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Alex Thorne
Let's go now to our guest, cz, the founder of Binance. Cz, thank you so much for coming on Galaxy Brands. I want to ask about hyperliquid.
CZ
So we have some interesting history with hyperliquid that I didn't know about. We force everyone to use bitcoin. That itself is actually not decentralization.
Alex Thorne
That's authoritarianism.
CZ
Crypto, no matter what it does, it doesn't have the power to extinguish our civilization, but AI has the power to extinguish.
Alex Thorne
Are you worried about Quantum as a threat to Bitcoin?
CZ
No, I'm actually not worried about it at all. I mean, crypto's not going away. Crypto is going to be a big industry. Okay. Yeah. We can regulate the industry by killing it, right? That's not regulating, that's just killing.
Alex Thorne
Welcome to Galaxy Brains.
CZ
An infinite amount of cash.
Alex Thorne
Cash. I'm your host, Alex Thorne. The US Banking system is sound and resilient. Bitcoin meeting new, all time high. If you're not long.
CZ
If you're not long, you're short.
Alex Thorne
Satoshi is going to come on there, laugh hysterically, go quiet.
CZ
All bitcoin's going to be erased. Bitcoin. Bitcoin is the best Crypto. Bitcoin is going to zero.
Alex Thorne
Welcome back to Galaxy Brains. As always, I'm your host, Alex Thorne, head of firmwide research at Galaxy Bitcoins. Not zero. We have a great episode for you this week. Cz, the founder of Binance, is our guest. He joins me in the studio here in New York to talk about a range of topics. With his vast experience in crypto, what does he think about the current market cycle? What is the drawdown? How long will it last? And has bitcoin bottomed? And a range of other fascinating Topics. We'll get CZ's thoughts on AI, what he's investing in personally today, in which spaces, what the future of the great convergence between tradfi and crypto is, and much more. Bibnet is off this week, and before we get to the interview with cz, I need to remind you to please refer to the link to disclaimer in the podcast notes. And note that none of the information in this podcast constitutes investment advice or an offer recommendation or solicitation by Galaxy or any of its affiliates to buy or sell any securities. Let's hop into it with cz. Let's go now to our guest, cz, the founder of Binance. Cz. Thank you so much for coming on Galaxy Brands.
CZ
Well, thank you for Having me, Alex,
Alex Thorne
and thank you for coming to our office here in New York. I want to start by asking you about this current market cycle. I had done some math and it turns out it really is the four year cycle, like almost to the day, which is crazy. You know, we're a long way off. Look at the block clock here. We're a long way off. The all time high of 125k or so. Is this a normal like cycle? Do you think it'll look different? What's your sense of where we are in the bitcoin wave of price?
CZ
So yeah, I think the four year cycle is actually pretty accurate. So I think it's a pretty normal cycle. You know you traced about 50% I think like we've seen worse, we've seen like 80% retracements in previous cycles.
Alex Thorne
Yeah.
CZ
And if you look at the current low four years ago, I was just talking with somebody else earlier today, 2022, around this time was probably the UST lunar crash that didn't hit the bottom. The FTX crash later on in November hit the bottom was like 16k. So we're still like four or five times higher.
Alex Thorne
Yeah.
CZ
So if you compare the lows, there's still 5x increase in the four years. So yeah, so I think it's a normal cycle but every cycle is higher. So over the long term I'm a very long term. I'm not going to exit. There's no exit in crypto for me. I think it's just a normal cycle.
Alex Thorne
Do you think that what looks about the cycle, not necessarily the shape and pattern, but what is true now that stands out to you in this bitcoin market that wasn't true in 22 or 2018. I mean I know there's a lot but like what's, you know.
CZ
Oh yeah, there's so much more positive development now today versus four years ago. Today you have the world's most powerful country supporting crypto, whereas four years ago that was the total opposite. There were war on crypto by the, by the US government here. So where we sit now, so. And also because of the US stance on crypto's change 180 degrees, every other country is following. Right. So now US leads in the crypto regulatory frameworks and also the discussions, et cetera, Just that alone is hugely different. And we're seeing very strong institutional adoption. BlackRock, all the ETFs, BNB ETF got listed last week. And then just so much more institutional participation that wasn't there four years ago. And the life cycle was mostly like because the previous SEC was suing everybody in crypto. So there was no utility tokens being developed. Everyone went to the meme coin space. But now we're seeing actually a lot more real development. So now there's more developers coming back to the us. Many of them left the US during the last administration because they were just so hostile and now we're seeing a lot more development now. So there's more stablecoins being issued in every country. There's more what we call real world assets. Now you can buy SpaceX pre IPO tokens I guess on Binance and many other exchanges too. So yeah, so a lot more is happening and I'm really excited. So even though we're talking about the cycles, the cycles don't end at the same place. Each cycle is so much higher than the last one.
Alex Thorne
Yeah, is that. I tend to think of that you mentioned the yearly low or the cycle low as a floor that's been rising. I tend to think of that when people say oh no, bitcoin hasn't acted as a digital gold. And I'm sort of like no, no, that is the digital gold growing on below and it's growing and then you know the speculators come in and move it all around on top. And it does seem like that, you know we're at 60k that that floor rising is the long term people using it as a, as a digital gold like asset.
CZ
I think bitcoin only reached 60k what 2 years ago. So like you know, if we say like four years ago, if we say we said bitcoin can hit well in
Alex Thorne
21 I think it reached.
CZ
Oh yeah, actually that's true. In 21 it reached that. But I mean that's the all time high, right?
Alex Thorne
That's right now it's like we've, we're, we're bottom. Well are we bottom do you think? Where would you have to guess the bottom would be here in this cycle?
CZ
I'm never accurate on this and I hate to make predictions but the previous high are usually the future support. So like where 60,000 was like the previous all time high like four or five years ago, now we feel this really low. So typically those support site and there's psychological and also technical reasons for it. People who bought at 60,000, when the price come back to 60,000 they might cash out. The people who. But now people who bought a 60,000 they will not sell now. Right, so you went to 120k, they come down. So they would just buy more.
Alex Thorne
Yeah, it's like a stepped up cost basis.
CZ
Yeah. So in technical analysis the previous highest always becomes the next low support. So there's quite a lot of, there's quite a lot of theories behind that. I don't know if they're true or not. I'm not a great technical analyst, but I think it feels like that. Yeah.
Alex Thorne
All right. And we'll move on beyond the cycle talk. But one more, I think that's so different looking between this all time high to current drawdown and this cycle versus certainly 20, 21 and 2, those prior blow off tops and then bear markets were either characterized by or even perhaps caused by sort of major marquee blow ups in the crypto industry. Often about the, you know, an unhealthy search for yield or yield often at the core of that story. Are there dead bodies that you think still that haven't floated to this? Because we haven't really heard about this really yet since the October of last year. Are there dead bodies we don't know about, you think in your mind that haven't floated to the surface?
CZ
That's a very interesting question actually. I was curious about that even like maybe six months ago, but during the last six months there hasn't been anybody saying they're going bankrupt, et cetera. So I think the industry got better at controlling leverage or borrowing. So I think there were a few shocks in the system but no one went bankrupt, etc. So knock on wood.
Alex Thorne
Yeah. None of the platforms really that I've seen, not like the, you know, the lending companies and exchanges like ftx, is there dangerous leverage in the system now this time that's unique, say from treasury companies or on chain perps or something that you worry about.
CZ
Based on my exposure to the industry, like based on what I know, which is a small subset of what the industry, maybe people think I know everything, but I only know a very small subset and I don't, I actually don't see a lot of hugely leveraged products right now. So I think there were some stablecoins which were giving high yields, they were like they were loop borrowing, etc. But overall those, the size of those things are relatively small to the industry size now. So I don't see any huge things with a lot of leverage today. So hopefully that should be good. That's a very good thing actually.
