Dovey Wan, Founding Partner at Primitive Ventures: Whats Really Going On with Crypto in China

Dovey Wan is the Founding Partner at Primitive Ventures. In this conversation, Dovey and Anthony Pompliano discuss the current crypto ecosystem in Asia, how most Westerners are misinformed about the landscape in China, what's happening on the ground in the country, and why Dovey created a holding company instead of a fund for Primitive. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO. COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off. Dovey Wan is the founding partner at Primitive Ventures. In this conversation, we discuss the current crypto ecosystem in Asia, how most Westerners are misinformed about the landscape in China, what is happening on the ground in the country, and why Dovey created a holding company instead of a fund for Primitive. I really enjoyed this conversation, and I hope you do as well. Skrt skrt! Wanna know who has the best URL? Crypto.com. That's right, Crypto.com.

• 0:42Anthony Pompliano?

  They're a crypto platform with one goal: motherf***ing mass adoption. That's why we're all here. We're trying to get crypto in every wallet. Crypto.com is helping people do that through buying, earning, lending, and card payment. Everything you could want at Crypto.com. Go help your boy out, tell him Pomp sent you. Download the app or visit Crypto.com. Pomp's got you, always. Ever wanted to get into mining and didn't know how? Don't worry, your boy Pomp's got you. Everybody got some electricity and wifi. All you gotta do is go to CoinMine.com, you buy a coin mine. It's like an Xbox or a Playstation that helps you turn your electricity into Bitcoin. That's right. You purchase it, it shows up at your doorstep, you pull it out of the box, you plug it in,

• 1:27Anthony Pompliano?

  connect to your wifi, five minutes or less, you're mining Bitcoin. All you have to do is control it from the mobile app they provide, and then you receive over-the-air updates that add new coins and new features on a consistent basis. Kinda like how Tesla does over-the-air updates and updates the car software. Just you're updating your coin mine. Consumer mining made easy. That's right, go to CoinMine.com, tell them Pomp sent you, and thank me later. As many of you know, crypto investors store their digital assets on exchanges or in cold storage for long-term safekeeping. However, this strategy doesn't help them grow their investment holdings or build overall wealth. With the new BlockFi interest account, users can now securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest,

• 2:12Anthony Pompliano?

  paid monthly in cryptocurrency. 6% is an absurdly high rate. It's the best rate in the industry. I highly suggest you go check out blockfi.com/pomp. Again, that's blockfi.com/pomp to sign up and start earning crypto today. If you follow Bitcoin and crypto, you've probably heard of eToro. They're the world's number one social trading platform, and I love it. They've got more than 10 million other traders that love it, too. And guess what? They just launched in the United States. eToro offers access to the world's most popular cryptocurrencies, including Bitcoin, Ethereum, and others. With the smartest trading tools and the ability to connect with the best traders around the world, there's no better place to build your perfect portfolio. If you're new to Bitcoin and crypto, you can test the waters with their $100,000 virtual

• 2:57Anthony Pompliano?

  trading feature. But if you're more experienced, you can create custom technical charts and use eToro's social feeds to inform your trading decisions. They've got transparent fees, and so you never miss out. They also have an easy-to-use application available on iPhone, Android, or any web browser. You can get started today in just a few clicks at etoro.com. Again, that's etoro.com. Get VIP access to Bitcoin and crypto markets today.

• 3:22Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:49Anthony Pompliano?

  Alright guys, bang bang, I'm here with W, we are in San Francisco. Thanks so much for taking the time to do this.

• 3:56Speaker 02

  Thank you, Pom.

• 3:57Anthony Pompliano?

  Alright, I have come to learn about all things crypto in China from the expert.

• 4:04Anthony Pompliano?

  Let's start with your background, you had a life before Bitcoin and crypto, what did you do?

• 4:09Speaker 02

  Yeah, so I was born and raised back in China, and so I did my undergraduate in software engineering, and my dad is also the first generation computers, just like software engineers back in China. Yeah, so like when I was 20, so I moved to US in Pittsburgh, and I did my master in Carnegie Mellon in information system management. And afterwards, and I moved to Bay Area, and I spent about four years at eBay as an engineer, product manager. So that was about 2012, so I was doing this like marketplace competitive analysis, that's when I learned about Silk Road.

• 4:51Anthony Pompliano?

  Okay, so let me get this straight, so you were getting your masters at Carnegie Mellon, you move out to eBay, and while you're doing the marketplace analysis at eBay, you discover Silk Road?

• 5:01Speaker 02

  Yeah. It's competitive analysis because back then, like Silk Road is considered as a really bad, is really bad example of the marketplace on how like no regulation and no internal policy can actually, you know, facilitate all these like, just like criminal transaction, things like that. And so like that's when I learned about Silk Road and when I learned about Bitcoin. And so like, when the first thing I learned about Bitcoin because I realized how powerful this, you know, like native like, native internet currency can facilitate global liquidity. Because when I, so when I was doing my master, so like the private school tuition here is not cheap,

• 5:44Speaker 02

  and so my mom basically, and then so like, it's the same for all these I... Um oversee Chinese students, actually, so because we all have to get the money out. So from renminbi, so like to the local Chinese currency and then into US dollar, right?

• 5:59Anthony Pompliano?

  How did people normally do that?

• 6:01Speaker 02

  Yeah, and so uh like the tricky part is and then every individual can only transfer up to fifty thousand US dollar every year.

• 6:09Anthony Pompliano?

  Okay, so fifty thousand dollar limit to transfer out of China every year per individual.

• 6:13Speaker 02

  Exactly, so like there's a cap, right? And so like the cap right now is even more limited, but like back then was like fifty, so like back then was fifty uh uh fifty US dollar. And so basically fifty like fifty thousand dollar can only cover like tuition. And then so my mom has to ask the other relatives and then use their like.

• 6:34Anthony Pompliano?

  Use part of their, yeah, use part of their cap.

• 6:36Speaker 02

  Yeah, exactly. Yeah, so so like basically like the thing's becoming more and more difficult. And and and so like that's when I realized, holy shit. So if I can use Bitcoin actually to like transfer all this and just like pop this like uh value transfer and just like currency remittance and then so they'll be much easier and it's just not for me. And then it's basically for all these oversee Chinese. Um and yeah, so like that's how I got into crypto. And then the other very interesting like coincidence is um like one of the co-founders of uh Definity and like Dream Lab, like Tom Dean. And so he works at eBay as well, and then we were actually product manager like peers.

• 7:16Speaker 02

  And so like he taught a lot about crypto and we exchanged a lot of ideas about um just generically about native like internet economy, right? So because if you consider what is the core thing to build a good marketplace is the trust. It is all this a protocol, but it's all like top down, right? Traditionally, we have only three business model for consumer internet. Marketplace, advertising and subscription slash like virtual goods, right? And then all this actually requires like data monopoly, like which means you want to acquire more data and like close source. And then so like further on, so you will build better protocol and then better like like targeting mechanisms.

• 7:59Speaker 02

  Et cetera, uh, based on the monopoly of your data, right? And so that's when we talk a lot about what is open economy looks like.

• 8:09Anthony Pompliano?

  Uh huh.

