theorem actually make a money. But I think it's one that is possible. It's a very small possibility, but I think it's definitely one. The issue about the Bitcoin one, though, is that if that actually happens, then Bitcoin security is effed. Then the whole value of the coin is effed. Yeah, they, in my opinion, need to solve the security issue. All right, let's actually keep talking about tokenomics.

You told me before the show you think buybacks are dumb. It was a word you used. You think they get too much attention. I would love to hear more about your thesis there. Yeah, look, I think they're dumb. It's probably a strong word. I think people have become crazy with this topic, honestly. Like, it's crypto Twitter only talks about that.

Like, I think there's two things. I agree that the dual equity and token model for a lot of these projects has been just a huge problem in terms of investor value. accrual and interest in general in the companies, right? I think the remedy to that has basically been some of the companies in these products all say, hey, we want to signal that the token has important. So we're going to buy back the token and we're going to burn the token so people that have the token are happy, basically, right?

In some sense, I agree, right? I think it's just taken to an irrational place where you have very early-stage startups, like literally startups that raise one, two, three years ago. that are using 100% of the revenue to buy back the token, right? And I just found that completely crazy, right? Because it's clearly not the right way to allocate capital if you're a startup. And I tweeted about this. It's pretty funny.

You have the AI venture market where literally investors are calling the startups and they're preempting rounds like a week after they raise to give them more money. And in crypto, we have like one or two-year-old startups that are, you know, they're saying, like the best way we can invest capital is just going to be to buy back and burn our model. And honestly, like from the investment perspective, it's such a turnoff because basically you're telling me like, hey, we think we're the best. We think there's nowhere to grow. And like the best use of capital is just to buy back the token. And obviously we know that's not the real answer for a lot

of these companies, but they're basically getting bullied into buyback, you know, into buying and and burning the token. And I think that's just like, it's just crazy, right? So I think one thing, that's one thing. The second thing is, I think generally some companies don't see a path to like becoming 10x bigger.

And so they're using that basically to allocate the capital and make kind of investors happy, right? Like I would rather a founder like come to me and say, hey, like, like my stable coin is like $5 billion of supply. I see like a clear market or pathway to become like $50 billion. I'm going to use the capital to do this. Like 100%.

Like I'd rather have that instead of kind of buying back the token. One thing that people forget also, Laura, it's like, you had a lot of past companies that were super successful, that were doing the same thing. I bet a lot of those companies wish they hadn't, right? Like if you go back and you see like the DYDX, the OpenCes, the blurs. Some of those companies

have similar to economics and clearly they're dead now. So it wasn't a good use of capital at that time. You know what I mean? And so I don't want to be like, you know, that sarcastic, but I think people are just focusing

too much on the buyback and like value accrual kind of thing. Yeah, your comments here remind me of how after the pump ICU somebody tweeted, okay, so we sent you all this money to buy these. coins. But now you're going to use that money to buy the coins back from us. And I thought it was

hilarious. Like, yeah, that's basically what's going on here. It is. It is literally. And that's why I think like for some of these companies, like per bomb, for example, like I would much rather have the team say, hey, we're doing these meme coin market. This is a market that we think can grow to this. We want to expand to this and this. And we think it's going to take this much money. And we think it's going to take this much money and resources, and this is how big we see the market and how we can grow into it. I don't want them to buy back the token, right? Like, it doesn't do anything for the protocol in the long run. And so, yeah, and as you said, like for companies and protocols that have actually raised a lot of money,

it makes even less sense, to be honest. But out of curiosity, so you also think that about hyperliquid because obviously that's sort of like the darling in this category. It is the darling. And I think right now, obviously, hype has most of the, of the market share, but I think, yeah, I think it's not the best use case. I tweeted about this.

I was half joking, but I was half serious. Like when I posted that hyperliquid should buy Gemini in the US, and I think they should acquire the exchange. I think to be really honest, and I've discussed this a lot with the team, I think L-1s have been very, very monolithic as to the strategy, right? I think in terms of distribution, like acquiring other companies, acquiring technology, acquiring talent.

