I mean, you come to my city and traffic is insane for like, you know, a whole week.
And if you want 10,000 acres for Arthur Hayes City, we can do that.
Even Squid Game is showing all the South Koreans killing each other or whatever, right?
And how much baijiu is not a dividend. It's a tale of two coins. Now your losses are on someone else's balance sheet.
Generally speaking, airdrops are kind of pointless. Anyways, trading firms who are very involved.
DeFi is the ultimate. DeFi protocols are the antidote to this problem.
Welcome to The Chopping Block. Every couple weeks, the now five of us get together and give the industry insiders' perspective on the crypto topics of the day. So, quick intros: Tom, the DeFi maven and master of memes.
We got Tarun, the gigabrain and grand poobah at Gauntlet.
And joining us again, a Token2049 tradition, we've got Arthur Hayes, the arbiter of alpha at Maelstrom.
And then of course we've got Bobby, the Bitcoin Brainiac, and obviously the head hype man at Dragonfly. We're early-stage investors in crypto, but I want to caveat that nothing we say here is investment advice, legal advice, or even life advice. Please see choppingblock.xyz for more disclosures. So we are here at Token2049 in Singapore. It is, I think, at this point, the biggest crypto conference in the world. It's one of the only places where I think you still feel this kind of energy. And it's sort of like the US conferences have gotten very institutional, a lot of suits. This is like the one retail mega conference that still gets the juices flowing. How have you guys felt about Token2049?
I mean, you come to my city and traffic is insane for like, you know, a whole week. But it's not just us. It's like it's everything happening at the same time. You know, there's like five conferences happening. There's like Milken, there's obviously F1 happening this weekend. So, it's not just us. Also, the air here is insanely bad for some reason.
It's like Delhi. It's bad.
Yeah, that's what I've heard. Fires in Indonesia.
I feel like the institutional shift, you also feel it here. This is like the first year where there's been no like wrapped Lambo out front, and it's like just everyone is growing up a little bit, which makes me a little bit sad. I kind of was looking forward to more kind of jubilation. Is there enough money? Everyone's broke.
There's one more day. You can make your dream happen still.
Yeah, that's true. That's true. The Lambos are tomorrow. Yeah.
Um, you know, I have an observation by the way, which is I think crypto is sort of emanating from Western institutions, but Eastern institutions are more functional, so they will survive. Western institutions, financial systems won't. Anything that's holding a lot of 10-year, 20-year, 30-year treasuries, I'm sure Arthur has some opinions on that. They're wrecked.
Fair enough. Well, I wanted to start with this story. So, speaking of fires in Southeast Asia, the network state has recently pulled the plug on its headquarters in Southeast Asia and is now moving to Kazakhstan.
Well, so yeah, so we actually already moved.
Already moved to Kazakhstan. Tell us the story of how this all played out.
So actually, we actually still have, you know, an office in Singapore, and we're actually going to open up something else in Southeast Asia. So stay tuned on that. But basically, Kazakhstan, just to talk about Kazakhstan, Kazakhstan is going to be the next El Salvador, the next UAE, the next Singapore. And the reason is, so first, why was it off the radar, right? Well, there's a Borat movie which really misled everybody about what Kazakhstan is. It's not, you know, you see a movie and you think, okay, it's like a caricature of reality, but it's like in the ballpark, you know, but like Jurassic Park, you know, you ballpark approximate it, like the DNA in Jurassic Park, but it's actually totally not. And really what Kazakhstan is, is it's landlocked Asia. And you're all familiar with like coastal Asia because, you know, the way Americans or Westerners learn geography is America fights wars there. So like Vietnam, Korea, Japan, Americans know those countries exist, right? And they're on the coast, right? China also, you know, is a part of the Korean War, right? Singapore recently, Crazy Rich Asians, there's a movie. They know Singapore exists. They're all on the coast. And Kazakhstan is so far inland and it's adjacent to Russia and China, and it speaks Russian, so it doesn't post in English, right? So for all these reasons, you know, Americans don't really have a reason to go there. Plus Borat made it seem like it's not a great place. And so because of that, it's like this encased in amber, absolutely amazing country, which is, I would call it Singapore but with space to build. So it has all of the quality of governance of a UAE or Singapore with really high IQ people and government. Like they're number one in the Physics Olympiad, tying with China and India, which is pretty legit as a country.
With 21 million people. They're tying countries that are 70x.
With 21 million people in Kazakhstan, because it is an enormous land mass.
