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- [00:00]
A
You can't have freedom of speech unless you have privacy. If the government or a corporation knows, you know, your thoughts or what you're about to say, then they can cut you off from exercising your freedom of speech. So once we realized that privacy is this prerequisite for, in a way, the basis for. For our country, we knew we wanted to spend more time in the space. And that was the genesis of cypherpunk. Oh,
- [00:50]
B
Hey, everyone. Jen Senasi here. And this is Market's outlook. Our next guest says zcash is the most mispriced asset in crypto because privacy is the most mispriced asset in society. Joining us now for more is Cypherpunk Chief Investment Officer and Winklevoss capital principal Will McAvoy. Hey, Will.
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A
Hey, Jen. Thanks for having me.
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B
Yeah, thanks for being on. I'm excited to dig into this. And so I just want to start here. Just talk to me a little bit about what you think the market is getting wrong about privacy.
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A
Yeah. So, I mean, when we look out across society, it is pretty clear that privacy is clearly in decline. Right. We may be in a moment in time where we have the least amount of privacy. We have the least amount of privacy that we've had maybe ever. And I think it's gone by pretty quickly over the past couple decades. People really haven't noticed. And I think we're at an inflection point, especially with AI coming much more integrated into society, that people are going to start questioning and kind of seeing the lack of privacy in their daily lives. And in that environment, you can sort of think about privacy as a very scarce asset. And as we know with crypto and macro assets, when an asset is scarce, when supply is decreasing, it's very likely that the price should be a lot higher. So I think we're entering into this paradigm sort of where demand for privacy is very high, supply is very low, and given that dynamic, it's going to be very valuable.
- [02:34]
B
I've asked this question a lot. I've asked Arthur Hayes, I've asked Zuko, I've asked the folks over at midnight. And it's something that I want to get your perspective on. I think what you're saying is absolutely right. But when I look out into the world to people outside of folks like you who are working very intensely on this, it doesn't feel like they realize what they're giving up. And it feels like that trade of privacy for convenience is one that just makes a lot of sense to people. And so what do you think is going to happen, that's going to make it click for just everyone who's walking out there who trade their privacy for convenience every day.
- [03:17]
A
Yeah, I, I think that is the right framing. I think since the advent of social media, it has been this very easy, you know, privacy for convenience trade, where it's like, you know, you scroll to the bottom of the terms and service and you just, you just check the box and, and the, the lack of privacy doesn't really have a negative implication for you. I think we're entering into a world with AI where there's many ways where the lack of privacy could have a negative implication for you, whether it's the government knowing so much about you, whether it's private companies knowing so much about you. In a world with AI, these AI systems that are going to be super powerful, they already are, and they're also super useful. In a world where they're super useful, we're going to want to be giving them as individuals all the context that we have on our lives about us, about our thoughts, about our feelings, about our activities, such that those AI can be super helpful for us. Right. So we're going to do that, but we're going to want to be assured that that data, that information is not going to be used against us. So, so that's why I think about privacy and AI as sort of two sides of the same coin. And AI is really the jumping off point for people to realize that privacy is really important.
- [04:47]
B
But don't you think just given the trajectory we're on, that people are going to continue to trade their privacy with AI and not realize again, outside of like the circles that you're working in right now and not realize what they're giving up. You know, I already know people who are uploading so much sensitive data to chat GPT just to make their jobs easier, just to make their lives easier. And like, what, what is going to be that inflection point? Are we going to have to wait for some kind of crisis for folks to really see what it is you're explaining.
- [05:18]
A
The chance of some sort of crisis is definitely, you know, a reasonable concern. Right. Every week you see headlines around data breaches and hacks and private information being public up until now? Yeah, sure. My name or your name and address and maybe even your Social Security number or even other information about you may be in some kind of disparate database in some part of the Internet that was leaked. No one's really doing anything with it. But as soon as you apply, you know, AI to Those databases, that information can really be used against you. So it's tough to tell exactly how it will be used against you. But certainly if there's an economic incentive for it to be used against you, I think someone will, and they'll use AI to do it.
