On Wall Street, the debate over digital assets has officially shifted from if they matter to how to integrate them by giants are moving beyond the proof of concept phase, even executing live production use cases like we repo trading with tokenized treasuries.
Now this convergence is creating a complex balancing act.
Institutions want the efficiency of programmable assets as well as golden records, but the demand strict privacy and governance that.
Public blockchains lack and added the reality of ongoing defy exploits the looming threat of quantum computing and the rapidly shifting AI startup landscape and navigating this next frontier does require serious discipline.
Well joining us to connect the dots across tra by blockchain and AI is Steven Willinger, Founding Partner of Blockchain Builders Fund.
Steven great to have you.
Thank you so much for joining me here on Wall Street we're paying attention to institutional adoption.
And that intersection of 5 as well as defies so some of these cyber risks out there, where are your concerns right now?
Yeah, I mean it's been a kind of hectic month for cybersecurity attacks both inside Web 3 and outside of it, it probably has something to do with the sort of like democratization of AI tools for both coding and also coding is just another way to build a breach.
And so I think it raises a lot of questions about how much decentralization is good.
Having some centralization and control allows trusted third parties to mitigate issues, right, so we've had a couple of hacks this week where if there had been Some sort of cool off period for large transactions and a governance body that could have reviewed those transactions before the funds went out.
It potentially could have been stopped.
So I think this is going to give pause potentially to institutions who are considering deploying onto highly permissionless and irreversible blockchains and considering other blockchains like Canton where governance is more baked in to the mechanism.
And there is the technology aspect of this as well, so we're continuing to see innovation, but with that also comes compliance as well as regulation.
So tell us what the vault.
Yes, a vault is a good way to think of a vault is an asset manager.
However, it can be structured in a way where the technology takes the place of a lot of the back office of an asset manager, right?
So a vault allows you to Put assets into a vault and have a strategy executed by a manager.
However, there can be guardrails placed on that strategy such that you only have to put a certain amount of trust in that asset manager, and this is quickly becoming the format in which crypto assets are deployed to earn yield, and that yield can come from any assets available on a blockchain.
And so I think you'll see a lot of trends where the back end for Management will start to look more and more like vaults, and you'll get a greater diversity of asset managers able to use this technology and ability for investors to go ahead and enter into those strategies.
So I think it's very much going to converge and it will likely have a lot of the trajectory that ETFs did.
We're early on.
It's a new packaging, but the cost is low.
You get great transparency and visibility into how the asset managers. assets and great guarantees about what they're going to do so you know exactly how you're exposed.
And while I have you here, I do want to ask you about quantum.
So there has been a lot of debate regarding the risks of quantum computing on digital assets and what it means.
So what are your concerns about QA and do you think a lot of this is hype similar to Y2K?
I think the Y2K comparison is a good one.
The QA keeps moving forward.
The technological breakthroughs are coming faster, I think, than folks expected.
Recently, Google and some Stanford researchers and I think some folks from the Ethereum Foundation were able to prove that you needed way less quantum computing power to do the algorithm that would break.
The cryptography and not only crypto but a lot of the things that manage like messaging and also compute from government to corporate, so that date is moving forward.
Fortunately it's not tomorrow and I think everyone is now aware of this issue and it's a relatively straightforward fix with a lot of quantum proof cryptography already being known.
A couple of the issues outstanding though, especially.
For the crypto industry, especially have to do with Bitcoin, where it is very hard to update the Bitcoin network and perhaps more importantly for this particular upgrade, there are a lot of bitcoins sitting out there that would need to be migrated, and the owner of that bitcoin, especially Satoshi's bitcoins, is not known and may not even be around anymore.
So there's going to be a big once again.
Decision for the Bitcoin community.
What they want to do with those tokens?
Do they want to leave them exposed and allow them to potentially be stolen?
Do they want to burn them?
Do they want to silo them off and create some claim process where if Satoshi is alive and comes back they're claimable?
But whatever that decision is, it's going to have a huge impact on the Bitcoin float.
21 million might not be the final number.
Yes, and I do want to ask you about artificial intelligence.
Obviously AI, the intersection of AII, as well as what it means for Wall Street.
We could have an entire podcast about this, but what do you think is going to happen and what are you focused on when it comes to AI?
Sure, so I'm in town for an event that my fund and the Stanford ecosystem is co-hosting with Cornell Tech tomorrow.
Called the programmable economy and it's all about the convergence of AI blockchain and financial technology, and I think there's like so many vectors this could be a weekly daily podcast.
I think you know the main thrust is that we now have truly native digital payments that are permissionless and we're emerging we're coming into a world where the first class citizen of the internet is no longer.
It's going to be an agent, right, and so they need a digital means of transaction that is not gated in the same way that our traditional payments are.
The average credit card transaction on the internet is $50.
That's not going to be how it works in the future.
There's going to be many, many microtransactions between these agents to get access to information, to carry out whatever it is their purpose is.
And so fortunately we have A means of transacting already available that's fit for purpose, and so there's tremendous innovation already going on to support not just the payments but the full economy that you could imagine needing to happen between agents on the internet, so not just the payments, but simple things like escrow, more complicated things like identity and underwriting for working capital loans for agents all the way through to insurance.
So we're seeing a rapid innovation on this front and I think it's going to be a space to watch. and Stephen finally before I let you go, you highlighted tomorrow's event and that is something that we're going to be paying attention to.
But of course with opportunity comes risk.
So what are you most excited about moving forward and why that's that's a big one.
I think what I'm most excited about is the is the amount of power that you know not just a technologist anymore, but the average person. is they're able to quite easily stand up agents on the internet for themselves without a deep technical expertise, and I think we're going to see a huge drop in the cost of information and just ignorance will no longer be possible for someone on the internet because they will have their own fully capable agent to do research and carry out transactions on on behalf.
So I think we're going to as much as the internet widened out access to information, I think with fully capable and quite intelligent agents we're going to see that another step function or a couple orders of magnitude for the average user on the internet and for the economic freedom of those users.
Stephen, it was great having you on the show this morning.
Thank you so much for joining us here at the New York Stock Exchange and thank you so much for sharing all of your insights.
Thank you so much.