• 8:10Speaker 02

  Uh, and and like fast forward and uh I quit eBay in twenty fifteen. And and then so I joined a local VC firm and like just a general VC firm here, so here in Bay Area. Um, so I cover anything uh marketplace, fintech and um like like like crypto used on the fintech. So because that twenty fourteen, twenty fifteen is everything about blockchain, but not Bitcoin, right? So it's all about this like enterprise blockchain service company and it's not different than so than like any SaaS business, right? So it's actually all SaaS, right? Uh, people building this like is.

• 8:48Anthony Pompliano?

  It's just it it's just a database.

• 8:50Speaker 02

  Management, yeah, so it's basically just like a database management technology, right? And and then so that's what we consider like blockchain back then and so had been looking into this space and and like actually like Stream Lab is my first and just the model company of Definity. So that was my first investment as like a VC.

• 9:09Anthony Pompliano?

  Okay.

• 9:10Speaker 02

  So because that's like Tom's company and so I know Tom from my eBay time. And then so he quit before I did and and then so when I quit eBay and then joined a VC firm and like his company is my first investment and then so it turned out to be a blockchain slash like crypto company.

• 9:28Anthony Pompliano?

  Yeah, absolutely. And and so when you first saw Bitcoin, you saw the use case with uh getting money out of China and kind of the the lack of censorship, et cetera. That was interesting.

• 9:38Speaker 02

  So it is not about censorship, it's just about efficiency.

• 9:41Anthony Pompliano?

  Efficiency, okay.

• 9:42Speaker 02

  So it's just efficiency and it's low cost and it's the instant and and so it's not about censorship because that we are still be able to get money out, so it's just a lot of hassle and a lot of overhead and it just doesn't. So it just doesn't like.

• 9:55Anthony Pompliano?

  It's harder, yeah, yeah. And and when you see that uh and you see Silk Road, was it something internally at eBay you guys like, wow, Silk Road is really interesting and like that is uh gonna eventually become a competitor to eBay or was it the exact opposite where you're like?

• 10:08Speaker 02

  It's like the exact opposite.

• 10:09Anthony Pompliano?

  That's exactly what is wrong with all of it.

• 10:11Speaker 02

  Yeah, yeah, right. Exactly, so it's such a bad example, so we consider that as a really bad like case study for how things can go wrong. Uh, and then so it eventually, you know, like like like. When run as well and but but but I think regardless of like what the upper layer application is. And like the underlying like the underlying currency and just like the median like the median of change. So like it's actually like so it's actually like what excite me the most. So that is Bitcoin and then what and then any other native cryptocurrency out there.

• 10:48Anthony Pompliano?

  Got it.

• 10:49Speaker 02

  And then like fast forward and um uh so I remember that was in twenty sixteen like like like the second half of like twenty sixteen. And and then um uh like Zcash, right? And and so I so I had been looking into Zcash for so for like a long time. And uh I remember like I think it's September or like October twenty sixteen.

• 11:09Anthony Pompliano?

  Okay.

• 11:10Speaker 02

  And so that's when they launched and and then um. So I brought this up to my former firm saying like we should invest in this. Because like what really excites me about Zcash is like before Zcash and there are so many other colored coins, right? And like peercoin, namecoin, whatever. And those are all feature specific coin, right? Like Zcash is actually the first like uh feature agnostic but orthogonal enough comparing with Bitcoin.

• 11:38Anthony Pompliano?

  Mm hmm.

• 11:38Speaker 02

  Because Bitcoins do has this fungibility problem, um etcetera. And and like Zcash is definitely one of a kind.

• 11:46Anthony Pompliano?

  Yep.

• 11:46Speaker 02

  And so I brought this up to my firm and so there's a concern about like regulatory etcetera etcetera.

• 11:52Anthony Pompliano?

  Privacy.

• 11:53Speaker 02

  Yeah, so so so we we didn't end up investing, but I but but like because of that. And um so becoming really good friend with like ZQ and then so like that's also when I met like Eric.

• 12:04Anthony Pompliano?

  Yep.

• 12:04Speaker 02

  Uh so who is my current co-founder of Primitive Ventures and.

• 12:08Anthony Pompliano?

  So to so today you and uh Eric are co-founders of Primitive. What is Primitive and kind of what is your guys focus?

• 12:14Speaker 02

  Yeah, sure. Um so Primitive is actually not a typical fund or VC. We are a um global crypto asset holding company and we basically do everything out of our own balance sheet. Uh so like that's why it makes us extremely flexible and we can do direct investment and we can do mining operation. We can uh basically incubate other projects or like company and like speeding out and we don't have. Um, like type of asset like restriction on like what we can invest on. And so you can consider us as a um, just like all in one platform. And yeah, so like that is primitive. And we have a office here in San Francisco, in Boston.

• 12:58Speaker 02

  Uh, like Eric spends like most of his time in like East Coast Boston and like NYC. And so I spend um, half of my time in US and then like the other half in um, Asia. Um, yeah, and and and so we also have our in-house engineers and like doing like like different research and and trying out different new ideas. And like Sir Ferguson, so you might have heard of the game um, Sat- uh Satoshi Treasure is what's considered as a ready play one, like crypto version, like ready play one. It's a global scale uh, like crypto asset treasure hunt.

• 13:32Anthony Pompliano?

  Yeah, so you guys created Satoshi Treasure, which literally is the idea that there's keys hidden all over the world. And then you guys on a periodic basis release uh.

• 13:41Speaker 02

  Like the puzzle.

• 13:42Anthony Pompliano?

  Like, yeah, like basically hints. People can take those hints and try to figure out where the keys are. And the part to me about Satoshi Treasure that's so interesting is I don't have to play by myself. Like I can actually team up with you because you have a key, I have one key, right? Then we go get five other people and and we build teams.

• 13:56Speaker 02

  Yeah.

• 13:57Anthony Pompliano?

  And then now you're playing this global treasure hunt that is specifically built on teamwork and collaboration.

• 14:02Speaker 02

  Yeah.

• 14:03Anthony Pompliano?

  And then if our team ends up unlocking, uh, it we get access to how much Bitcoin?

• 14:07Speaker 02

  Uh, so it's basically like a million dollar worth of Bitcoin.

• 14:11Anthony Pompliano?

  Okay.

• 14:11Speaker 02

  And then also we got another million from my Tito's Foundation.

• 14:15Anthony Pompliano?

  Okay, so there's two million dollars worth of Bitcoin that's uh up for stake. How many keys do I need to actually get uh the win?

• 14:24Speaker 02

  Yeah, so like this is actually the beauty of like cryptocurrency. And um, when we have this at private key and it's not just a single key. And so we use this Shami's secret sharing scheme and then basically split, so basically split this single private key. Into a thousand key shards.

• 14:42Anthony Pompliano?

  Okay, so there's a thousand shards of this one private key.

• 14:45Speaker 02

  Yep, and then the other thing is in order to win the whole pot. And then so you will need to get up to four hundred keys.

• 14:52Anthony Pompliano?

  Okay, so I need four hundred of the thousand in order to be able to get the pot.

• 14:55Speaker 02

  Yep.

• 14:55Anthony Pompliano?

  How many does the most successful team have so far?

• 14:59Speaker 02

  Um, uh, so so far we have released um, seven or eight. And so like seven or eight like just puzzles. And then so some so some so like there so there are also like two different kinds of the keys. One is the generic key, like basically you and I can get the same key.

• 15:15Anthony Pompliano?

  Mm hmm.

• 15:16Speaker 02

  And then so it's basically like uh duplicable, right? And then the other one, so the other type gonna be the unique key.

