Ali, given your long, uh, tenure and experience in AI as an AI researcher and now investing at this intersection, what are you finding most interesting? What are the most productive areas where these two trends are overlapping?

Well, actually, let me give you a story first from the time that I was working at Google.

I first worked at Google X and then moved over to Google Brain.

When I was at X, I had already been following crypto for a very long time, and I actually pitched someone very high up at X to start exploring crypto ideas as a part of X.

And this is X, their "moonshot factory," which is supposed to be maximally open to new ideas, maximally open to new potential technologies.

And this was twenty sixteen, twenty seventeen, at a point where it was already clear that there's a lot of excitement around crypto as a new technology.

And I was basically laughed out of the room.

Tell us about that, 'cause that sounds pretty important the way you phrased it there.

Um, so yeah, just tell me a little bit about like how you think the privacy blockchain competition is shaping up.

Yeah.

I mean, I would say it's, it's still likely not a winner-take-all type of dynamic where you have only one chain that wins everything.

There are many different kinds of use cases, and the trade-off space is very broad, so I suspect there will be different kinds of chains, all of which maybe have privacy as a feature, that specialize in the various different regions of the trade-off space and all kind of carve out their own niche.Um, of what ends up being on-chain finance.

Um, I think that the argument that I was making in that post that you're, that you mentioned is that block space is essentially becoming commoditized, and performance by itself is no longer enough of a differentiator.

Uh, and the reason for that is largely that it's become very easy to move between chains, given that we now have very good interoperability solutions and, and, uh, uh, like cross-chain asset, uh, bridging solutions.

Um, and so therefore, if you are just a public blockchain that, uh, has high performance, uh, your fees are ultimately likely to be compressed down to zero because it's very easy for people to migrate to other chains.

Uh, but anyway, so, you know, do you think-- Like, what happens to the potential for hacks in a world of privacy blockchains? Does it vastly increase? Um, or does the fact that it's a privacy chain also make it harder to perpetrate a hack? Um, or, or, you know, only-- Or, or does it only make it harder to detect a hack? Like, how, how does it affect security if we go to a world that's predominantly privacy chains?

Why is privacy becoming so important for this next phase of crypto adoption?

Yes.

Uh, well, the first observation is that, uh, we're now at a point in the cycle where block space is becoming a commodity, and just launching a high-performance blockchain is no longer really enough to be able to win in the competitive ecosystem of layer-one blockchains.

It is no longer differentiated enough.

Block space is approximately the same everywhere.

And then also because of the fact that we now have extremely good cross-chain interoperability protocols, uh, it is very easy to migrate from one blockchain to another, making any one blockchain far less defensible.

So our, our thesis now is that in order for a layer-one blockchain to succeed in this new era, it has to have one of three things.

You specifically have been very vocal about the fact that this is happening at a much faster pace than most people were expecting, and I'm curious to see, uh, just to hear, um, what are some of these near-term breakthroughs or just rapid changes to adoption that you think is making this time horizon shrink to where, like you said, we get to this world where we have fully autonomous agents being economic actors in the, in the, the financial ecosystem happening? Like, why, why do you think this is accelerating so quickly, so suddenly?

Ali, given your long tenure and experience in AI as an AI researcher and now investing at this intersection, what are you finding most interesting? What are the most productive areas where these two trends are overlapping? Well, actually, let me give you a

story first from the time that I was working at Google.

I first worked at Google X and then moved over to Google Brain.

When I was at X, I had already been following crypto for a very long time.

And I actually pitched someone very high up at X to start exploring crypto ideas as a part of X.

And this is X, the quote unquote moonshot factory, which is supposed to be maximally open to new ideas, maximally open to new potential technologies.

And this was 2016, 2017, at a point where it was already clear that there's a lot of excitement around crypto as a new technology.

Tell us about that, because that sounds pretty important, the way you phrased it there.

But maybe help us just paint a picture of what's the latest happening on the crypto firm and what are you guys most excited about at the moment?

Yeah, happy to.

Maybe I'll start with the crypto fund and then talk about the context and where we are now in this space.

The crypto fund exists at the firm with the sole purpose of specializing on crypto companies, companies that are entirely focused on building protocols or building around protocols, building around decentralized systems.

We started the Vertical back in 2017, 2018, and started a fund that is kind of the same A16Z mold, but very tailored for the needs and requirements of companies in the space.

And in particular, crypto companies are unique in that they need much more help on both regulatory legal policy, just given that there's been so much uncertainty on that front in this space since its inception.

And then also in many cases on the tech research front, because there are so many open-ended research problems that are core to the space because it's so nascent that people who have spent a lifetime studying those disciplines have a lot to contribute to.

Do you think that's accurate? And if so, where do you think we're heading next with that space?

What makes secrets hard to migrate? Is it a technical issue or is it something more social about it? What is the cause of that

friction? Yeah.

Yeah, it is a fundamental technical issue that stems from the fact that any privacy system has to operate within what's known as an anonymity set, in that your privacy is guaranteed by virtue of the fact that your activity is sort of mixed with the activity of many other users, such that it is not possible to attribute any one action to you or to anyone else.

The larger the anonymity set, the better, the harder it is to track someone down.

Strength in numbers.

The smaller the anonymity set, the more risk there is that you might be tracked down.

Whenever you have different anonymity zones, different chains are different zones in that they have their own anonymity set, you have fragmentation of the anonymity sets that you're inhabiting, and crossing from one anonymity set to another entails some risk because there's a lot of metadata that gets leaked in that transition, including timing of transactions, the correlation of transaction sizes on one anonymity set versus another one, network activity that happens at a far lower level, even at the TCP IP level.

Why would lock-in, or the sort of lock-in that we would see among privacy chains, why would that be superior or preferable to what we've seen in past eras?

Help us understand better the stablecoin landscape around like what big companies or types of companies have emerged or will emerge as a result of it or how it impacts the crypto startup ecosystem more broadly.

So right now, at the center of all of the action are the stablecoin issuers.

So we've got two of the major ones right now are USDC, which is created by this consortium between Coinbase and Circle.

And then there's Tether.

And so both of these are the biggest two issuers of stablecoins today.

Then, of course, both of these stablecoins operate on top of blockchains.

So another important piece of the stack is the infrastructure on top of which some of these stablecoins operate on.

A dog or an ape or anything else.