I think there's a lot of things that you can do with the token, and they actually have this huge market caps. Like, at peak, Ethereum was worth more than $500 billion. You know, if you use like 1% of market cap, you can acquire something for $5 billion. That's a lot of money. Like, you could acquire a lot of things with that. I'm just giving, you know, an example.

So for high, look, I think they're going to have more competition. I think PURPS is going to get very, very competitive. I think it's a market that is going to become increasingly, regulated, you now have perps like approved in the US. I think you're going to have stock perps also approved. So Coinbase, Robin Hood, you know, the backpacks of the world,

they're all going to compete there. And so I think you want to be in a position where you have resources to be able to compete, right? And not buying back and burning the token. And look, like, maybe you can do that, but it doesn't have to be programmatic and like something like set in stone. You know what I mean? Like you can decide on the month to month basis.

You know, like it depends on market. right? Like your token may be worth like a hundred billion one day and like the month after that it's maybe worth like 60 billion and maybe the strategy isn't the same basically. That's kind of what I'm saying. Oh, interesting. Okay. Yeah, I've had other investors on the show who said the opposite that they thought programmatic would signal something to the investor and basically create more confidence in the token. But anyway, okay. Just slow around that. That doesn't make, the same way like a team can make a buyback programmatic, which means like, you know, it's basically automated, they can do the same the day after where they basically,

you know, they go back to the old model. And so it doesn't give you any more confidence that it's programmatic, right? Like tomorrow, the hype team can come and say, hey, guys, we're not going to burn like any tokens. We're going to go to zero, right? And they could do that. And so clearly the automatic thing doesn't mean much, right? Like at the end of the day, I think that's what people forget about these protocols and teams. You have to underwrite the team. And so you have to there's some trust in the team that they're going to do the right thing, right? Like if you have to encode some of this stuff like that early into the project, it's not good.

Like it's kind of a red flag, to be honest. Oh, wow. Interesting. So you tweeted that you think tokenized equities could surpass stable coins in on-chain supply in three years. That was remarkable. Ark itself is bringing its $1.3 billion venture fund, ARCVX on chain through securitize. And, you know, I also want to just mention the call you made is so interesting because tokenized equities just recently passed 1% of global stablecoin

supply, which you also tweeted about. So given kind of how big stable coins are compared to tokenized equities right now, why are you so bullish tokenization that you think it would soon outpace stablecoin supply? Yeah. So I think if you look, if you look at the market right now, you roughly have like 300 billion worth of stable coins, right, between like all the issuers, basically you take all the issuers. I think mainly,

even in the stable coin story, like it's super, super early. You know, people talk about payments and like cross-border payments and like remittances and stuff like that. The reality, if you look on chain and kind of the use cases, it's mostly basically the PMF is exporting the dollar to emerging markets. right? Like that's a real PMF of stable coins today. And I think it's great. I think it means like we're very, very early on. And I think more use cases like remittances, I think there's a lot of great companies working on this that are going to happen at some point. I think if you see like of the US capital markets, I think the demand to do things with US stocks and getting access to US stocks is extremely large in emerging markets and offshore basically. Right. And so I think you'll see something very similar actually where the first leg of growth of tokenized stocks,

I think it's going to be very concentrated in a few stocks. It's going to be basically exporting the asset to other countries, distributing the assets. And so right now we're very, very early. If you see like tokenized equities perps is the dominant kind of trading primitive. I think spot is going to take more time because you need, you know, you have the asset, you have store the asset. Now you have the innovation exemption. You actually have to plug into the U.S. equities,

and you have to work with a bunch of the custodians, the clearing houses and all that stuff. So it's going to take longer. But I think in terms of appeal and what we've built in crypto, like the biggest PMF is finance. I think blockchain is very, very good at moving, storing, and managing money and assets that represent basically that have value, right?