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B
All right, talk to me about where zcash comes into the picture. I asked you about what the market's getting wrong about Privacy. What's the market getting wrong about? Zcash.
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A
Yeah, so, so if, if privacy is this scarce asset, zcash is the tradable monetary unit of it. And of course it, it focuses on a, on a narrow, on a narrow slice of privacy. And that's financial privacy. It's the privacy to transact freely. So I, I think they go hand in hand. I think there, there's, there are many other lanes of privacy that are, that are important. Whether it's, you know, privacy when browsing the Internet, obviously, you know, privacy when communicating with friends and family. Zcash again, is this, is this private financial layer. So if you're bullish on this longer term theme of, of privacy, if you agree with me on it, then certainly you're going to want to have the financial and the transaction layer covered. And that's where zcash comes in.
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B
And why zcash specifically? I mean, there are other privacy protocols out there looking to solve this from different angles. So why zcash? What makes it stand out?
- [07:31]
A
Yeah, so I view zcash as, there's a few things here. I view zcash as like cypherpunk privacy. Cypherpunk privacy, meaning like, like true privacy. Like you have the keys, you have total control, and it's yours. A lot of the other privacy protocols in crypto are really just trying to rebuild Web two privacy on Web three Rails. Right? Like you don't. It's not true privacy. Maybe it's like, yeah, yeah, sure, your, your transactions are not public, but the developer of an application or the database manager can see your data or a government can see your data very easily. So I'm not super interested in those technologies. And we're not at cypherpunk. We're focused on true privacy protocols, ones that truly preserve your privacy. We think zcash is that. And look, we have been big fans of Bitcoin since Inception and zcash is essentially encrypted Bitcoin. It is a, you know, derived from the Bitcoin code base. There's a 21 million hard cap. It uses proof of work mining. That stuff has been proven out over, over a decade now. And zcash makes the one sort of critical improvement to add privacy.
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B
All right, you've unpacked your zcash thesis a little bit. I love a price prediction, as does our audience. What's target for zcash?
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A
I don't typically give price predictions, but I, I think in, in, in the thread, in the thread that I, I laid out on X, I think the, the, the, the right way to think about zcash is comparative to other important assets. Right. So in one instance, if it's able to maybe get to something like 2% of Bitcoin, if you could convince, you know, 2% of the Bitcoin holders to, you know, to value a private version of Bitcoin, you get, you know, you know, Zcash in the upper, close to 2,000. If you expand that and you get to convince some gold owners and offshore, you know, wealth holders, whether it's people who hold money in offshore bank accounts or money or, or value in art that hasn't entered their country, you can get even higher. You can get 3,000 or 4,000. So that I think is a reasonable medium term range. But I think in the long run there's quite a good setup here for much higher.
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B
All right, unpack, connect the dots for me. You mentioned bitcoin and gold there. I think people listening might say gold could be private. I could buy gold with cash, I can keep it at my house. That could be private. Bitcoin, I guess, could be anonymous or pseudonymous or private in a way. Talk to me about how zcash diverges from Bitcoin and gold. What, what takes it to the next level.
- [10:53]
A
Yeah, so, so bitcoin to your point, is pseudonymous. Right? So if, as you know, if I send you a bitcoin, that transaction is public, but maybe people don't know that it's my wallet that's doing the sending and that it's your wallet doing the receiving. In a world, again, in this world with AI, it's going to be, and again already is very good at stitching together disparate data sources. Right. So if there's a, a data leak about me or about you, if you have, you know, public information on your, your social media pages, any information about you will be used to de, anonymize the bitcoin blockchain and, and all the wallets. And it's already happening. There's obviously a lot of negatives to that. Right. So if I, for example, use bit, I, I want to use Bitcoin every Morning to buy my cup of coffee, which is, you know, I go to a coffee shop two blocks away from my apartment, and I go at the same time every day. Obviously, you don't want, you know, that fully transparent. You don't want the whole world to know that you go to the coffee shop on 42nd and 2nd at, you know, 7am every day, that there's, you know, a personal security risk in that. So, so, so, so that's, that's sort
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of
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why, you know, why Bitcoin is not going to, you know, be able to provide the, you know, the same privacy guarantees as zcash does. And zcash does it, you know, through ZK proof. And so it's a strong encryption technology. And so that's sort of the comparison between Bitcoin and zcash for gold. Look, I think you just need to compare gold against sort of any digital asset. Gold is really great in many ways, but it still is very difficult to transport. You can imagine a world where maybe if the Chinese central bank is buying a lot of gold, I do assume that the United States government or other governments know that because, you know, you actually have to, you know, load the pallets onto a 747 and transport them around the world. Like, that's all out in the open. So in a way, gold is a, is a bit private, but it's certainly not as private as zcash.