• 15:23Anthony Pompliano?

  Mm hmm, and basically if I have one unique key, you can't get it.

• 15:25Speaker 02

  Yep, yep, yep, right. And and and so uh I didn't look into the recent stats and but I think like most of the teams right now, they're pretty much on parity, yeah, and and so they all got this. Uh, you know, like so so they all got this, so just a generic keys out there. Uh, and uh and then there are different team formation across the world. And because this actually require like global collaboration, right? Because sometimes like the key can be in Tokyo, can be in Beijing, can be in, you know, San Francisco. Um, and um, and then like, like the key itself is actually a QR code.

• 16:03Anthony Pompliano?

  Mm hmm.

• 16:04Speaker 02

  Like the interesting about a QR code is it can be hidden into anywhere. It's not just physical place. It can be hidden in website, it can be hidden into uh, you know, like the background of a music video, like things like that. Um, so like there's a lot of like different medium that we can actually hide the key shard.

• 16:23Anthony Pompliano?

  Got it, okay. And and so as you continue, what is the goal of the game, right? Obviously, there's somebody's gonna win this two million dollars with the Bitcoin, but like, why did you guys start Satoshi Treasure?

• 16:33Speaker 02

  So like, so because when we start like Satoshi Treasure. Like, so because like, we have been thinking like, what can drive like massive adoption, right? Like, the current key feature of crypto, we have to admit that, like, even though we have been saying, okay, it's that stubborn resistance, whatever, blah, blah, blah, but we have to admit that the current most active users of crypto are traders.

• 16:57Anthony Pompliano?

  Yeah, the the the biggest use case right now is speculation and trading.

• 17:01Speaker 02

  Yeah, so like exchanges have most of the users, like, like exchanges have the best DAU, right? And but like, if we even look at exchanges, uh, like the biggest exchanges, like the retail exchanges out there, like Binance, and then so they might have, um, like, so their DAU probably anywhere from like fifty thousand to like, like, to a hundred thou- so to a hundred thousand, and like, so during like current ma- market climate. Uh, and so most of the others are on the lower end of, let's say, like fifty thousand, right? And and so it's tiny, so it's a tiny, small DAU, like this scale of like used to be, it's like, so just comparing with any internet scale like product, right?

• 17:42Speaker 02

  And then so when we think about what can drive like mass adoption, and then we think about what are the young people like to do? And then so what can actually like unite the auto community, right? And, uh, and and so if we think about the current crypto games out there, they're actually not crypto game, so they're just.

• 18:00Anthony Pompliano?

  They're games that have crypto incorporated as a payment.

• 18:03Speaker 02

  Or whatever, right? So it's not crypto native, right? And, uh, and then so that's why we think about what can be crypto native, and then so we can, so like, what can a specific like, like gamification mechanism is fun, is playful, and then can also educate users like to learn about crypto. If you want to play the treasure hunt, so so if you want to play such a treasure, you have to learn like what is the key, what is private key, what is public key, and then how to use wallet? And then, like, most important thing is proof of work, right? You have to spend actual work like to get a key. Like we human, like, like, we only like care about our own investment.

• 18:44Anthony Pompliano?

  Yep.

• 18:44Speaker 02

  Our time, effort, money, whatever.

• 18:46Anthony Pompliano?

  Yep.

• 18:47Speaker 02

  So when you have your investment and actual work.

• 18:50Anthony Pompliano?

  Mm hmm.

• 18:50Speaker 02

  Into a specific thing and when you unlock the achievement. And then like the feeling will be completely different than any random airdrop.

• 18:57Anthony Pompliano?

  Yep, yeah, yeah. Yeah, it it's the whole adage that like the things that you work for, you treasure the most. Right? And so if I just give you something for free, then it's just, well, it had zero cost basis for me. So if it works or not, who cares?

• 19:12Speaker 02

  There's no sunk cost, like, there's no opportunity cost. Basically, this is a treasure. If you want to play it, and then so people all want to win the prize because it's that so it's that significant enough of the money. And but that require proof of work.

• 19:25Anthony Pompliano?

  Mm hmm.

• 19:26Speaker 02

  And also, what's interesting about this is we also mimic the difficulty adjustment.

• 19:30Anthony Pompliano?

  Mm hmm.

• 19:31Speaker 02

  Because like, the more people played about it, and then the more competitive it will be. And then the more difficult like the puzzle gonna be.

• 19:39Anthony Pompliano?

  Mm hmm.

• 19:39Speaker 02

  And then so this like difficulty adjustment is also what we mimic from the actual proof of work. Uh consensus algorithm.

• 19:45Anthony Pompliano?

  Mm hmm.

• 19:46Speaker 02

  Uh, um, and then also because it's like a, like a massive, like global collaboration scheme, right? And then so. That is also what like Bitcoin like offers us, right?

• 19:55Anthony Pompliano?

  Yeah.

• 19:56Speaker 02

  Like, it's so it's like a trustless. So it's a, oh, so like talking about this, like the trustless element of this game is also so interesting. Uh, because I previously, uh, if I want to join your team, right? And then so you also want to make sure, like, say for instance, uh, like, once we get to the point that. Okay, a team have like three hundred ninety eight keys.

• 20:19Anthony Pompliano?

  Mm hmm.

• 20:19Speaker 02

  And I have like two or one like unique key. And then so we might want to like joining forces and then like to win the pot, right? And then but the thing is that, how? Like, because I cannot show you the QR code, because you can easily just duplicate that, right? And then so there will be an interesting like ZK layer on top of that. And then how we can, so how I can prove to you that I have the key without reviewing the actual QR code? So that's a very interesting like cryptography problem that we are currently working on with many other researchers out there and like engineers and. And then like.

• 20:56Anthony Pompliano?

  Well, it's the whole idea that like gaming can drive innovation the same way that like say race cars drive innovation in the automobile industry. Right? It's the the competition is something where everyone is trying to win something. There's a prize, right? And so you're incentivizing innovation through competition.

• 21:12Speaker 02

  Yep.

• 21:12Anthony Pompliano?

  Same thing with gaming.

• 21:13Speaker 02

  Yeah. And then like also like the gaming itself has drive a lot of people from ARG community, just alternative reality community. And then people who have played Pokemon Go, people who have played like Ingrass, like just launched by Nandit, right? And and um and also we are currently collaborating with many universities out there and just a college kids like. So they love this type of like gameplay and and then so so they're so they are super into crypto. And then also, you know, scavenger hunt is something that had been doing like since like very young. And so they're very familiar with uh like the rules and and just like uh like the policy out there. So um so I think it's a perfect like hybrid of both being like crypto native.

• 21:58Speaker 02

  And as well as um just like uh massively and just like like average people can easy get on board of this.

• 22:06Anthony Pompliano?

  Yep. Uh let's talk Asia and China. Um you spend a good portion in China. Uh you were born in China.

• 22:14Speaker 02

  Yep.

• 22:14Anthony Pompliano?

  Um you speak Chinese, which is helpful.

• 22:17Speaker 02

  Both Mandarin and Cantonese.

• 22:19Anthony Pompliano?

  Okay, so you do speak both.

• 22:21Speaker 02

  Yeah.

• 22:21Anthony Pompliano?

  Um what is going on in China with Bitcoin and crypto, right? We just saw that President obviously had a bunch of uh pretty bullish statements.

• 22:29Speaker 02

  Yep.