And so I think equity is just like the normal evolution. We're very bullish, honestly, on tokenization. And that's why we've tokenized our venture fund. I think stable coins again, I think they're going to continue to grow probably like 40 plus percent Kager a year, like compounding over the next few years. But I think equity and you'll have like different flavors are also going to grow a lot. I'll also say one thing like most of the yield that we have in crypto is very circular, right? Like most of the fixed-ish income kind of yield in crypto depends either on leverage, you know, borough land markets or looping basically ETH or Solana yield essentially.

Like a lot of the yield that you can see on AVE and Morph in all of these markets. I think just equity, they bring like a new set of assets. They're volatile like in a different way. And so also like in terms of yield, I think it's going to bring like more uncorrelated yield that is not correlated to the big three basically, Bitcoin, Ethan Seoul. and that is going to be very, very healthy for markets. It's going to attract a different set of users, basically. So that's why we're just very excited about RWAs in general and what we tokenized the venture fund.

Yeah, I mean, I was also wondering if when you did that, if you had thoughts on how it might affect the trading of it, I understand, obviously, you know, tokenized equities are so small right now. So there's just that also, which will have its own effect. But do you think it will just look, you know, in terms of the training, it'll look exactly like, you know, how it does in Tradfi. Yeah, so it's a good question. So right now you can basically subscribe and redeem to the fund on chain, basically, through

securitized. But there's no secondary trading market, right? Right now enabled just yet. And so I think there's, it's really like what we do with securitize. It's really the first step, right? We wanted to tokenize the fun. but I think the real work really starts now. I think more guidance obviously over the next kind of months will help.

I think there's a lot of utility that we can bring to the tokenized venture fund and stuff that you cannot do in trade fight with like the normal shares. And we're very excited. But in terms of pricing, right now if you subscribe to the venture fund, the nav is basically public, right? So the nav will be the same off-chain and on-chain essentially, right? And so there is no secondary liquidity in market on chain just now.

I think perhaps it's something that you will enable at some point. So again, like still very early. I think we're very confident for us, really, it was can we get to a new set of users, like basically on-chain users? And we really think of as crypto, like as a new distribution platform.

Can we be early to this game? Because we're ARC invest generally. We're very good when we're early at things like that. And then can we increase the time? Like, can we expand to other geographies? Can we distribute the fund to geographies in a more efficient way than the traditional way? And so those are really the things that we were kind of looking at. But right now, again, very early, I think there's a lot of work to be done still.

Let's talk. We're kind of at time, but I really want to ask you two more questions. So let's just quickly talk about where the agenic commerce competition is going. You had a tweet about the announcement from Cloudflare. and what you thought the impact would be on L1s. Tell us about that thesis. Yeah, so I think Cloudflare, obviously with AI, things are changing a lot

in terms of internet traffic, right? I think they announced in their last earnings call that now more than 50% of the internet traffic is basically bots through AI, right? Which was pretty shocking. And obviously, they need a way to limit that, right? because basically that's kind of the role that Cloudflare has on the Internet right now. And so if you look at kind of the podcast and interviews, it seems like using blockchain technology

and basically the AI agent or bought, you know, having to pay basically a nanotransaction to be able to access content or website is something that CloudFer is kind of looking at, right? And so I think it's just very interesting that more of a TreadFite company obviously is thinking about this, like the intersection of crypto and L1 and how it can provide like a solution to to basically agentic commerce and agentic, you know, just internet traffic in general. I think we're still very far away in terms of throughput. Like if you look, Matthews, I think it's the CEO of Cloud fare. We're talking about like 10 to 100 million TPS.

And so we're very, very far from that. But look, I think there are teams that are working on that. We're very excited, you know, for example, like, layer zero is going to launch their L1, like in the next few months. I think in terms of throughput, they're going to be able to deliver things that are really impressive. So I think in terms of the use cases, we're still pretty far from the 10 to 100 million TPS. I know a lot of people are talking about agentic commerce and agentic workflows in general

on crypto. So I think it's exciting, but it's still very early. And I think the uses that we're seeing through MPP and the X402 protocol of Coinbase and circle, it's very, very nascent right now. So we're looking at it, but I think it's very early. And so how do you think this will impact L1s? I think we need to increase throughput, Escalides L1, like orders of magnitude still, right? I think right now the Solana, Sui, Aptos, we don't have much activity going right now, right? I think it's still pretty small, the use cases. And so people are okay with the throughput right now.