Alex Thorne
All right, let's move on a little bit. Let's talk about Wall street and the, what we call the great convergence between tradfi and crypto. It's definitely happening, right. Crypto is building tokenized securities, real world assets, things like that. Tradfi is integrating cryptos or building on new blockchains.
CZ
Absolutely.
Alex Thorne
Assuming they do eventually reach a stasis of integration, where do you think the line between decentralization and centralization will have landed? Will tradfi make crypto more centralized or will crypto make Tradfi more decentralized?
CZ
I think both will happen. As you said, we're seeing that convergence already and also in theory there shouldn't be a convergence. Crypto is not a separate industry. Crypto is just a new technology, new tool that makes financial transactions, that facilitates financial transactions in a higher speed, lower cost, more transparent way, etc. So it's just a new tool. This is like there's no Internet company, right? So they are like Internet infrastructure companies like Cisco, whatever. Right. But you don't make like for bookstore. You can create an online version of it and you can grow big. You don't have to be a pure e commerce company per se. So now what we call traditional financial companies, they can use blockchains, is open to anyone. They can use this new technology, they can use the bitcoin blockchain, they can develop their own blockchains. There's a variety of different technologies. All of them are like, most of them are open source. So anybody can adopt this technology. And for the crypto companies, crypto guys, they can offer services very similar to traditional financial services. They can provide loans, savings, trade stocks now, so remittances, payments, all of those things crypto can do. And they don't have to be limited to crypto. They're now integrating stablecoins, they have fiat channels, they handle fiat currencies as well. So, so they shouldn't be this division, they should just be one. It's just the financial industry, it's the fintech industry and now it's just more global. It's just with this new blockchain it's faster, cheaper. Many of the crypto guys don't do a lot of the traditional, the structure is different. So I think we're definitely going to see that. Well, we're definitely going to see that convergence. And there shouldn't be a convergence per se, it should just be one industry. So I think that's good to see on the decentralization versus centralization part. Yes, any platform, any company in the industry is part of centralization. Even any team, any project that has more than one person is centralization. But humans, we have network effects. We usually work in A team. Very few guys can work solo with AI. That might change to some extent, but no, we need a team of people usually. But the technology is always evolving to be more and more decentralized. So I think both will happen, the centralization aspects of IT and the decentralization of it. So I think also many people sort of have a binary view of centralization versus decentralization. In a decentralized world, anybody can work together, right? So decentralized world should accommodate centralized players. The centralized players, if they offer really good services at a low cost, very secure, then they will gather more and more users. There's network effects and that causes small groups of centralization. Of course, if monopolies have advantages and disadvantages, we've seen that many history. But companies who abuse their monopoly power usually lose their market monopoly over time. It may take a while, but that will happen. And they just give new entrance opportunities. So I think yeah, the, it's, it's, it's going to be always coexist to some extent. But I'm a strong proponent for decentralization. So I think the technology will continue to push forward in the decentralized. More and more tools will become more and more decentralized.
Alex Thorne
Some of the banks and card networks are now building their own blockchains because I think you're totally right. You know, you can build a business on top of a decentralized platform, but I think they've been resistant to allowing their assets to go on the decentralized platforms. So even some of them are building semi centralized blockchains. Some Examples there was MasterCard announced the new one MTN, right circle and you know, without passing any, like some of these are more or less decentralized than others. But Tether, Circle, Stripe are all building stablecoin focused blockchains. Got Canton now, which is from digital assets. So it's like the, you know, the next iteration of the sort of classic permission blockchain, you know, is that why aren't they building on bnb, Ethereum, Solana? And also should they.
CZ
Ah, okay. I think well, in a decentralized world, if you force everyone to build on specific blockchain, anyone can build their own blockchain. That's what the decentralized ethos is. And then I think the more different blockchains they are, the better it is actually for the consumers to an extent. Right. Sometimes it causes consumer confusion and liquidity, second documentation, et cetera. But by and large the more choices we have, the better and over time the consumers will be clear which ones will have usage. It's also not clear that the majority of people just only care about decentralization. I think most people care about low cost, secure, easy to ease of use and those basic things. Most people like we're hardcore bitcoiners and crypto guys and we talk about decentralization, we understand the implications of that. But most people just look at the results, right? So they just want low cost, ease of use and security and freedom. So if those guys, you know, traditional large financial players, they want to develop their own proprietary blockchains and they somehow get people to use them, then kudos to them. But I think more and more people are going to demand more freedom because now there's this side with the true sort of decentralized crypto world that have much higher degree of freedom and much lower cost, et cetera. So this puts the pressure on them to become that. Let's say, look, if a few large companies develop their own stablecoin that's on the blockchain, on their own blockchain, but you can't transfer it to a guy across the world, then they will limit their usage. So I think the demand is there. We want to be able to transact with anyone in the world instantaneously at low cost, without worrying about borders, all of this stuff. Of course compliance is important. At the end of the day, it's what the consumers choose to use.
Alex Thorne
I think that's a fair way of looking at it. I also personally think that private permission blockchain, not passing judgment on which what label, which of the specific ones I would label that. It feels a little bit like a corporate intranet. And the public permissionless general purpose blockchains are more like the open Internet. And so maybe there's a hub and spoke if they still okay for some reason inside their four walls they want it to be on their chain. But if they can bridge, and that's a knock on wood, bridging is risky these days. But if they can somehow interconnect to the broader. It's kind of like the cosmos thesis yet again.
CZ
So you have many like what do we call it? Like hubs, like spokes and hubs. Spokes and hubs, right?
Alex Thorne
Yeah.
CZ
So it's totally possible. Look, and many countries, they're not totally comfortable with a purely open blockchain. They all want their own national blockchain.
Alex Thorne
Is that true?
CZ
Yeah. So like with many of my discussions with different country leaders, they all want like a national blockchain, so interesting. But it's just the human psychology takes them time to say, look, we're going to let go control of money or we're going to let go control of the financial sector in our country. So that might be a stepping stone and over time you will evolve. And also for a large country like say for the usa, if all of Wall street somehow uses one or two blockchains and that's kind of proprietary, all the big players, you still see trillions of dollars moving through those networks. And that's fine. The retail guys may not use, may be cut out from that even, but that's fine as long a corporate intranet, as long as there's enough activity on there, that's fine that serves its purpose.
Alex Thorne
So to each their own basically and we'll see how it shakes out, I guess.
CZ
Yeah, especially when we are advocating decentralization. Decentralization is different from everyone have to use an open source single blockchain. If we force everyone to use Bitcoin, that itself is actually not decentralization.
Alex Thorne
Yeah, that's authoritarianism, basically. Yeah, that's right.
CZ
So it's a bit counterintuitive.
Alex Thorne
Yeah, that's a good point. Let's move on to some other topics. Binance built the modern perpetual swap. Now of course perps are, and not then too, but even more so now they're sort of key financial instrument today in crypto and have been, you know, even before Binance obviously Bitmex had sort of the. One of the first perps exchange.
CZ
Yeah, yeah.
Alex Thorne
I think like the perps that Binance offers now are the perps that people use today. So they modernized it. But separately though, as long as, you know, back into 2016, 17 when Arthur Hayes had perps on Bimx and later, these have been very important and highly efficient and for those who know how to use them well, a great financial instrument. Now it looks like we're going to get perp, so a legalization of crypto perps in the US So you're going to see maybe the big futures, you know, CME and CBOE probably and whatever else, CFTC licensed entities trading crypto perps. But also perhaps stocks, perp stocks when they arrive officially in the US or any major market. What happens to like the quote unquote offshore crypto exchange leading the perps world? Because that's been the case even today. Hyper Liquid also is an example of that.