- [13:30]
B
Markets move fast. Crypto moves faster from the floor of the New York Stock Exchange. CoinDesk Public keys tracks the money markets and moves shaping digital assets. Okay, talk to me a little bit about this regulatory risk. You know, I've heard people argue that privacy coins face this like, existential regulatory risk. And, you know, governments could ultimately suppress protocols like zcash or coins like zcash tokens. Sorry, what do you think of that? And, and I asked that through the lens of, you know, the SEC ending its investigation into zcash earlier this year, but we still don't really have clear legislation in the U.S. and so, you know, could a new chair of the SEC come into that position in the future and look to suppress something like zcash? And is that something that you're thinking about and, and maybe pricing into your, your thesis and your investments?
- [15:12]
A
Yeah, I, I like. Look, I think the first thing to note is that the regulatory environment has done a total 180 in the past couple years. Right. The industry was sort of on the brink in many ways. Push, push, down and out. We're in a position where we have a very Constructive regulatory environment for crypto across the board. There will always be this risk with any disruptive technology that, that a government or government official comes along and wants to regulate it. So that's not exclusive to zcash. It's not exclusive to privacy preserving technologies. That is sort of the nature actually of, of disruptive technologies. So that's a very difficult thing to plan for. You sort of just have to, you know, from a first principles perspective, I think, build strong confidence in the technology and kind of just, you know, have this, you know, understand this notion that it really, in many ways throughout history, the sort of, the aim, the aim of government, it's not always the aim, but you know, government is looking to sort of, you know, control and regulate, you know, the current, the current environment, the current day. Obviously technology is largely trying to push, you know, the day forward, trying to build a new world. There's, there's always going to be a conflict there. So yeah, I'm not too worried about the regulatory environment. And all you have to do is look to what has happened with Bitcoin since China banned Bitcoin. Right. The price is only higher. So I'm not too worried about it.
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B
All right. I want to talk about cypherpunk's investment in Zodl Z, a privacy focused mobile wallet created by the creators and developers of Zcash. I received 0.00, I think 01 cent of Zcash from Zuko on Zodl. So that was my only interaction with Zottle. Talk to me a little bit about how you see Zodl evolving and I tell that story with Zuko because that was the only time I used it. I definitely would use it again, but there are other wallets I use more. And so like where. How does Zoddle start to take market share from those and how do you see, how do you see it evolving?
- [17:44]
A
Yeah. So I think the first thing here to note is that we made the investment because our aim at cypherpunk is not just to be, you know, another dab. Right. We're not just looking to accumulate Zcash. I think we're going to accumulate a ton of Zcash over the next five to 10 years. But our goal is really to have this organization where zcash is the, the hub, if you will. And then we have a constellation of super important privacy preserving technologies, many of which maybe even the majority of which will be synergistic with Zcash. So Zle is the first one of those. We invested $5 million alongside some other great investors like Paradigm and, and Andreessen Horowitz and Coinbase Ventures and look, I think the thesis is pretty straightforward. It's when Bitcoin emerged, it was extremely hard to use. It was this amazing backend technology, but no one knew how to interact with it. And you had a wave of crypto exchanges come along and build the front end for the Bitcoin backend, make it accessible to users, make it easy to use. So that's what Zodl is. Zoddle is the front end for this super important privacy preserving backend technology, which is zcash. Zodl is also the most popular zcash wallet right now. So they're crushing it. They have a ton of great adoption and you can sort of think about it as an early stage venture investment into what we think is one of the, what is going to be one of the most important venture backed privacy technology businesses you mentioned.