Exactly. So there are 3,000 times the size of Singapore, but only 3x the size population-wise. So Kazakhstan is the place that if you want 10,000 acres for Arthur Hayes City, we can do that.
Yeah. You can get it and they'll want you there. Okay. And the people will love it. They want to build startup cities. They want to build crypto cities. In fact, if you come to Network State Conference on Friday, you're going to see a delegation from Kazakhstan. Many senior ministers have come down. This is Kazakhstan's sort of big thing on the world stage. Binance is now opening up. Astana, you know, last year had a special economic zone. Shervin Pishevar is setting up there. Olaf has come up there. There's going to be a lot of things happening there because it has all the digital stuff that we know. It's got actually a really, really good crypto law. It's, if you want to build data centers, they've got the space. Texas is now banning them, you know, or stopping them. Kazakhstan has the lowest energy and building costs in Asia because it's got like enormous amounts of, it's like 40% of the world's uranium. So it's got all the digital and all the physical. See, Singapore is an amazing, amazing place, but it doesn't have any land, right?
Or there's countries that have land, but they don't have great governments. It's very unusual to have both.
So when you left Southeast Asia, I remember you were sort of looking at many different jurisdictions to go to next. And I think you might be one of the only people in the world who has done this kind of jurisdiction shopping under duress in the way that things played out. What was that like?
So great question. So the thing is, first of all, you know, 10 different countries bid for Network School. Okay, more than 10 in fact, and we're going to open up nodes all around the world. We've clearly got something where we can print out Silicon Valley in a new place. Especially with all the visas being cut off to the US, there's this flow of talent that wants to go somewhere, and now it will go everywhere, right? And it'll decentralize just like crypto itself, just like our community here is, whatever, you know, 50 passports in this room. That's something just like cryptocurrency doesn't map to legacy currencies. Crypto identity doesn't map to legacy identities, right? That's the next big step for us. You know, get out of your currency, then get out of your legacy identity. Get a new passport. You know, second passport is much more important than the first home. So many of these countries, that's... Go ahead.
No, no, no. I mean, that's a perfect... Bobby.
I think I'm more curious. What does like horse trading look like when you're shopping for a new jurisdiction? Like who's coming after you? What are the leverage you can pull? What do they offer? Like what do the offers look like?
Yeah, yeah, yeah. So, without kissing and telling, so to speak. Okay. It's actually a lot like...
I'm just saying, I'll give a little bit. They'll like it. They'll like it.
Yeah, it's like a lot like enterprise sales, you know. It's like basically as you ascend from retail to SMB to enterprise to small governments to large governments. Small governments are actually a lot like enterprises. See, the thing is, this is one of the secrets. Ready? Most countries are small countries. Okay? Most people have not actually made this graph. Take the 193 UN members. Let's use as an operational definition of what a country is. Okay? There's exceptions and so on, but let's use that. And you make a histogram of their populations, and you'll find that half of them have less than 10 million people, and like 20% have less than 1 million people, right? Only a small fraction of countries by number are the 100 million plus countries like Russia, China, India, America. Most sovereigns are small, like Cayman Islands. You know the population of Cayman Islands? Who knows?
Yeah, 70,000. Yeah, exactly. What's BVI? It's like 30K. Okay, that's smaller than Palo Alto. So the number one asset they have is a flag. Okay. And so the complementarity between what we do, we've got these gigantic crypto networks, social networks. We're gigantic international networks, but we have no physicality. They are small states. They have physicality. They have legitimacy, but they don't have anywhere near the capital or connections in many sense of the term that we have. That's a really great deal to be done, right? A billion dollars goes a long way in a country with 100,000 people or a million people. It's like a thousand a head, $10,000 a head, right? So you have a lot more leverage than you think. And the key is to... Now, here's the tricky part. You actually have to go to these places. And the reason you have to go to them is you have to just assume that Hollywood is wrong, but you don't know what is right.
You can't ballpark the...
Do you see what I'm saying?
And here's why Hollywood is actually deeply wrong. Essentially, Hollywood doesn't show, and I want to give the ball to you guys, I want to go to Demopolis, but Hollywood does not show movies of prosperous non-Western countries, with the exception of Crazy Rich Asians. That's like, you know, even Squid Game is showing all the South Koreans killing each other or whatever, right? And the reason is it's depressing for Americans to see other people doing well. So even if you post a video of like Chinese glowing cities, they'll be like, 'Oh my god, they just put LEDs on their cities,' right? They don't understand. You'll see this, you know, complete cope on social media, and it neglects the fact that Shenzhen basically didn't exist in its current form 40 years ago. It's like, now they put LEDs on the cities. They built the cities, right? So the point is that without travel, you can't calibrate as to some countries really are bad, and you have the whole two-by-two, right? You think it's bad, it is bad. You think it's bad, it is good. You think it's good, it is bad. You think it's good, it is good. Literally, the whole two-by-two is there.