CZ
Yeah, yeah, yeah. So there's quite a lot of interesting implications there. Yeah, I think you.
Alex Thorne
It's a long question.
CZ
Yeah, sure, sure, sure. There's quite a few things there, I think. Well, first of all perpetual futures was not invented in crypto. It exists in traditional finance.
Alex Thorne
Was it the first implementation, though?
CZ
Arthur Hayes did the first implementation in 2014 in crypto at Bitmex. And then Binance was late. Binance only started offering them in 2019. So five years later, and there was a few others offering different varieties of maybe not perp futures, but like delivery futures. Every Friday you have to do a settlement and rollover. So there was different variations. Binance started offering them, but Binance had the largest user base. So now it's got by far the best liquidity and the best volume and also the best prices, lowest slippage, et cetera. Now with cme, traditional giant futures exchanges, listing futures now, I think it's good because they serve a market that we never serve well, that Binance never served right. So Binance never served those institutions in the US While Binance Global does not serve any US users. Which one will get bigger? That's actually a less important question, at least to me personally. As long as we have more people trading crypto, it is better, most likely, if CME or CBOT or whoever else in the US they can get all the institutions trading crypto futures, that's more liquidity. There will be guys who can trade on both platforms that will bridge liquidity. There will be more liquidity for crypto trading, and I think that's really, really good. So I'm less concerned about who has to be bigger than the other. I think the more people have access to crypto perp trading, the better liquidity it is and the better liquidity is actually the best protection for consumers. When there's good liquidity, you see much less crashes, et cetera, and much less liquidations, et cetera. So it's just better protection. And then you saw the last part, which is, well, now the crypto exchanges are trading like stock futures and there's many other things that they're not trading yet. Even the unstructured products that's not traded today could potentially be structured enough to be traded on the blockchain. And FX trading, I predict, will move to the blockchain. Every country will eventually have their own stable coins and then those will be available to be trading on chain 24. 7. And I think the FX price discovery might actually happen on chain because it's much more transparent, much easier to see and much more continuous. So I think all of those things will happen. Will that have a negative impact in traditional stock markets? I think so. But again, at least for Binance ecosystem, for what I can See, the users are very separate, right? So today, like, you know, you will live. The guys who live in New York and this country have. You can buy stock, whatever you want, but most other people outside of the country cannot buy. It's not that easy for them to buy US Stocks. Some of them can, but it's actually a very small number, percentage wise in the population. Which country don't want their stocks to be available to everyone in the world? Right? So like look, if you list SpaceX, why don't you want everyone in the world to buy the stock? Which company wouldn't want that? Which stock exchange wouldn't want that? Which country wouldn't want everybody in the world to buy your government bond? Why would you prevent other people from buying a government bond? And look, if one country buys a lot of your government bond, that's actually the easiest reason for you guys not to have a conflict. So you guys have to negotiate on trade and not attack each other. So I think the world is becoming a smaller place. Even with all the geopolitical tension, et cetera. I think the world is becoming a small place also. I think crypto exchanges providing access for people who are not in that country to buy your stock doesn't hurt the current stock exchanges in the country. It actually helps it. It's better liquidity, better demand, et cetera. So, yeah, that's my view.
Alex Thorne
Okay, I like your point about increasing access to stocks being one of the key benefits to tokenizing stocks. And I did look into this also. I was surprised to find that it's actually cost prohibitive for many people to buy stocks. Here we can, you know, I can buy them on. I think you can buy them right in Cash app or like in Venmo. But I mean, it's really quite easy. But you know, in some countries I've heard, you know, to even be able to open an account that can trade a US ADR there or has access to a, I don't know, corresponding broker that can place the trade here has like really high minimums. For example, you know, $5,000, which, you know, most of the world can't actually put up as a minimum. Yeah, yeah.
CZ
And each trade is like 2 to 5%.
Alex Thorne
Right, right.
CZ
So how many times can you trade? And also just many parts just don't have access. Doesn't matter how much premium you want
Alex Thorne
to pay, you can't get it in at all.
CZ
You just kind of get access.
Alex Thorne
I want to ask about hyperliquid. It's one of the few actually positive coins in return this year here to date, but also obviously a big and growing platform. It sits somewhere, I would say, more decentralized than Binance, although less decentralized than like Uniswap as an example. Somewhere in the middle. Have you met Jeff? What are your thoughts on Hyper Liquid? Just generally.
CZ
Sure, sure. So we have some interesting history with hyperliquid that I didn't know about with Jeff specifically. I never met him in person. He was actually in one of the earliest EasyLabs incubation seasons. So I assume he's a very smart young kid and he obviously very capable, so there's some long history there. And also I think the hyperliquid invention is actually awesome. He proved a new market niche that was not proven by other people before. So he created something new which is very interesting and apparently he has a very small team and I'm sure that team is very capable. They occupy a niche that Binance Exchange cannot compete. They don't have kyc. They claim they're decentralized. Again, I'm not going to comment on another project based on the technology we see, they have a lot of control. It's a small team that controls the platform. So whether that's decent. They use a smart contract for deposit and withdrawals. That claim that's decentralized. I'm not going to get into the definition of it. That's not my place. But they serve a niche where in the US if you have a vpn, you can use it. So everybody knows that. But they have pretty decent volumes and they are able to service many users that Binance cannot serve. Which again, it's not my place to comment whether that's good or not, but they have some technology innovation that I think is quite good.
Alex Thorne
Yeah, well, I mean, just since you raised it too. The history of no KYC crypto exchange is filled with people getting in trouble for that. Yeah. Should they be worried?
CZ
I would never do what they do, given what I've experienced in my life. But I'm not a legal person, I cannot give other people advice. Again, I think, I assume they have good lawyers, they're making a lot of money, so I assume they check their. They handle them. They're big boys, they handle themselves.
Alex Thorne
That's a fair answer. So not perps, but prediction markets. I think one of the breakout sort of new segments of. It's not necessary. It's not really crypto, although polymarket, I think they're the largest, or at least the largest independent one is built on crypto. What are your thoughts on Prediction market. A lot of jurisdictions are Both inside the U.S. u.S. Certain U.S. states are mad then different countries are either grappling with them or trying to regulate them or mad about them but also just they appear to have a fair amount of utility. Especially in certain circumstances where you would have to trade a proxy to an event rather than the event itself. Either on the regulation or just on the product. The concept. How do you think about prediction markets now?
CZ
I also think that's a very clever or good invention. Well that's not a new invention. Prediction markets have been around for a while. Event futures prediction markets.
Alex Thorne
I remember trading on one called in trade. I think that was based in the UK one time presidential elections like in 2008. I could trade.
CZ
Yeah, they come and go. Right. So as you said that feels a little bit like betting. Right? You're betting on, you're going to kind of predict an outcome of an event. So again I'm not a lawyer. I assume there's many different, different regulations, different places about this particular industry. But it does feel like at least when I listen to talks by like for example the CFTC chairman, Michael Selick, he's no. In multiple talks, he's quite supportive of it, at least in tone. I don't know the legal definitions, how they define it, but at least in tone he's very supportive. Multiple important people in the US agencies are supportive. I personally think this is a great thing. I think anything that allows people to discover price, price discovery, liquidity is good. There are many implications for this real world implications. Whether it's funding to predict the weather better predictions are important in our lives. We want to be able to predict things better. So where there's real money on the line, I think the prediction markets are much more accurate than every other prediction because anybody who has good predictions will be in those market. So there's some really interesting implications for it. So I founded one of the exchanges. So I like to see any tool that provides price discovery and liquidity. So I think it's great. And also, it's also great that I believe Polymarket Kalshi, they all have licenses in the US So this means that. I didn't know that you mentioned that some states may not like it. Exactly.