• 22:29Anthony Pompliano?

  But from your perspective, what's going on there?

• 22:32Speaker 02

  Yep. Okay, uh so first of all, and I think it might be helpful to give just a macro background.

• 22:37Anthony Pompliano?

  Okay.

• 22:38Speaker 02

  Uh so like. China has been on this ten percent GDP growth for like last thirty years and like which means the living standard double every seven years. Which is insane.

• 22:47Anthony Pompliano?

  Pretty, pretty credible.

• 22:48Speaker 02

  Yeah, yeah, right. It's like a miracle. And uh and also like Chinese governments, like they're really good at like top-down planning. And they're really good at uh infrastructure building, right? So building railway, building like high-speed roads and building all these skyscrapers, it's so etc. And like the Chinese economy has been developing from like from early days on like this tech cell, low-end manufacturing industry. And then now probably more into uh consumer electronics. And then but what's the next, right? Because like the economic growth has been slowing down. And like the government, so they actually need to have another top-down planning on what is the next theme to focus on.

• 23:32Speaker 02

  And it will can further drive this economic engine, right? So I think the emphasis and promotion of blockchain is actually no different than like AI and like five G. So AI and five G has been a huge emphasis for the last like five years, right? And that's also what's considered as a technological infrastructure.

• 23:52Anthony Pompliano?

  Yeah, basically they're doing the top-down plan that you're describing where they're saying, okay, the future is going to look different than the past. We need to be the leaders in certain categories of technology or or uh aspects of development. One of those is AI, we want to be a leader. One of them is five G, we want to be a leader. Another one is going to be blockchain, we want to be a leader, right? And they're doing it uh in many cases, AI and five G, they've done it before most other countries have either recognize this important or two made a national commitment to it. And blockchain, it looks like same thing's happening where they're realizing early, this is gonna be important, let's make a national commitment. And because of the structure of the country when it comes top-down, then everyone mobilizes to make it reality, right?

• 24:34Speaker 02

  Exactly. Um so like if you look at how fast that AI and five G has been developed in like local China. Yeah, and then so you won't be surprised in about. I would say three to five years and then a lot of things gonna be on this blockchain rail and like blockchain infrastructure. Um, so I think like when so for most of the western audience here, just like. This is a very typical China thing to be honest, and also it's not the first time that presidency uh publicly promote blockchain.

• 25:04Anthony Pompliano?

  Okay, when was the first time?

• 25:06Speaker 02

  The first time, okay, the first time is at a uh science specific conference, it's like a nationwide science. It's so it's like.

• 25:13Anthony Pompliano?

  Like a science conference.

• 25:14Speaker 02

  Yeah, so it so um so I remember it was back in twenty seventeen or like twenty eighteen. So like the Chinese government has always been pro blockchain.

• 25:23Anthony Pompliano?

  Mm hmm.

• 25:24Speaker 02

  So like this time, uh so like this time is definitely different because it elevated priority.

• 25:29Anthony Pompliano?

  Mm hmm.

• 25:30Speaker 02

  Of watching as a um so as a neutral technology.

• 25:35Anthony Pompliano?

  Mm hmm.

• 25:35Speaker 02

  To the same level of AI and um uh five and so to AI and yeah.

• 25:40Anthony Pompliano?

  So basically what it what uh the president said was uh one, it's important, two, wanna be a national leader, three, the idea that it's neutral, right? It's not good or bad, it's just technology.

• 25:48Speaker 02

  Yeah, it's like the neutral technology.

• 25:50Anthony Pompliano?

  Yep, and and really what I extrapolate out from AI, five G, blockchain, etcetera, that emphasis of top down is. They believe that China can become a greater superpower in the world if they are leaders in these technologies. Because it'll help drive innovation, it'll drive economic activity, it'll drive GDP and and you get all these benefits from. Being a leader in that space, right? Is that fair to say?

• 26:13Speaker 02

  Yeah, so I think they're like, so if we think about what is like the real intent, right? And so there will be two fold uh uh specifically about blockchain. So like the like the domestic like so it's that domestically and um so domestically in China has been on this. Um huge problem of shadow banking business.

• 26:33Anthony Pompliano?

  Mm hmm.

• 26:34Speaker 02

  And so.

• 26:34Anthony Pompliano?

  Explain that problem, the shadow banking.

• 26:36Speaker 02

  So the shadow banking is um right now over ten trillion of banking asset. It's actually outside the visibility of like PBOC.

• 26:45Anthony Pompliano?

  Okay, so so the People's Bank of China has visibility to majority of the assets in China, but there's ten trillion dollars?

• 26:52Speaker 02

  It's at ten trillion, basically.

• 26:53Anthony Pompliano?

  Outside of their purview.

• 26:54Speaker 02

  Yeah, so so so like which means that thirty percent of the M two money supply, uh so it's that thirty percent, close to thirty percent of the M two monetary supply.

• 27:04Anthony Pompliano?

  Mm hmm.

• 27:04Speaker 02

  Is from this.

• 27:05Anthony Pompliano?

  Thirty percent of M two monetary supply is outside of the PBOC's purview. So where if it's outside of the PBOC's purview, where is it?

• 27:13Speaker 02

  Um it's all from this uh.

• 27:14Anthony Pompliano?

  Is this like private banks or?

• 27:16Speaker 02

  No, so so it's like a a lot of this like financial institution or just like peer to peer lending company. And like uh micro lending company and then even the other wealth management companies selling your just like. Selling individual high yield products and then so these are all shadow banking.

• 27:34Anthony Pompliano?

  Mm hmm.

• 27:34Speaker 02

  Yeah, and because it will actually inflate the empty monetary supply.

• 27:39Anthony Pompliano?

  Yep.

• 27:39Speaker 02

  And all these are outside like just like the control of like P P O C, right? And so that's why like the blockchain, like the biggest purpose, like the most in so like the most important task. Uh of this blockchain promotion, uh in my personal opinion, is actually mentally, financially, structurally. Prepare for the upcoming digital renminbi and that's the D C P E thing.

• 28:03Anthony Pompliano?

  So so let's talk about this. So uh well, before we talk about D C E P, let's talk about China and Bitcoin, right? So uh China has been very pro blockchain, obviously, uh president's comments, etc. Bitcoin has not been so well accepted, right? There's been uh at least from the western point of view, there's been uh banning of Bitcoin uh trading, there's been banning of exchanges.

• 28:25Speaker 02

  Yeah.

• 28:25Anthony Pompliano?

  Uh there's even been reports that there's been banning of I C Os, right? All this kind of stuff. What's actually going on? Like, how does the Chinese government look at Bitcoin specifically?

• 28:34Speaker 02

  Yeah, so I think uh so like first of all, there's no banning on Bitcoin like per se.

• 28:40Anthony Pompliano?

  Mm hmm.

• 28:41Speaker 02

  Like, I can still hold Bitcoin.

• 28:43Anthony Pompliano?

  Yep.

• 28:43Speaker 02

  So I can occasionally buy Bitcoin like through like P O to P O um through P O to P O T C. And uh and then it's kind of like a gray area, like if I trade heavily and then what is that? Like, what does that mean? Uh like what has been banned is all this facilitator and then liquidity platform of cryptocurrency. Not specific to so not specific to Bitcoin. And also what has been banned like officially is the privately issued token, basically is I C O.

• 29:11Anthony Pompliano?

  Okay, so they banned I C Os and they banned the centralized exchanges?