And you saw all of those when you were evaluating jurisdictions.
That's right. So, and that just means you just have to put a lot of miles, and you actually have to see it on the ground.
So, who are the folks who were, you think it's good and is good? And who are the folks you thought it was bad and they were good?
Well, you know who's bad? I'll say who do people think is good and is bad? Yeah. It's Western countries.
They were in Western countries also. They actually did on your network site. Do they want...
No, no. What I mean is like they are in a bizarre... You know what it is? The terms first world and third world are obsolete. I just think about it in terms of descending world and ascending world, right? So the quote first world is like the failson who's like inherited something that they couldn't build, right? The Brooklyn woke, you know, and they're like...
Oh, you were really trying to pry a list of countries out of you and you are not...
Come on, man. Who did you sing KTV with? How much baijiu did you drink?
Zero KTV. Zero KTV. Absolutely. I'm half, you know. But...
It's not that much like enterprise sales.
Yeah. What I'll say is countries under 10 million people, which is like 100 countries, really like, you know, a billion dollars goes a long way, right? And so I mean one of the things, here's another way to calibrate it. Okay, take your Twitter following, you know, Arthur, your Twitter following, make a histogram and just, you know, AI can do this for you in a day. Take any country, take its legislators, its president and so on, and compare how many followers they have to how many followers you have, right? Your visit to that jurisdiction will be the number one news event of their year. Okay? I realize even for congressmen and senators in America, tech guys actually have much more distribution than you think. If you just took a liking to a certain politician and just wanted to retweet everything they did, like I mean obviously you have to, like there's no... it's something where you actually believe in it, right? But you would be a very important constituent for them, you know, you should live in the jurisdiction and so on and so forth, right? So basically we radically underestimate our leverage is the short version.
So Bobby has given us an experiment. We have to go look at who's retweeting him to figure out the list of countries he won't pick. But the data is...
I didn't make it that easy for you.
By this time next year, we're each buying a politician in some random...
No, no, no, no. It's not very clear. You're not buying a politician. I would... what you're doing is you're actually making a capital investment in the country, right? So that's the thing is the ascending world countries are ascending world because they actually have a... many of them are post-communist or they're like in Latin America, they're post... I don't know what you'd call it, post-drug, you know, right? Like what Kelly just said, post-inflation in the case of Argentina, right?
It's like everyone in the US keeps making post-economic memes given some of the recent tweets we have, and now we're talking about the post-drug economy.
I don't know if we have to hit the post-drug...
Okay, it's actually interesting. It's like post-economic normally means, you know, okay, you're wealthy enough, you don't have to worry about things, right? These guys are like sort of post-anti-economic. Whatever communism was, Keynesianism is anti-economics. So the great thing about them is they have immunity. They have antibodies to all the communist Keynesian stuff. I love it so much. I don't have to explain it from scratch. We don't have to debate about whether, you know, effort leads to results or whatever. So that whole part of the world, all those people, they're ready to do business. And here's the thing, you know, the best part, you go to these countries and there's multiple of them. They have murals of Elon, okay? They have murals of all the tech guys. They're not like trying to shoot at them or say the... you know, there's a saying, a prophet is without honor in his own home. Okay, they love tech. Okay, Arthur, they'll build you a statue. Okay, I'm serious. They really will. If you find a country and you basically adopt it, right? I mean, you have to actually commit. That's what I think.
So, are you moving to Kazakhstan?
Huh? Yeah. I've already set up there. We set up there months ago.
Do you have... Is there a statue of you in Kazakhstan?
Yeah.
I never asked for a statue of me. I'm kind of a horse... statues crowd-sourced statues.
Arthur will have a great statue. It'll be like a Greek god kind of statue. So that's why I recommend...
Yeah, like holding a longbow. I could see that.