Alex Thorne
Yeah. Because the reason though is because they have prediction mark sort of the hook for them is that they have prediction markets on sports outcomes which is historically considered sports gambling, which is a highly regulated state by state level activity historically in the U.S. okay. So yeah, that's why they're upset.
CZ
Okay. So that's just the state versus Federal because you're right.
Alex Thorne
You are right. The CFTC is, has taken a strong stance legally as well. They joined cases to defend prediction market firms against state. They've joined the Maria submitted amicus briefs in support of the prediction markets and they're releasing a new rulemaking framework for prediction markets which the existence of alone is supportive. So it is. Yeah, they are supportive. And also the CFTC is very clearly asserting its federal primacy over the states as it relates to prediction markets. So there is an interesting intergovernmental sort of thing here. But yes, you are right, they are supportive.
CZ
Okay, I actually didn't know those details. Yeah, like I always stay away from politics, so any sort of jurisdiction fights, I stay away. But I think for consumers as an industry, globally, for crypto it's a good thing. But with any new technology, new platform, as long as they do it well, you'll be really good. There are always ways to do badly. But I think the larger players today do it really well. And I think there's quite a lot of new upcoming prediction markets as well. Like that's probably like 1001000 plus prediction market projects in the crypto space. So I hope all of them will execute it responsibly.
Alex Thorne
Yeah. Let's talk about something you mentioned earlier about, you know, many more blockchains, many more consumer choice being, you know, good. And of course there are many and there probably will be more. Most activity is like in crypto today is probably, I don't want to say centralized. It's sort of coalesced around like Ethereum, Solana, bnb, Tron, that's maybe probably falls off after that, but a few others. BNB has definitely consolidated itself into a top tier chain. It's also a top asset. What's exciting about BNB right now that we should be focusing on or looking at.
CZ
Sure.
Alex Thorne
As researchers, but also just the public.
CZ
Sure. So now I don't run the exchange. I actually have a lot more time to talk with developers in the community. I'm actually really excited about some of the new features they're building on BNB chain. So one of my recommendations to the developers is like don't do big upgrades doing bull markets, but in bear markets, markets quieter, you make a big upgrade. So I actually advise this to every blockchain, not just the BNB blockchain developers. So now they're working on a next version which is much faster, which is much cheaper, more privacy controls for users. There's quite a long list of features that when I saw it, I was like, so I'm not a very imaginative guy, actually. I don't drive these things. But when I saw there, like when I talked to them, when I saw the list of features that they're building, I was like, wow, you're going to get all of this in one version. So they're building it.
Alex Thorne
Do they have a name for this forthcoming upgrade yet that we should.
CZ
I don't know the name, actually. I think they have a code name, but I forgot.
Alex Thorne
Well, we'll check it and I'll throw it in the show notes.
CZ
Sure, sure. No, I forgot, but I talked to the developers, but I don't want it. Right. So this is their drive.
Alex Thorne
Is that to compete a little bit like, Solana broke onto the scene, I guess years ago at this point by being faster and cheaper than Ethereum. You know, you've got like and other differentiations. Privacy has been a big topic these days as well. Like, is that. Is that for one just to make it better or is it. Is there competition? I don't know how sort of semi or decentralized L1 developer teams think about big upgrades like this.
CZ
Sure, sure. I think. Well, no, I think there's not a competition with a specific chain. I think Solana came around four or five years ago, I guess, maybe. Maybe even be longer. And then initially it was going to be supported by ftx. SBF was all over it and then they suffered quite a bit because of the FTX crash. But it was great to see their recovery. So it shows the resilience of a decentralized blockchain. Solana. When BNB chain was first started, there was quite a lot of accusations on BNB chain being overly centralized because they have less nodes than Ethereum, but Solana has much less nodes. So there's always a balance of nodes versus performance. Right. The lesser nodes, the less time you need to do synchronize. I think Ethereum still like the holy. What they want to be the fully decentralized. So every upgrade is really difficult for them. So there's a balance there somewhere. I think BNB chance up to like, I don't know, I can't remember. I actually don't know. It's like 41 nodes or 100 nodes. I actually don't know.
Alex Thorne
We'll look to and we'll throw that in as well. Don't worry, don't worry.
CZ
This shows like, how untechnical I am.
Alex Thorne
Get a computer in here, Phineas. Look it up.
CZ
Yeah, but I think Solana's rise and Recovery wasn't so much the decentralization versus non decentralization aspect of it. It's that they were very heavy into the meme space. They also marketed themselves really well in the US where BNB chain was not marketing themselves at all. They got a lot more US developers on the chain during the last administration where BNB chain was trying to stay out of the US or anything related to BNB chain Binance myself, we're trying to just stay as far away as possible. And also during the life cycle where the last SEC was suing every crypto project. It's very hard to launch a crypto project that has utility. So that's why all the meme coins were proliferating and Solana didn't have exchange associated with them anymore after FTX went down. So they just went like they just went. They use the word pump and dump a lot. Right. So there's a platform called Pump fun in the BNB chain ecosystem. If there's a platform called pump, there will be a lot of regulatory increase. So in the BNB chain, because there's a binance like a large exchange and BNB chain, even though it's a completely separate blockchain, is completely independent. But we're kind of still in the sort of closer ecosystem, we are much more scrutinized by regulators. Anything that's called pump on the BNB ecosystem will get a lot more scrutiny. So the chance grown indifferently. But I think that's good, right? So I think that's actually very good for the space. If you only have one chain in the space, then Regulate will probably be shut down by now. The fact that we have multiple blockchains is actually a good thing. And they proliferate in different places at different times and that actually helps the entire industry to grow. So I think that's really good. I think Solana's recovery is fantastic. It's actually phenomenal.
Alex Thorne
Ethereum sort of community took a path. They were taking this path before Solana, but it sort of became urgent which their own hub and spoke model because the layer 1 blockchain is highly decentralized. So they promoted this L2 thesis. But then the L2s are predominantly optimistic single sequencer roll ups today. Not decentralized really. And I don't think any have reached whatever stage of. I think it's stage two of actually being decentralized. What do you think about that thesis? And I know Vitalik has seemed to sort of say, well maybe we should be working on the L1 more again.
CZ
Yeah, you Know, I did. I did sense that shift in Vitalik's tone. And also. Also, yeah, I think was like also four or five years ago where the Ethereum community was all about L2s.
Alex Thorne
Yeah.
CZ
And I think in the last couple of years they kind of reversed course
Alex Thorne
and stopped because now the biggest one by far is Base, which is basically operated by one company. It's not. I mean there are some safety ways. It's not that you have a unilateral exit capability, but the sequencer can order transactions, charge arbitrary fees, whatever.
CZ
Exactly, Exactly. So the L2s are not very centralized. Extremely centralized. So now with the Ethereum community you want to promote fully decentralization. But all the L2s are super, super centralized and then so. And also the L2s don't. But I don't think that's the main reason. I think, I believe the main reason is L2s don't contribute to the L1s. Right. So they, they only know the L2s only need to spend the Ethereum once, like I don't know, with a batch.
Alex Thorne
Right.
CZ
So they actually don't contribute to.
Alex Thorne
I think we did the math and we found that Base was paying more in licensing fees to opt the Optimism foundation to use the tech than they are actually paying in Ethereum L1 fees.
CZ
Oh, by far. Yeah, by. Oh, by far. It's probably by like two or three magnitudes. Yeah, right. And then eventually I think Vitalik figured out that the L2s don't help the L1s. And then Ethereum went through a period of where they had. Vitalik has to deal with a lot of pressure due to the price performance of Ethereum and there was a lot of jokes online, which is unfair to him, to be honest. But I think that all of those things combined made him realize that, well, he's still going to work on the L1. So now he's shifted his focus a bit, which is fairly normal for you experiment. You try different things.