I think Groupit is going to be a major vector for some of these use cases, and we're still orders of magnitude. And so I think we still need teams working on that. And again, I think they are teams, but I think we're probably two or three orders of magnitude away. And so we still need to scale these all ones very, very aggressively, basically. Okay. So last question, stable coins have come up a few times in the conversation.

And obviously, there's a lot of new entrants to the competition. But I know that you are bullish on Circle and Tether, who are the incumbents. Why is it that you think that this competition in a way has kind of already been called? I think people are underestimating basically the network effects around, you know, like network effects and liquidity mode of Tether and Circle essentially. I think broadly like people think of the Stable Corn market of this market where, with like thousands of players. And really like it's not the reality.

The reality is like if you see what has been used so far and what is being used on chain, they're basically like two stable coins, which is USC and USDC and USC. Like the rest really don't really matter honestly. And you've seen obviously announcement of stable coin consortiums and other players trying to tackle that market share. I think it's just like overall a business that is super complex to build.

the right, like people see Circle and Tether as this kind of ERC20 stablecoin on Ethereum and other blockchain. But really like it's a business where you need like, you know, tens of licenses in different countries. You need to be regulated. I think the risk for businesses to switch is actually huge, honestly. Like I was thinking about this. It's like, you know, 3% yield or whatever you can pass on to the users for institutions. Like, the risk is enormous. Like we've talked about it now even with AI, with quantum, like just security and reliability around these assets is just huge for exchanges, right?

One of the things that I kind of wrote in one of the essays was Binance. Binance has 50 billion worth of stable. Like literally has, I think, 45 billion's worth of USDT. They're not getting any yield on that. They haven't been getting any yield for over 10 years. Well, I was asking myself this when I was writing this is why I haven't the, why haven't the, they switched to another stable coin, I'm sure there's a hundred stablecans that are willing to pay a Bynance at least 60, 70, 80% of the NIM in net interest margin. And so I think the thought

process was like, why hasn't this happened? I think people are just underestimating the sikiness of these stablecoins, they're kind of liquidity supernovas where they power so many other companies in the system. There's a lot of people that rely on them. And just like the main training bears a Bitcoin Ethereum liquidity. They're built from Stimclones. I think the switching costs to companies such as Binance, they're just huge. The risk is huge. They're not going to switch for 60% of the name or like even 80% of the name. That's our thesis. And so I think Circle is becoming like a much

broader internet money company type of business. Like I think in five years people were no Circle for other things that are not like. like USDC and some of the products that they have right now. And so generally, I would say, people are heavily underestimating how hard it is to launch a stablecoin network that is big, right? That scales into the hundreds of billions. And so that was kind of the thesis around the tweet and some of the comments. Okay. Yeah. I mean, I think finance did have it stable coin, but some New York regulator went after them for some reason. It was the Paxos. Yeah, it was the Paxos partnership. Yeah, exactly. And so they went after the StableCorn.

and they basically had it to shut it down, I think. Yeah, and I don't remember how big it got. I think it was in the pretty big, like 15, I would say, like probably 15, 20 billion. Like it was pretty big, right? But I don't imagine like any other company in the world wanting to use like a Binance stable coin, if you know what I mean. And not because Biden is just like in terms of incentives, like they're not very aligned, right? And I think that's sort of the problem that we have with some of these other stable coins

that are not very neutral or they're like, consortiums where you have like a thousand companies and then like, you know, what's the strategy? Who's the line around kind of the incentives and the economics? So that was kind of my point as well. There was a period where I think I thought that it would have been a good idea for Coinbase to buy circle. But actually just the point you made about neutrality, I think is actually a reason why it is good that at USC is owned by circle instead. Anyway, Lorenzo, this has been so great chatting with you. Thank you so much for coming on unchanged. It was great, Laura.

Thanks for having me. And thanks to everyone for joining this live stream, and we will catch you Wednesday. Bye for now. 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. You know, I'm going to

Thank you.