• 29:16Speaker 02

  Uh, yes.

• 29:17Anthony Pompliano?

  Okay.

• 29:17Speaker 02

  So, okay, the ban is um whenever there's like a top down policy like that. And the private sector will always have way to navigate through, okay. So even though, so, so I think that that's why a lot of like westerner like don't understand how to do business like back in China. So there's a lot of room to be flexible and then to be just, you know, like to to be sneaky around it.

• 29:41Anthony Pompliano?

  There's a separation between the policy and the enforcement.

• 29:46Speaker 02

  Yeah, exactly.

• 29:47Anthony Pompliano?

  Is basically the the difference.

• 29:48Speaker 02

  Yeah.

• 29:48Anthony Pompliano?

  And the uh it's very similar to here in the US, right? The the example I I used recently was somebody from China was uh they were explaining to me the policy is set. But it's not always enforced in certain jurisdictions enforce it, some don't. And so you gotta kind of understand the the local politics, if you will. That's very similar to here in the US, take marijuana, for example.

• 30:06Speaker 02

  Mm hmm.

• 30:06Anthony Pompliano?

  In some country, in some uh counties or states.

• 30:09Speaker 02

  Uh huh.

• 30:09Anthony Pompliano?

  It is illegal at the federal level.

• 30:11Speaker 02

  Yeah.

• 30:11Anthony Pompliano?

  And they heavily enforce those laws. So they will arrest people for minor possession, etc.

• 30:15Speaker 02

  Yeah.

• 30:16Anthony Pompliano?

  But then there are some places uh at the state level, like uh Colorado, for example, but has said, no, we are going to legalize this at the state level. And not enforce the federal law.

• 30:24Speaker 02

  So I think there's a fundamental difference here is that US government or like US the regulation has always this a possibility between the federal level and like the state level, right? When they, so just when it comes to China, like everything is actually federal level.

• 30:39Anthony Pompliano?

  Yeah, everything is the federal.

• 30:40Speaker 02

  So like this, like at the state level, ideally, so they should follow the policy and they should follow the regulation. But the thing is that China, so back in China, things are managed by people, but not by law.

• 30:52Anthony Pompliano?

  Mm hmm.

• 30:53Speaker 02

  There's always like people over the law.

• 30:55Anthony Pompliano?

  Mm hmm.

• 30:55Speaker 02

  And there's always people over the like the regulation. And even the regulation itself is not definite regulation. So like um um like nothing is that deterministic, right? And then so the regulation itself is kind of like premature, like many of them. So there's always this loophole, then.

• 31:14Speaker 02

  Like you can try, right?

• 31:15Anthony Pompliano?

  Um hum.

• 31:16Speaker 02

  Say for instance, um uh like like like the ban on centralized exchanges. But Hobi and OK and Gate I O and they're still happily operating in like mainly China. And and even growing really fast and then so then what, right?

• 31:30Anthony Pompliano?

  Um hum.

• 31:30Speaker 02

  Um so there's a lot of like reason behind it, like say for instance, like right after the twenty seventeen like ICO slash exchange ban. And Hobi OK and then all the other remaining exchanges like who didn't shut down. So they all reincorporated as like a foreign entity, but the operating entity are still back in China, right? And then from that perspective and then plus they have good relationship with the regulator and they have all this like. You know, cover up and like so and then local endorsement, things like that. So they can still grow and like operate.

• 32:03Anthony Pompliano?

  Um hum.

• 32:04Speaker 02

  And so like that's why doing business in China, you have to manage a lot of uncertainty.

• 32:10Anthony Pompliano?

  Um hum.

• 32:11Speaker 02

  Because even the regulation like things should be set, like it can be fluid.

• 32:16Anthony Pompliano?

  Um hum.

• 32:17Speaker 02

  Yeah, and then there's always this like room pretty fuzzy thing and like.

• 32:23Anthony Pompliano?

  Okay, so so that's Bitcoin specifically. What is the Chinese um kind of thoughts around? One of the big knocks against Bitcoin, right, from detractors is that uh the Chinese control all of the mining, right? Like Bitcoin's controlled by China, um and I think a lot of that has to do with the mining pools, less so from mining itself.

• 32:41Speaker 02

  Like uh so I would say mining itself as well, so both pool and mining.

• 32:45Anthony Pompliano?

  Okay.

• 32:46Speaker 02

  Like the local farms, basically like where the machine like.

• 32:49Anthony Pompliano?

  Yep.

• 32:49Speaker 02

  So Chinese miners, like basically like the hash power, like what like like you said, who the hash power belongs to.

• 32:56Anthony Pompliano?

  Yep.

• 32:56Speaker 02

  And like conservatively, so conservatively, I would say sixty, so sixty to seventy percent of the hash power. Are belongs to Chinese.

• 33:05Anthony Pompliano?

  People in Chinese, yeah, in China.

• 33:07Speaker 02

  Yeah.

• 33:07Anthony Pompliano?

  Got it.

• 33:09Anthony Pompliano?

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• 35:01Anthony Pompliano?

  Okay, and so where does this go, right? If the Chinese government is saying, um, we want to embrace blockchain technology. We're not so excited about the Bitcoin thing, but it's there. And now they're talking about DCEP, which is the Digital Currency Electronic Payment System. Or a digital renminbi. Like, talk a little bit about, from your perspective, what they're doing, why they're doing it, and kind of how this is gonna get rolled out.

• 35:29Speaker 02

  Yeah, uh, yeah, so let, before we get on to that, so one thing I want to add about the Bitcoin thing is, uh, right now, local Chinese can still buy Bitcoin easily. Uh, because China has a really good, like, Bitcoin supply, right? Like, seventy percent of the Bitcoin production is at Bank China. So, uh, local Chinese have no problem buying Bitcoin. They don't even go through, like, local, uh, so just like, local Bitcoin, so.

• 35:53Anthony Pompliano?

  Where do they buy it?

• 35:54Speaker 02

  So all this OTC. So, so, so there's a very.

• 35:58Anthony Pompliano?

  There's like somebody in their local town who's doing OTC transactions.

• 36:01Speaker 02

  Yeah, so it's a super established, like, OTC network.

• 36:04Anthony Pompliano?

  Like over WeChat or Weibo or something?

• 36:06Speaker 02

  So, so it's all over, um, so, uh, so basically, because China is already cashless, so it's very, so it's very easy to transact any, like, cash equivalent, like, like, just like deals, right? And, and so, uh, Huobi, OK, and Gate, all these, like, local, so all the local exchanges, they have this, uh, centralized portal for, like, information matchmaking. Uh, so I can always, like, go up there and then, like, check, like, who's, like, selling or buying Bitcoin.

• 36:35Anthony Pompliano?

  Got it.

• 36:36Speaker 02

  And then we can just connect, like, over WeChat and whatever, and then, uh, transact the fiat on-ran over WeChat or, like, even Bankingwire. And then, so that's not a problem. So the Bitcoin local liquidity is extremely good back in China. So there's no problem of, like, Chinese cannot get on to Bitcoin.

• 36:53Anthony Pompliano?

  Okay.

• 36:53Speaker 02

  Okay, so that is actually a prerequisite. For the digital renminbi.

• 36:58Anthony Pompliano?

  Yep.

• 36:59Speaker 02

  Because if you think about if you want to run any digital like US dollar here in US, people are still holding this US dollar bill, right? So there's still like like a ton of transaction is happening on physical dollar.