Alex Thorne
Totally.
CZ
So there's still like. No, as you said, there's just pretty strong. A few strong L2s. But I think in the future it's still L1. To be honest, it might be like, what do you call it, a back and forth thing. For a while L1s will get faster, but then the demand will come and then the L1s can't scale that quickly and then there may still be other L2 type of solutions in the future. Again, they may be back and forth.
Alex Thorne
I think this is a decent option too. Instead of building A whole new chain. If you're a big bank or something, do some kind of L2 on an existing chain. Especially if the chain is natively built for like safe bridging. The way the optimistic rollups are. Right. They're not bridging back to the L1. They integrate directly. That could be an interesting way for the hub. And spoke to which it doesn't seem like what the decentralized main consumer base of Ethereum actually wanted today. It may have a place though.
CZ
Yeah, but. Well, L2 is as centralized as they are. If after a batch you still Synchronize with the L1, it's still immutable.
Alex Thorne
That's right.
CZ
Right. So it's still like. No, they still like. It's still better than like what, where today a bank can just change. You can change records from 10 years ago.
Alex Thorne
Right. Because if I ask the L2 to process a transfer from Alex to CZ and the sequencer refuses, I can just replay that directly on the L1. So you can. But that does get to this one thing. You know, this is what the L2 maximalists always say is that that unilateral exit capability is like the stopgap. And it is.
CZ
Yeah, yeah.
Alex Thorne
But if the transaction isn't a simple transfer and it's a top up of a loan collateral, some kind like that has real implications even if you could get out. You know what I mean? Like if I need to top up liquidity or I need. Okay, that's where it starts to actually become problematic. Right. Like. Or honestly, even if it's just a
CZ
trade, I actually didn't think that far.
Alex Thorne
But it needs to be like right now, even one minute late is like a problem. Then having to go through that, like that's sort of what I. You know, if the. Again, if the sequencer chooses to censor you on the L2.
CZ
Yeah, yeah.
Alex Thorne
It's one thing I think about. I think about it a lot with tokenized securities.
CZ
Okay.
Alex Thorne
We tokenized Galaxy stock on Solana.
CZ
Yeah.
Alex Thorne
I think we would do other general purposes too. We just started with one.
CZ
Yeah, yeah.
Alex Thorne
As an issuer. Sponsored security. But one thing I knew is that I just didn't think the L2s were decentralized enough to be the credibly neutral platform upon which we wanted to trade. So.
CZ
That's true. That's true. Yeah. So you actually delved this in much deeper.
Alex Thorne
Yeah, yeah, no, I went deep on this one.
CZ
Yeah. Than I have.
Alex Thorne
Let me ask you about YZI Labs. Used to be called Binance Labs, Core Investment investment vehicle for you. What is the core thesis these days? Because I've seen that they've. It used to be mostly crypto or all crypto. Now I'm seeing some AI, some biotech stuff too. What are you guys doing there at YZ Labs?
CZ
Yeah, so. Yeah, yeah. So I give a rough guideline, say look, 70% crypto, 20% AI, 10% biotech, roughly. So I think all three are large sectors that will continue to grow tremendously. And all three have so much more new innovations to be discovered, to be done, to be built that can have tremendous positive impact on our civilization. Basically. So Easy Labs philosophy. I want them to invest for impact and not necessarily financial returns. Sometimes they may diverge. I'll give you an extreme example. Let's say we invest a billion dollars into a drug research company that cures say a common disease like cancer. And the cure is very cheap and the company may not make any money, but it will cure like you know, a million, 10 million, 100 million people. I'll be very happy to lose that 1 billion, a couple billion dollar in what investment. It will make me super happy. Right. Because we, we have the impact.
Alex Thorne
Well and it's also like a smaller principal investment. I guess it's more the loss of it being a $1 billion gain. Right. Like so you get funding it at the low, at the early stage is interesting for that reason.
CZ
Yeah. So, so easy lapse for look for very early stage projects. Many of them are a bit crazy. So they're very high failure rates that we expect. But we also have, I think we invest in some really good projects.
Alex Thorne
Are there any that stand out right now or I don't know, recently in a new batch or something that's been around that is really exciting. You want to promote like a portfolio company?
CZ
Well, there's a bunch of crypto companies which I would not actually talk about because I don't want to be seen as promoting them specifically. Get many of them have tokens. This artificial womb company that we invested in, so now you can have a kid in your machine. Right. So this frees the ladies from the pregnancy process and then you actually frees the guys from like getting attacked. Well, begging a woman.
Alex Thorne
An artificial womb.
CZ
Yeah. So I think they actually went to the second trimester testing in rats. So I think they're probably, probably five, ten years away from humans.
Alex Thorne
Is this like growing humans, like for space travel, for example?
CZ
Potentially. The different use cases are huge. Right. So like, well this is going to be like the metrics if humans are Farmed.
Alex Thorne
Yeah. Well, that's why I gave more charitable one. You know, we actually, we got to set up a new civilization light years away and so we just send the ship for a thousand years and eventually it just births humans there.
CZ
I don't know.
Alex Thorne
Making that up. Pretty good sci fi concept though when
CZ
I say if humans are farmed like people can understand both positive and negative impact of it, which I understand the technology could have. But anyways, it's a technology that can help many, many people. And then there's a reason another one that like uses like a. Uses a PLA. Not a plastic like a 3D printed like a Styrofoam that puts in your knee cartilage and your cartilage grow around it so it causes more growth of your knee cartilage.
Alex Thorne
Oh, wow.
CZ
Many old people have knee problems. Right. So my.
Alex Thorne
You don't have to be that old to have a knee problem, I'm telling you right now.
CZ
Exactly. So like stuff like that. And this one is also quite early. They haven't quite started. I forgot the stage. They might just be starting the next clinical trial on humans. So stuff like that. And we invest in a bunch of AI robotics as well. But it's actually the biotech companies that gets me really excited. It's just very tangible. Like one day you will help many million people where AI robots.
Alex Thorne
We all know it's going to be big, but it's cool. Yeah. It's not like you just solved everybody's knee problem.
CZ
Exactly.
Alex Thorne
That's. That's much more tangible.
CZ
Yeah. So there's a psychological reward for those biotech investments. Yeah.
Alex Thorne
So I love that. Let's talk about AI. You guys are investing in AI? We're building. We have a. We're an AI data center company. Also in addition to crypto, everyone's using AI. I've got a bunch of. I asked the employees of Galaxy to submit some questions. One that everyone wanted me to ask was what is your favorite LLM for you to use personally? Right now I switch between them. There's ups and downs. But right now, which phone app of AI are you super excited about?
CZ
I have almost all of them installed. I subscribe to all of them and I use different ones for different things. Well, OpenAI is the first one you install. Right. So they're the oldest. Anthropic cloud is much better for coding, I find. But I don't write much code. But it's still pretty good for answering questions. I also find like the different AI companies, sometimes they're not Available in different countries. I travel a lot.
Alex Thorne
Is that true? Interesting.
CZ
So I travel a lot. So you travel to some countries. One AI company is not available.
Alex Thorne
You just open the app and it's like, sorry, I can't operate service in this country.
CZ
I'm like, I'm just only here for three days. But then you go to the next one. There's also some geopolitical tension as well. For example, when I travel to Hong Kong, none of the US AI companies work. So then you use Deep Seq. Kimi A bunch of the Chinese guys, I'm not political, I'm like, look, I just use whatever is working on my phone.
Alex Thorne
I just have to ask this question real quick. Yeah, can someone answer it please?
CZ
Yeah. But overall though, I generally find the US large language models to be much more precise and much more accurate. Whereas the Chinese open source ones are very good as well. But they are not as comprehensive sometimes.