- [19:37]
B
Cypherpunk doesn't want to be just another digital asset Treasury. I know we've seen some of the challenges with digital asset treasury models, especially as the markets have taken a downturn. Just tell me a little bit more about how Cipher Punk is planning to evolve. Some of the milestones that are coming up that will give you real other business operations other than holding on to your stockpile of zcash.
- [20:04]
A
Yeah, so. So on the DAT side, our goal is to accumulate at least 5% of the Zcash network. I think when we get, you know, around that figure, we, we'll check in, we'll say how much more do we want to go? Right now we're just below 1.8% in terms of, outside of the Zcash accumulation strategy. Look, without going too deep into our plans, there's so many different important critical privacy technologies that are related to zcash than some that aren't in the ones that aren't, you know, you know, you know, browsing the Internet, is there something we can do in the VPN space? Private communications, is there something that we can do there? Data storage and management, collaboration within your company. Right, you probably, if you're working on some pretty important stuff at your business, you probably don't want your SaaS providers to have access to your planning documents and all that. You probably don't want OpenAI to have access to all those things. So we like to call ourselves public privacy because we're the only public company that's actually focused on privacy technologies. So because of that there's just so much white space for us to operate and I think if we fast forward, you know, into the future, we really do look like this broad and this sort of constellation of privacy preserving technologies that are all sort of feeding off of each other and synergistic with one another.
- [21:54]
B
All right. And Will, just before I let you go, we talked about the potential for some kind of crises to make people open their eyes to privacy and the challenges with privacy in the society we live in today. But if you were to look to the next 12 months, what's one development that could happen in the next 12 months that could change the narrative either around Zcash or privacy?
- [22:15]
A
I think the, the interface through which we will leverage AI is going to be camera based. So you. There's a. I think there's a very good likelihood that we fast forward 12 months out and we're sort of all wearing cameras. And, you know, almost everything that we're doing is being recorded from these cameras. It's really cool, right, because it feeds into our, into our eyes and it's helpful. It gives a lot of great context. But I think just once everyone realizes, you know, that they're being recorded by AI, you know, almost 24 7, I think that that's going to be one of the inflection points where people start to really demand much more privacy.
- [23:03]
B
I know I said that was the last question, but just one more, I promise. What makes you care so much about privacy?
- [23:11]
A
That's a good question. I mean, so Cameron, Tyler and I, we spent the last, at least the last year thinking deeply about privacy from the perspective that sort of. What we realized, and what I think a lot of people are realizing now, is that privacy is a prerequisite to many of the freedoms that we cherish as Americans. You can't have freedom of speech unless you have privacy. If the government or a corporation knows your thoughts or what you're about to say, then they can cut you off from exercising your freedom of speech. That's true for surgery, seizure and many other instances. So once we realized that privacy is this prerequisite for, in a way, the basis for our country, we knew we wanted to spend more time in the space. And that was the genesis of cypherpunk.
- [24:12]
B
Okay, last one. I swear. Do you imagine a future where people are using zcash as they are using cash today or as they may be using stablecoin? And in that future, do you see AI agents using zcash? Where does zcash fit into how people are transacting?
- [24:29]
A
Yeah, I, I think it's all the above. I think there's, there's certainly going to be a lot of motivation to use zcash for, for payments, whether it's you personally or, you know, the 10 AI agents that are working on behalf of you. Right. If, if you have a company with AI agents, you, you probably don't want to be signaling to all of your competitors what you're buying. So I think there's certainly an application with AI agents, and then the other use case is just private store of value, similar to Bitcoin.
- [25:04]
B
Well, it's been such a pleasure having this conversation with you. Thanks for joining me today.
- [25:09]
A
Great. Yeah, thanks for having me.