• 37:09Anthony Pompliano?

  The Chinese population has been uh trained and has created a habit around digital money already. Right? They're used to digital.

• 37:17Speaker 02

  Yeah.

• 37:17Anthony Pompliano?

  Currency, whether it's in on a basis of blockchain or not.

• 37:20Speaker 02

  Yeah.

• 37:20Anthony Pompliano?

  In the US, although ninety two percent of money supply is quote unquote digital, it's much more.

• 37:25Speaker 02

  Credit card.

• 37:26Anthony Pompliano?

  Yeah, it's much more credit based and it's much more um based on multi-day settlement of money. Whereas in China, that's not the case.

• 37:34Speaker 02

  Yeah, it's just instant, right? So it's like, like, I don't bring any cost with me, any cash with me. I just bring my phone.

• 37:40Anthony Pompliano?

  Your phone. Yeah, you don't need to bring cards. You just literally your phone has everything in it.

• 37:44Speaker 02

  Yeah, and then it like and then right now, a lot of most of this just like like just like cash has been obsolete, right? So like cash has been awesome. So like cash has been obsolete for like three, five years and and and then so I think that is actually what. Like pave the path for this digital renminbi. And then uh and then like PBOs understand, okay, it's just a change of the backend. It's just change of the monetary supply. Like previously, we are like printing out the physical like renminbi bill.

• 38:15Anthony Pompliano?

  Yep.

• 38:16Speaker 02

  And then sending shipping to physically shipping to all the commercial banks. And then all the commercial banks then leveraged this like fractional reserve, right? So they leveraged this up. And then using the cash as a reserve, like just like like uh like at the local level. And then but like right now, we can basically switch the so we can basically just flip the entire thing. Uh onto this blockchain infrastructure and make anything as M zero. Because it's back to the full reserve system. And then so that's how, like I said, like like that's how they can fight the shadow banking business because everything gonna be M zero. They have the full visibility on the entire economic activity. And then the other thing is, they can actually also program monetary policy.

• 39:02Speaker 02

  Let's think about this, like if I want to cool down the version market, like which is it so like which is in such a huge bubble back in China right now.

• 39:10Anthony Pompliano?

  Yep.

• 39:10Speaker 02

  If I so if I want to cool it down, I simply just subtract like ten trillion digital renminbi.

• 39:17Anthony Pompliano?

  Mm hmm.

• 39:18Speaker 02

  Flowing into that market, right?

• 39:20Anthony Pompliano?

  Mm hmm.

• 39:20Speaker 02

  So all this monetary policy like adjustment does not have to become from this clumsy discussion or like implementation and then from central bank indirectly influence the commercial bank, they can do it just over a button, right?

• 39:37Anthony Pompliano?

  Yep, so basically what you're talking about is they create a much more uh controllable um kind of um uh transparent system, right? So they have transparency.

• 39:47Speaker 02

  It's that program, so it's programmable monetary policy and like and like fiscal policy as well.

• 39:53Anthony Pompliano?

  Are you worried as you move towards that world, uh or we all do, uh that the Chinese government can increase surveillance?

• 40:01Speaker 02

  Oh, so like that is that is not a worry, like that's like a fact, right?

• 40:05Anthony Pompliano?

  Yeah, like that's the point of this.

• 40:06Speaker 02

  Like, like, yeah, so because like when it comes to digital fiat and there's no anonymity, so like the anonymity level is it it it's it's just the same as the credit card. Right? It's the same as a credit card, it's the same as like WeChat Pay and Alipay and and then so like that's why the digital renminbi is not cash, cash, like cash has the best, like the physical cash has the best anonymity, right? So it has the full privacy and.

• 40:32Anthony Pompliano?

  And and it's fully decentralized, right?

• 40:34Speaker 02

  And it's fully decentralized.

• 40:35Anthony Pompliano?

  If I if I hand you cash, nobody knows who I am, nobody knows who you are, no one can stop us, right?

• 40:39Speaker 02

  Exactly, so like, that's just the fact that there's no financial privacy, so like.

• 40:46Anthony Pompliano?

  Yeah, when you have the electronic financial system or a digital financial system, uh you decrease the anonymity to zero, right? And there's fully understand who's transacting with who, how much, where, what they're buying, etcetera, so you so you have a full surveillance system.

• 41:03Speaker 02

  Yeah, so like the centralized platform, they always have the full visibility of like so of like what's going on and so everything gonna be held on the private cloud of the P P O C.

• 41:13Anthony Pompliano?

  Mm-hmm.

• 41:14Speaker 02

  Okay, so like it is not cryptocurrency, it is just.

• 41:19Anthony Pompliano?

  It's just a digital currency in a centralized database. And it it looks and feels from a user experience standpoint, very similar to a digital currency. But it's not a cryptocurrency in that it's not uh permissionless, it's not open. It there's no level of uh privacy, it can be censored, etc.

• 41:37Speaker 02

  Yeah, and so like I think a good analogy here is I had so I I so I have been using this analogy is um. So have you watched the so you must watch the movie The Matrix, Matrix.

• 41:48Anthony Pompliano?

  Oh, Matrix, yeah, yeah, yeah.

• 41:49Speaker 02

  So like the digital fiat or any fiat coin is basically like the Agent Smith there.

• 41:55Anthony Pompliano?

  Okay, Agent Smith, yep.

• 41:56Speaker 02

  So it looks like human, so it looks like cryptocurrency.

• 41:59Anthony Pompliano?

  Yep.

• 42:00Speaker 02

  But actually it's not cryptocurrency, so it's just the opposite.

• 42:03Anthony Pompliano?

  Yeah, yeah, yeah. Basically, it's the same user experience, it's it's basically the Chinese government is saying, yes, this user experience is the future, yes, people want to use this, yes, it is more frictionless. Uh and people will ultimately use it. But our back end is going to be something that is beneficial for the PBOC and for the Chinese government.

• 42:20Speaker 02

  Yep.

• 42:20Anthony Pompliano?

  Not beneficial for the people.

• 42:22Speaker 02

  Uh well, so I would argue that, right, and um what is good for the people?

• 42:26Anthony Pompliano?

  Okay.

• 42:27Speaker 02

  Like what is good for people, like most like ninety-nine percent of the average Chinese citizen. And then what I care about is can I maintain my living standard, like can I further make my living standard better? And like what's good for people is like so they are prone to things that makes their life easier and more convenient. Um and also like if PBOC can can so can put it off and then fight shadow banking. And then so that's actually good for the people. So because.

• 42:55Anthony Pompliano?

  Why is it good if the government can fight the shadow banking?

• 42:58Speaker 02

  Yeah, because shadow banking right now like like is a huge problem, a lot of people go like just like go bankrupt. Because of like shadow banking, like say for instance, so so they borrow money from all these like very. Uh like extremely high interest like lending platform and then so so they basically went uh bankrupt. And then so and then many of them are in this like like death like spiral of so. Of this like very immature just like credit facility, right? Uh and I think the shadow banking is definitely a problem of the entire society and then so will cause a lot of like problem down the road. So if P P O C can fight the shadow banking, and I think it's definitely good for the people

• 43:41Speaker 02

  because shadow banking has been a huge, just a, just a draw and like black hole of like sucking in a lot of um, just a liquid cash and just like cash reserve of the average um, so of the average um, Chinese citizen. And the other thing is from like global perspective and uh, as we all know that Chinese government is very into this one belt one role like initiative and there's

• 44:07Anthony Pompliano?