Alex Thorne
Yeah. Qwen Deepseek Kimi. I've used some of these at home myself. Do you think? Well you. Since you mentioned the geopolitical aspect, I think this is very interesting. There's a great essay. Many people have theorized but AI 2027, you read that essay, it's really good. I'll serve.
CZ
No, I got it, I got it.
Alex Thorne
Well, it's sort of like you know, from, from 25 to 2027, what might happen and then eventually it becomes a choose your own adventure like accelerationist or safety and but you know, one of the big stories clearly of AI. So China's announced some 200 plus billion state investment in data center growth. Obviously we have enormous private, mostly private, but I think plenty of public support of data center growth and capex spending here in the us. Like is this, is it going to turn into like a, you know, Cold war style AI arms race? Like should it, Is it, is it already happening?
CZ
Like I. Okay, again I'm not expert on this area but I actually do think that it's going to, it's definitely going to be a race, especially with what's happening recently. I mean it doesn't take two brand sales to figure out China's definitely working on their own chip, right? So China definitely is working on their own data centers, both countries. So US definitely trying to work on its manufacturing and so it's a race. But racing competition can be healthy. It actually increase the speed of growth. But I think on AI we got to be a little bit careful with the speed of growth because AI is so powerful that it can be dangerous. It can be very dangerous. So right now, many people are looking at crypto regulations. Very few people talk about AI regulations. What can you do not do with AI? And crypto regulations are actually much simpler. It's just like a record, right? You're just dealing with money, basically. There's not a whole lot more. Well, there's kyc, aml, it's all that same money stuff.
Alex Thorne
Basically, it's just new technology.
CZ
But AI can do so much more. AI can hack your computer, can figure out how to build a nuclear bomb. AI can do so many different things. You can program robots, you can program nanobots, you can fly nanobots. What can you do and cannot do with that? They obviously can program drones, et cetera. So there's so much application for AI, but I don't think anyone's really thinking about, well, in a deep way, in a comprehensive way on how to regulate AI. I say that, but when I actually think about that problem, I don't know how to do it. Yeah, it's such a hard problem.
Alex Thorne
Because you want to promote the growth and innovation too. It's not just like. Because we have seen some proposals, I know in the US probably everywhere, I would assume, you know, there's a small but rising populous backlash of like, no more data centers even. Not just make the AI safe, but like build less AI. That's not winning out at the moment. But I haven't seen anything more nuanced than that yet.
CZ
To the point. Typically the first versions of regulations, or what people say is like too binary.
Alex Thorne
Yes.
CZ
Okay, yeah, we can regulate the industry by killing it. Right? That's not regulating, that's just killing. Regulating the industry means that you want to promote use of it, otherwise you don't need to regulate it, just kill it. Yeah, that's not regulating. Right. But it's just so hard to regulate AI and many people are not thinking or talking about it deeply. But when you think about this problem, it's actually very important for our civilization. Crypto, no matter what it does, it doesn't have the power to extinguish our civilization. It's very powerful. There's a lot of money involved. It's a great industry, but it helps global commerce, it grows our economy, et cetera. But AI has the power to extinguish our civilization if we don't use it carefully. So. Yeah. But anyway, that's just me ranting.
Alex Thorne
Yeah, No, I appreciate it. That's what I wanted to hear. I think one of my favorite things to. Have you built anything personally at home with Claude code or whatever? That like most people are tinkering with something. It's one of our favorite questions to ask like over a drink. What are you building with AI?
CZ
I tried, but very unsuccessfully, I tried Open Claw. I installed it on my one of my unused Macs and then I tried to get it to download my Gmail, which it very easily connected to. And I tried to get it to filter my email. I get so much junk mail. Yeah, oh yeah, I get so much junk mail to the point I don't use email.
Alex Thorne
No, I know, me too.
CZ
It's bad, I just don't use email. But I thought it has this Gmail skill. So download, see what it can do, plug that in, got a Gmail API key, put it in. But it was so careful. It was so resistant to deleting emails. For me I'm like, oh, remove all the junk and only show me like the email stuff that are important. But I would say probably 30%, 40% of my emails are requesting for some kind of meeting with me. It was like, well, this guy's requesting an email meeting with me. There's all this meeting requests. He thinks it's important.
Alex Thorne
Right. A lot of that's junk as well in your mind. Yeah, it's just spam inbound.
CZ
I'm like 99% of that is just junk from people I don't know. I'm not going to accept those meetings. So AI, I tried it. It just doesn't do what I needed to do. Interesting.
Alex Thorne
Very interesting. Let's talk about Quantum a little bit. Another thing. I did a presentation earlier to an investment bank about Bitcoin and Quantum and the mitigation paths. Are you worried about Quantum as a threat to Bitcoin?
CZ
No, I'm actually not worried about it at all. I think number one is the more compute power we have, the better. They are already quantum resistant encryption algorithms. So all we need to do, conceptually, very simple, all we need to do is upgrade the change the encryption algorithm. But for a decentralized technology like Bitcoin and with so many users all around different parts of the world, the coordination is difficult. And there's also the satoshi bitcoins that what do we need to do? Et cetera. But overall I'm not worried about it. I also think that I have a sneaky suspicion that Google says 2029. It'd be very. Yeah, I mean I appreciate that they
Alex Thorne
give, they give such some urgency.
CZ
Some urgency and the early notice. I don't know what's going on in like what do they have maybe they can already crack bitcoin. They don't. If that's the case, I'd be super appreciative that the fact that they don't. They don't.
Alex Thorne
Yeah.
CZ
But more likely, I think there might be a little bit of a PR angle to that. Look, if you're a quantum researcher, you want more attention for quantum. And you might not put out an estimate that's relatively aggressive. You said 2035. Nobody was going to read that article. Yeah, you said.
Alex Thorne
And I think actually under testing, one of the main Google authors of that paper, Craig Gibney, a longtime quantum researcher, said, really he thinks it's about a 10% chance by 2029. Yeah, right.
CZ
But I appreciate that's an engineering estimate.
Alex Thorne
Right, right, right. And honestly, to be clear, I think they've been getting pulled forward. Like that Google paper did describe a substantial improvement in the math and therefore reduction in the number of qubits required.
CZ
But regardless, the day is going to come and then bitcoin is going to have to upgrade. So the ecliptical encryption is going to have to upgrade.
Alex Thorne
Yes.
CZ
And we as a community need to somehow coordinate it. So that's a task on us.
Alex Thorne
There's some early work happening, but I would say it's early. And you know how decentralized bitcoin is. Like, like, you know, Ethereum foundation released a whole roadmap. Well, great. Like there's no such group in bitcoin, but I'm seeing some green shoots of activity, I would say.
CZ
But I think when the urgency gets stronger, a number of key groups will get together and there will still be a lot of debates. There may even be many forks of bitcoin, but eventually we'll get there.
Alex Thorne
Yeah. I think about the risk of. Well, we've. Bitcoiners have lived through many forks before.
CZ
Many forks, yeah.
Alex Thorne
Bitcoin gold, bitcoin diamond, bitcoin cash.
CZ
Tell me about it.
Alex Thorne
Whatever.
CZ
Tell me about it.
Alex Thorne
It's funny that that doesn't happen as much anymore, but that used to be like a major theme of bitcoin for like probably like three years, maybe like 2016 to like 2018. So many forks, right?
CZ
It was more like. No, it was more like. No, August 2017 was the first BCH
Alex Thorne
fork, but there were some others before.
CZ
So after the BCH fork, then it was the binance is the first exchange to say we're going to support both forks because otherwise the user have to download the bitcoin from the exchange, install both wallets and figure out which one stick with which one's not which one's like. And to download the entire bitcoin blockchain takes like three or four days back. Then they have to go through all that work. So Binance was the first exchange. I gave this idea, say look, why don't we handle this for users? Because we have a big wallet and we just give users the BCH that they're supposed to get and then we're done. And then we list BCH and people can trade.