Yeah, something like that. That's right. But you know, I just mean as a figure of speech. The point being they will welcome you as opposed to throw Molotov cocktails at Sam Altman's houses, which they're doing in San Francisco. Right. So like, and to be very clear about this, some countries will welcome you depending on who you are. Yeah. Look, there's a bunch of blue states that think billionaires should not exist, okay? And there's a bunch of small states that want those tech billionaires there. And so they're both going to get what they want kind of, which is blue billionaires will not exist, okay? You will not be able to be a billionaire in a blue state because they'll pass these taxes. And so that's why Larry Page is out. That's why Sergey Brin is out. That's why Zuck is out. That's why Larry Ellison is out. That's why Elon is out. Thiel is out. Bezos is out. Right? Ken Griffin is out. All them out of blue states, right? So those all just go to zero and lose their tax base and lose their billionaires and they're left with centi-millionaires and so on. And where'd they go? Okay, they can go within America, but actually the world's a lot bigger than that.
Oh no, he also mentioned Thiel. So Uruguay, right? Paraguay and Uruguay. That would be on the list.
Okay, so Latin America. Latin America. Very interesting. Now, do you have Latin American bidders?
Were there any bidders who were from Latin America?
Uh, what can I say about that? It's a big... Yeah, it's a big place. Like, let's say, let's say it's potentially...
Potentially. Come on, right? Okay. Okay. We're not getting in yet. We're not getting the... You know, he likes to go. Let's move on. Let's move on. Okay.
Okay. So, speaking of going to zero, one of the big announcements yesterday was this giant drop by OpenAI. OpenAI released something like 700 AI-written manuscripts producing new mathematical results, some of which they had formalized in Lean, some of which they just kind of had this, I don't know, AI slop that they published. There was a couple of really massive results in this drop, one of which is considered to be one of the most significant results in the last 100 years, which is known as the Riemann hypothesis. There was some stuff about matrix multiplication. There was some stuff about fast Fourier transforms, a particularly weird result, I think, an improvement in asymptotics. It's freaked a lot of people out. And part of the reason why it's freaked a lot of people out is that, of course, there's this idea that, okay, mathematicians are maybe now either obsolete or they're very quickly facing a complete change in what their job is going to look like. And we're not immune to what's happening in mathematics because, of course, crypto is dependent on mathematics. And so yesterday, Justin Drake, one of the cryptographers at the Ethereum Foundation, he posted that it is time for crypto to go into bunker mode. Now, what is bunker mode? Bunker mode in his parlance, he's like, look, mathematics is now going into overdrive. Things that took, you know, 5, 10 years are now happening in days, and we don't know what's going to change. Normally, a lot of the cryptography that we use in blockchains, they change over time, right? We used to use SHA-2, now we use SHA-3 in Ethereum. You know, back in the day we used MD5 20 years ago. And we move across cryptographic algorithms over time. But the pace at which we move is much slower than the pace at which this math is now happening. We had 700 drops in this OpenAI drop, sorry, 700 results that came in this OpenAI drop. There were zero related to cryptography. That's really weird. It's really weird because probably the most economically significant part of math is cryptography, and yet there was not a single result in cryptography, which probably implies that there were some results, but they didn't publish them because they may be doing some responsible disclosure, or they may just be saying, look, this is so potentially damaging that we need to do some totally different paradigm of how we deal with this. So Justin Drake's recommendation is that, look, freeze. Do not move. Take all of your assets that are of any size and put them into addresses that have never signed any transaction because we don't know what's coming. And if a lot of the mathematics that undergirds blockchains, like the discrete log problem, which is the foundation of public cryptography, if it turns out that, you know, we don't have any proofs that this stuff is hard for classical computers. We're pretty sure it is because a lot of smart people have tried and they haven't been able to prove anything. But that's true of a lot of stuff that's now falling in mathematics. And so the kind of pace that we used for crypto in the past may not be the right pace to think about what's happening going forward. And so his recommendation is this: we're now maybe going through a critical period, and everybody should be a little bit scared. How do you guys react to this warning from Justin Drake?
So I think there's like two things that are a little bit... So also, by the way, a lot of people had responses to this, including Vitalik and others, that were like, this might be a little extreme. I think the first thing to note is that most of the advances that people found are not like practical algorithms. They're generally like, okay, there's something that you learn in intro CS class that like you can't multiply two numbers faster than a certain amount of time. That's clearly wrong, but it also assumes that you have like infinite memory. So I think there's a sense in which the practical algorithms that break this stuff versus like the theory of like, oh, there exists an attack, are actually quite... there's still quite a big gap. But that said, like practical when there's...
OpenAI has infinite compute resources to put at these things, whereas if you're an attacker, you don't.
You don't know how much... I haven't gone through this, but like, how much compute did it cost for them to do each one of these discoveries? Have they...