  Explain the initiative.

• 44:08Speaker 02

  Yeah, so one belt one role means there's a Asian, so there's an Asian um, transportation like soup role. So that's literally like, like the ancient soup role um, when the uh, when like China doing business with many other Middle East countries and like Turkey, uh, like Pakistan, et cetera, and there's about sixteen member countries along this ancient soup role. And so like, so that's why what the one belt one role initiative is, uh, the Chinese government wants to use its own experience like to help the other develop, uh, so to help the other developing countries, uh, helping them on infrastructure projects, helping them on this financial infrastructure potentially.

• 44:51Speaker 02

  And if you right now go to countries in like Africa, in like even like more deep like Zeferson, and you will see a lot of this like um, Chinese, so Chinese state-owned company doing their uh, local infrastructure projects there. And so like, there's a lot of like Chinese workers that working and living there. And even in some area, uh, renminbi has better liquidity than many other global currencies out there. So I think from global perspective, the digital renminbi can further enhance uh, like the, basically like the demand of like renminbi as like a, so uh, further enhance the uh, the demand of uh, renminbi as a global currency.

• 45:35Speaker 02

  And then so it will also help the Chinese people because they don't have to do all this like very clumsy like foreign exchange and and just say uh uh uh just like switch money to US dollar and then uh use the US dollar in like their um uh uh local just like local states that where like they might be um uh working in like a foreign country.

• 45:58Anthony Pompliano?

  Mm-hmm.

• 45:59Speaker 02

  So I think like they will further help the local liquidity especially uh so especially along this one about one role uh membership com- uh so membership uh.

• 46:10Anthony Pompliano?

  Countries.

• 46:10Speaker 02

  Countries, um so that will also be good for the people as well.

• 46:14Anthony Pompliano?

  For sure. And so do you think that the digital renminbi fits in with the kind of the social credit system? Like, how do you see the digital currency with the social credit system?

• 46:23Speaker 02

  Yeah, I think the social credit system is one thing that the western community has been, you know, like overrated or just.

• 46:31Anthony Pompliano?

  Okay, so the western community thinks it's way more important than it really is.

• 46:36Speaker 02

  So it's not, so it's not important is the social credit system, um so first of all, like China right now don't even have a good like very basic financial credit system.

• 46:49Anthony Pompliano?

  Okay, so the financial credit system isn't even that good in China to start with.

• 46:52Speaker 02

  Yeah, yeah, so like that's why there's this huge like shadow banking business that because like there's no good enough like credit facility from just like so from standard commercial banks, right?

• 47:02Anthony Pompliano?

  Okay.

• 47:03Speaker 02

  Yeah, a- and so like the so the credit data is very scattered around.

• 47:08Anthony Pompliano?

  Okay.

• 47:08Speaker 02

  Uh it's on so it's with Alibaba, it's with WeChat, it's just all scattered around. So there's not even a good like basic financial credit data like like repository out there.

• 47:20Anthony Pompliano?

  Okay.

• 47:20Speaker 02

  And then so not even seeing this like social Skynet like level credit system.

• 47:26Anthony Pompliano?

  Where is the social credit system today? Like when you're in China, do you see anything to do with it?

• 47:31Speaker 02

  No.

• 47:31Anthony Pompliano?

  No.

• 47:31Speaker 02

  No, so so like, okay, if you go to any just like credit checking system, so if you put in my. Chinese ID. Like, large chance and you know so little about me. And because there's not enough like data synchronization.

• 47:46Anthony Pompliano?

  Yep.

• 47:46Speaker 02

  Um, so I think like the western imagination of the Chinese social credit system. Uh, is definitely not there and then probably even one tenth or or.

• 47:57Anthony Pompliano?

  Okay, so the system isn't nearly as complex or developed as the western world thinks it is. But in the future, go out ten, fifteen, twenty years, could the digital uh renminbi end up?

• 48:08Speaker 02

  Yeah.

• 48:09Anthony Pompliano?

  Being part of that social credit system and actually increasing the surveillance and increasing kind of the negative side effects?

• 48:15Speaker 02

  I think like once the data is there and then once like, once the data is there and once like. More, so once majority of the economic activity is on this transparent ledger to PBOC and TCCP. They can do whatever they want, right?

• 48:31Anthony Pompliano?

  Yeah, yeah, yeah, yeah, got it. What uh, what are you most excited about with Bitcoin, crypto uh and blockchain in China? Like, what's the most exciting thing that you see right now?

• 48:44Speaker 02

  I think the most exciting thing, uh, like first of all. We have all this mining infrastructure, right? And mining has been very like, very, I would say very manual and very primitive. And because when people think about mining, they all think about uh have a ton, so have like workers and just like sitting in. You know, data center and manage all these boxes. Uh, I think there's a lot of things that we can do in the mining space and then how to tokenize mining pool. And then so um how to make mining like cloud friendly and there's a lot of like innovation. Um, so there's a lot of innovation in the area.

• 49:26Speaker 02

  Uh, so I have been working with some of the top mining pool like founders out there. And then so to best, so to basically make mining uh more resistant. And then also to make money more um uh accessible, like to do smaller scale miners. Uh, I think that will be the trend. And then also mining is actually a global energy like arbitrage play. Uh, we have seen a lot of like Chinese miners and like go outside China, like, like with their existing experience on like beauty mining facilities. Uh, and so. And uh different and they're so they're like companies and making this a Lego like mining facility.

• 50:07Speaker 02

  So it's like everything is like Lego and they basically comfort everything from the container. Uh so from the actual shipping, so by the actual shipping container. Because the logistic cost is a so it's like a huge cost like when you can't see mining. Uh if when so uh in rainy season and you want your miners close to the dam. Like close to the hydro power.

• 50:29Anthony Pompliano?

  Yep.

• 50:29Speaker 02

  When it is dry season and you want your miners close to the coal, right? So there's a huge transportation uh like involved and then how to made a transportation.

• 50:40Anthony Pompliano?

  Is that why we see on like recently rainy season ended, right? And we saw a drop in the hash rate for a day or two? And then we see and then we see it recover quickly? Or is that more just coincidence than?

• 50:51Speaker 02

  Uh so like that's more like so statistical thing.

• 50:54Anthony Pompliano?

  Okay.

• 50:54Speaker 02

  Because it's never accurate to look at daily hash rate.

• 50:57Anthony Pompliano?

  Yep.

• 50:57Speaker 02

  Yeah, yeah, so uh rainy season definitely contribute to uh. Well, like rainy season, like the end of the rainy season contribute to the increase of the cost. Basically, you will have like more expensive like electricity supply, but not necessarily leads to the hash power drop.

• 51:17Anthony Pompliano?

  Got it.

• 51:17Speaker 02

  Like the hash.

• 51:18Anthony Pompliano?

  So people actually have to shut the machines off, they just pay more for power.

• 51:21Speaker 02

  Yeah, so they would just ship it to like the coal like power supply or like the like wherever in like Xin. So in like in the Mongolia or like Xinjiang, that's where most so most of the coal power is and and. And like the hash power correlate with the price.

• 51:35Anthony Pompliano?

  Mm hmm.

• 51:35Speaker 02

  It's like a lagging indicator.

• 51:36Anthony Pompliano?

  Mm hmm.