Alex Thorne
Very few people exchange. I did a study back then when I worked at Fidelity about what, how they all the exchanges handled the BCH fork. Many did nothing. They technically had the keys, but they didn't give you the bch. Coinbase didn't give you the BCH or let it to trade I think until like December. Some, I think maybe it was Bitfinex. They had perps also to see where it would trade in the future, which is actually a really important thing if a fork's gonna happen. But yes, I remember Binance was one that said we'll just, just were going to give it to you. Yeah, some I think sold it and gave you the bitcoin proceeds. Very strange.
CZ
But the counter effect was that helped a lot of users. But the counter effect is now then after that people saw that Binance supports bitcoin forks and because we want to give users benefits. So then there was like bitcoin gold, bitcoin, diamond bitcoin. And then all of them are useless. Yeah, right. But all of them have some value when they first forked. And so the exchange was forced to support quite a number of them. And after a while we said, okay, we're going to have to stop. So there was like, I would say probably a three, six month period. There was a lot of forks and we stopped supporting them. That was that, that was.
Alex Thorne
The bitcoin forks era was exciting. So just back on the quantum thing, you mentioned this. So assuming we get the tech to the new cryptography and bitcoiners decide to add it and all of that part of it is solved. Should bitcoiners or bitcoin do something with Satoshi's coins or not? My understanding is there's kind of three options. You could do nothing and effectively it's a bounty. And the downside obviously is that you likely get the coins one day swept by an entity that creates sell pressure. But the sell pressure does redistribute them ultimately to the community. So like, like there's a minor upside there, I would say potentially long term upside versus Short term downside, there's one that says, I don't know, some version of freeze and seize either to one day give him back if he can show up with a passport that says satoshi or whatever. I know that's tricky since the only proof we actually would have would be cryptographic proof and that will have been broken and then there's some sort of middle ground idea which is like slow the spending or something. What do you think? I mean and knowing that, I'm not sure where I stand on this, but
CZ
I think the first option is definitely bad, we should do something with it. But I would actually propose a different solution. I think we should say look, once we know we're going to fork bitcoin, I would put a fourth option on the table. Say look, as a community, why don't we give a timeline, say within six months or 12 months if those coins don't move, then we're going to lock them. So on the new protocol, on the new protocol there will be like only 20 million coins because we're just going
Alex Thorne
to lock them, take away a million
CZ
coins, just take away those million coins. Those addresses will be frozen. On the mirrored one, those addresses will be frozen. I would say let's give him a year. If he doesn't do that in a year, I think then we give him time. He may be alive, maybe not be alive, he may even not be a person who knows. So but if we don't do anything with it, then we basically give it to somebody who's going to hack it, the first guy who runs a quantum to crack it. Eventually that will happen and that's not a good way to distribute in my opinion. So that's what I would do. That's what I would suggest. I think at the end what we do should be up to a community vote and I don't know how. We probably have to signal with a bitcoin flag.
Alex Thorne
Yeah, in bitcoin the votes are usually minor flags. The minor flag run nodes that support UASF potentially but that can be sybil attack. But yeah, it's a tricky question. I don't think there's frankly any good answer to the question. Unfortunately.
CZ
No, no. But I do think that if he doesn't do anything with it, my recommendation would be, well, the new protocol should be freezing. Like those will be taken out of circulation.
Alex Thorne
Yeah, just two questions here to wrap up that are sort of really quite open ended. What is something in the last year that you've changed your mind on or you know, last year or two this
CZ
is a pretty simple one.
Alex Thorne
Yeah.
CZ
RWAs I was pretty skeptical, like say a year or a year and a half ago. I felt like, who's going to like. I'm not sure if anyone's going to trade this stuff. I'm not sure if it's going to take off, but the speed is taking off actually caught me by surprise. So I think like stablecoins, all your futures, AI stocks, so they have very good uptake in the crypto community. That means that the demand is there. So that means that many people in the world wanted to access those things and they didn't have access. So that caught me by surprise. Ten years ago it was stablecoins, but stablecoins, I got over that quite a bit earlier.
Alex Thorne
Yeah. Last question. Czech. You founded Binance in 2017, right. What's something that's as obvious to you today or that you are as convicted in today that was obvious to you then and that you were convicted in then? Something that's held true to you the whole time.
CZ
Hold on, let me ask. You mean from a business opportunity perspective or a belief perspective?
Alex Thorne
I would say a belief. A belief perspective. When you founded Binance, you had great conviction in this thing and today you have the same or even stronger conviction. Can be an idea concept.
CZ
Okay, okay, that's simple. I mean, crypto's not going away. Crypto is going to be a big industry. So that hasn't changed. So that belief has now only got much, much, much stronger. So that's. Yeah, I don't know how to explain it in simple terms. It's just going to. To get bigger. There's no way for it to get smaller actually. Yeah, so the prices will fluctuate of individual coins. But the industry is going to grow. Right now quite a lot of hard money went to AI. They're chasing all the AI stocks. Fantastic. Well, guess what? People are trading AI stocks using crypto now. The AI is actually contributing to crypto's trading volume. That may or may not help crypto itself, some of the crypto itself, but it's now the people are using blockchain to access those things. And also AI today, as hot as it is today, they don't transact for us yet. So now they can find the cheapest ticket for us, but we still have to pay for that ticket ourselves.
Alex Thorne
Agentic trading and payments and stuff, you're
CZ
thinking they will come, they will come in a matter of months, not years, I think.
Alex Thorne
And they'll use crypto.
CZ
They will use crypto. Imagine today if you launch that thing. Or you have an agent that can buy your tickets or trade for you or do whatever. You can integrate payment system country by country or you can say we're going to turn on crypto. And also for many of the current payment systems don't work with AI. The AI can't swipe your Visa card, it can probably fill a form. But whenever there's a 2fa whenever, like how can you do KYC, show your passport? You just can't do those things. Whereas with blockchain, it. It's API driven, right. So it's much easier for AI to use. So while AI is great, AI is a tool for you to get stuff done. AI still need to spend money. AI still need to transact. Guess what? They're going to use the blockchain. Well, they're going to use a better. We still need a good. We still need to continually upgrade the current financial system so the financial system's not going away. When we had blockchain, Internet didn't go away. When we have AI blockchain and Internet is not going to go away. So all three are big, big technologies. So I think many people ask me, are you worried that all the money is going to AI? No. Yes, some money went, but that's okay. There's enough money around and we're dealing with money industry. Even the money that went there still flows on the blockchain increasingly.
Alex Thorne
Well, thank you so much, cz, founder of Binance, for coming on Galaxy Brains.
CZ
Oh, thank you for having me.
Alex Thorne
Yeah, thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X intangible coins. Follow Galaxy Research on X at GLXY Research. Read our written reports@galaxy.com research and don't forget, if you like Galaxy Brains, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts and more. We'll see you next time.
Podcast: Galaxy Brains
Host: Alex Thorn (Galaxy Digital Research)
Guest: CZ (Changpeng Zhao), founder of Binance
Date: June 18, 2026
This episode features an in-depth conversation between Alex Thorn, head of research at Galaxy Digital, and CZ, the founder of Binance, about the evolving cryptocurrency landscape. CZ shares his views on the current market cycle, regulatory developments, the convergence between traditional finance (TradFi) and crypto, predictions for blockchain technology, trading platforms, the implications of AI, quantum threats, global adoption, investment trends, and much more.
The 4-Year Cycle and Market Drawdown
CZ believes the 4-year Bitcoin cycle remains strong and predictable. Despite current drawdowns (down ~50% from ATH), he sees this as part of a normal cycle, especially compared to previous 80% drawdowns ([02:29]).
"We've seen worse, we've seen like 80% retracements in previous cycles." — CZ ([02:29])
Market Lows Have Risen Substantially:
Even now, the current "bottom" is 4-5x higher than the 2022 FTX crash low (~16k), supporting the thesis of Bitcoin as digital gold with a rising floor ([03:03]).
"If you compare the lows, there's still 5x increase in the four years. So yeah, I think it's a normal cycle but every cycle is higher." — CZ ([03:03])
Increased Institutional Participation:
Institutional investment (BlackRock, ETFs, BNB ETF) and developer activity are at all-time highs. The US regulatory shift from opposition to support is pivotal, encouraging both US and global progress ([03:37]).
Convergence of TradFi and Crypto:
Not a Separate Industry: Crypto is a new technological layer within financial services, claims CZ. The lines between "TradFi" and crypto will blur as both adopt each other’s best features ([09:34]).
Coexistence of Centralization & Decentralization:
Both models will persist, and the industry should not be binary about the two. Efficient centralized solutions may thrive within a decentralized ecosystem, and vice versa ([09:34]).
"In a decentralized world, anybody can work together, right? ... The decentralized world should accommodate centralized players." — CZ ([09:34])
Custom Blockchains Are a Human/Political Stepping Stone:
Many institutions and countries remain uneasy about pure decentralization, so they launch semi-centralized or national blockchains as an intermediate step ([17:02]).
"With many of my discussions with different country leaders, they all want a national blockchain." — CZ ([17:02])
Decentralization ≠ Mandating Bitcoin:
Forcing everyone onto one blockchain (like Bitcoin) would be counter to decentralization, bordering on authoritarianism ([18:07]).
"If we force everyone to use Bitcoin, that itself is actually not decentralization." — CZ ([18:07])
Perpetual Swaps and Market Evolution:
Binance Modernized Perpetuals, But Didn’t Invent Them:
Crypto perps originated at BitMEX, and have since become a cornerstone product ([19:32]).
Regulatory Changes Will Bring Perps Onshore:
US-regulated venues will soon trade crypto perps. CZ sees this as beneficial—bringing in new participants, increasing liquidity and stability, and fostering global access ([19:25]).
"The more people have access to crypto perp trading, the better liquidity it is ... that's actually the best protection for consumers." — CZ ([19:32])
Tokenized Stocks and Access:
Tokenized securities on blockchains increase global access to financial markets, addressing high barriers and costs in traditional systems ([24:24]).
"Which country doesn't want everybody in the world to buy your government bond?" — CZ ([19:25])
Explosion of New Blockchains:
More chains and consumer choice are positives for the ecosystem, driving innovation and resilience ([32:14]).
BNB Chain Upgrades:
BNB chain is undergoing a significant technical upgrade focused on speed, cost, and user privacy. CZ emphasizes no competition fixation—multiple thriving chains benefit the whole space ([33:45]).
Ethereum L2s & Decentralization Debate:
L2s have enabled rapid scaling for Ethereum, but are far from the decentralization ideal. Vitalik’s recent focus appears to be shifting back toward L1 improvements ([37:23]).
L2s don’t greatly contribute to L1 security or fees, representing a friction point in Ethereum’s evolution ([38:25]).
"The L2s are not very centralized. Extremely centralized. ... They only need to spend the Ethereum once, like I don't know, with a batch." — CZ ([37:53])
On Tokenized Securities:
When offering securities, true decentralization of the underlying chain is critical to maintain neutrality and censorship resistance ([41:19]).
History with Hyperliquid:
CZ shares that the founder participated in an early Binance Labs incubation. Hyperliquid occupies a niche for US users who bypass KYC requirements with VPNs, and serves users Binance cannot ([25:02], [26:53]).
"I would never do what they do, given what I've experienced in my life. But ... they’re big boys, they handle themselves." — CZ ([26:53])
Utility and Legality:
CZ finds prediction markets (like Polymarket) highly valuable for accurate price discovery and real-world forecasting. He notes US federal support, although state-level restrictions (especially around sports) remain a hurdle ([28:00]).
"I personally think this is a great thing. I think anything that allows people to discover price, price discovery, liquidity is good." — CZ ([28:00])
YZI Labs Thesis:
Rough allocation: 70% crypto, 20% AI, 10% biotech. CZ favors large societal impact over pure financial returns. He highlights investments in radical biotech (artificial wombs, knee cartilage regrowth) and robotics ([41:51]).
"...if we invest a billion dollars into a drug research company that cures ... cancer ... I'll be very happy to lose that 1 billion ... because we have the impact." — CZ ([42:49])
Adoption and Rivalry:
CZ uses multiple LLMs (OpenAI, Anthropic, DeepSeek, Kimi), noticing strict geographic/geopolitical access controls. US LLMs are generally superior in accuracy ([45:54], [46:50]).
AI Arms Race and Regulation:
Both US and China are investing heavily in AI infrastructure. Regulation lags far behind; CZ warns that unregulated AI poses civilization-scale risks, whereas crypto, comparatively, cannot “extinguish our civilization” ([47:56], [50:05]).
"AI is so powerful that it can be dangerous. ... Crypto, no matter what it does, it doesn't have the power to extinguish our civilization, but AI has the power to extinguish." — CZ ([50:05])
Quantum Threat Not Immediate:
CZ isn’t worried in the short run. Quantum-resistant algorithms exist, but the decentralized nature of Bitcoin makes upgrades difficult ([52:37]).
Satoshi’s Coins After Quantum:
CZ suggests locking unclaimed Satoshi coins after a reasonable window post-upgrade, rather than leaving them as a “bounty” to be grabbed ([58:20]).
"If those coins don't move, then we're going to lock them. ... If we don't do anything, then we basically give it to somebody who's going to hack it, the first guy who runs a quantum to crack it." — CZ ([58:20])
"Crypto's not going away. Crypto is going to be a big industry. So that hasn't changed. That belief has now only got much, much, much stronger." — CZ ([61:37])
On Cycles:
"Every cycle is higher. So over the long term I'm a very long term. I'm not going to exit. There's no exit in crypto for me." — CZ ([03:03])
On Decentralization:
"If we force everyone to use Bitcoin, that itself is actually not decentralization." — CZ ([18:07])
On Institutional Crypto Adoption:
"We're seeing very strong institutional adoption. BlackRock, all the ETFs, BNB ETF got listed last week ..." — CZ ([03:37])
On AI Dangers vs. Crypto Dangers:
"Crypto, no matter what it does, it doesn't have the power to extinguish our civilization, but AI has the power to extinguish." — CZ ([50:05])
On Satoshi’s Coins and Quantum Computing:
"As a community, why don't we give a timeline, say within six months or 12 months if those coins don't move, then we're going to lock them." — CZ ([58:20])
On the Unstoppable Growth of Crypto:
"There's no way for it to get smaller actually. ... The industry is going to grow." — CZ ([61:37])
The conversation is casual, sharp, and often self-effacing, with CZ and Alex joking about industry patterns, tech details, and their own knowledge gaps. CZ speaks candidly about regulatory realities, investment logic, and his past mistakes and present optimism, giving listeners an unfiltered view from one of crypto’s most influential figures.
This episode offers rare, comprehensive insights into how a key architect of modern crypto finance views the sector’s evolution, current challenges, and future. CZ is fundamentally bullish: he sees ongoing cycles as natural and healthy, institutional adoption as a game-changer, and innovation as a continuous and multi-faceted process. Regulatory and technological battles (such as with AI, quantum computing, and national digital currencies) will persist, but the industry’s march forward is, in his view, inevitable and broadly beneficial for global finance.