• 51:36Speaker 02

  Yeah.

• 51:37Anthony Pompliano?

  And as an investor, what area of the world are you most interested in? Is it Asia and China? Is it the US? Is it broadly you you're interested everywhere? Like like, how do you think about the geographic breakdown of investment opportunities?

• 51:52Speaker 02

  I think crypto is the first sector that US has no unfair advantages. Uh like if you look at. Our whole stack, right? Mining is not here in US. Trading majority and uh trading activities as well as trading uh uh uh as well as trading facility, um so our majority not in US. And I think here in US, we have probably advantages over like Portugal and uh engineers and talents. Uh and then also just business model innovation, right? Like DeFi and all that. Uh so I think uh like crypto generically as like a whole ecosystem is so it's very global and then very decentralized.

• 52:37Speaker 02

  And so that's why we are global from day one. And I don't see US has specific advantages and then it might have like disadvantage like when it comes to like taxation, when it comes to like regulatory uncertainty um and so like there's definitely things also a lot of investment opportunities outside US. Different from like Asia is really good for all this like application level.

• 53:04Anthony Pompliano?

  Hmm.

• 53:04Speaker 02

  Uh innovation like wallets, like exchanges and then um like gaming as well. Um and also this like centralized like uh financing platform, uh lending etc. Uh and anything about mining is that definitely in uh Asia. Um so I think we have to first to have this like value judgment on like which area is that specifically good for what. And then so like that's how we can make further due diligence and like assessment on uh specific investment candidate.

• 53:39Anthony Pompliano?

  Got it. All right. Before I finish up, I always ask a couple of rapid fire questions. Uh what do you think is the most important company in crypto other than Primitive Ventures?

• 53:48Speaker 02

  The most important company in crypto, uh I personally think right now is Binance.

• 53:53Anthony Pompliano?

  Why?

• 53:54Speaker 02

  Uh because that Binance um.

• 53:58Speaker 02

  So, right now, like, so, so because if we think about the systematic risk of our, so of our whole industry, uh, if there's any bug in like the Bitcoin code, right? Uh, and then also if there's like potential, just like, Tether collapse. Okay, so it might be Tether plus Binance.

• 54:15Anthony Pompliano?

  Okay.

• 54:16Speaker 02

  It might be Tether and Binance.

• 54:17Anthony Pompliano?

  Both of them.

• 54:18Speaker 02

  Yeah, and then, so if there's any major, major hack of Binance, and then so those are the three things that I think can be the biggest systematic risk of our, so of our industry. Uh, and Tether and Binance are definitely responsible for the last two, right?

• 54:32Anthony Pompliano?

  Okay, uh, what is the one regulation you would change or improve if you could?

• 54:37Speaker 02

  Uh, here in US or, or China.

• 54:39Anthony Pompliano?

  Wherever.

• 54:39Speaker 02

  Uh, here in US, I would definitely change first the taxation. Uh, right now, if you trade Bitcoin to Ethereum and you, you have to pay capital gain, and that's insane. And then, so we should like tax all this as sugar water company, but not like trading crypto. For like, so for capital gain. Because I previously did, like, the asset swap, like, we don't have to pay tax, right? And like, that's also the biggest problem why all these like volumes are outside of US. Uh, and then that is also the easiest thing to fix. All the, all this like very fuzzy, uh, like definition about what is that security, what is token, etc., what is, right? Because like taxation is very straightforward. Just that, don't tax this certain behavior.

• 55:24Speaker 02

  Um, that's one thing I would change here in US. Uh, the, so that will definitely keep many crypto players stay here in US. Uh, and, and then, so China, I was, I would definitely try to legalize like fee on RAM. Uh, for any like crypto purchase. Basically have, like, it can be like state-owned exchanges allow fee on RAM to buy Bitcoin. Uh, like, the biggest adoption bottom net I see for like crypto and for Bitcoin as an SOV is like the fee on RAM channel. Uh, it is not sufficient enough. Uh, like, that's one thing I want to probably potentially can do it in China if we can pull it off, and so they will be huge.

• 56:10Anthony Pompliano?

  For sure. What's the most important book you've ever read?

• 56:12Speaker 02

  The most important book is What's Life from, uh, like, uh, Schrödinger.

• 56:17Anthony Pompliano?

  What is that?

• 56:18Speaker 02

  Like what is life?

• 56:19Anthony Pompliano?

  No, wha- wha- what's the book about?

• 56:21Speaker 02

  Like, the book is about how life is actually a computer. And then so how life is so, how life is so, how life is all about minimize the um entropy growth. Um, that is actually what Bitcoin did, right? So like the Bitcoin keep things in order within the system.

• 56:37Anthony Pompliano?

  Yep.

• 56:37Speaker 02

  But like dumping the, so but like Bitcoin mining is actually dumping the access like entropy out of the system. And then Bitcoin mining is like, we basically uh like counting hash is useless work. But that's actually necessary, like if you want to keep the entropy low within that system. Because overall in the universe, like entropy is always positive.

• 57:00Anthony Pompliano?

  Yep, yep, absolutely. And and uh before you get to ask me one question to end it, uh we talk about aliens. Believer or non-believer, you think they're real?

• 57:09Speaker 02

  Yeah, statistically, it's definitely real.

• 57:11Anthony Pompliano?

  Why?

• 57:12Speaker 02

  Because we can't be the only like.

• 57:15Anthony Pompliano?

  Just the universe is too big?

• 57:16Speaker 02

  Yeah.

• 57:17Anthony Pompliano?

  Do you think they look like humans?

• 57:19Speaker 02

  No, I don't think so.

• 57:20Anthony Pompliano?

  So what do they look like?

• 57:21Speaker 02

  Uh, what do they look like? Eh. Okay, so my favorite like alien movie is Arrival.

• 57:30Anthony Pompliano?

  Okay.

• 57:31Speaker 02

  So that is my perfect um imagination of like.

• 57:35Anthony Pompliano?

  Of what an alien is?

• 57:36Speaker 02

  Yeah. So it's all about information transformation.

• 57:40Anthony Pompliano?

  Yep.

• 57:40Speaker 02

  So it's not about how the physical setup is.

• 57:43Anthony Pompliano?

  Yep.

• 57:43Speaker 02

  Yeah.

• 57:44Anthony Pompliano?

  It's it's just about the intelligence.

• 57:45Speaker 02

  Yes.

• 57:46Anthony Pompliano?

  Okay, what one question do you have for me to uh finish up?

• 57:49Speaker 02

  Uh, I think the question for you is, uh, so if you're Satoshi. If you're Satoshi, and then is there anything you want to change on Bitcoin?

• 58:05Anthony Pompliano?

  I don't think that you can because with hindsight, although there are things that people may say are not ideal.

• 58:15Anthony Pompliano?

  If those things had been changed, we might never get to this point. So like the exact creation, launch, the characteristics, the adoption, the hacks along the way of changes. Everything got us to this point. And so if you go back and change any of that, we may not get to this point. And I look back and I say like, it's pretty fucking incredible that we got here, right? Like literally in 11 years, we're talking about Senate and Congress in the United States, the president, the Chinese government, like it has arrived. Bitcoin and blockchain technology has hit the global stage. And so if you go back and you change any one thing in that process, we may not get here.

• 59:00Anthony Pompliano?

  And so it's just, just take the flaws along with the pros and move on, right?

• 59:06Speaker 02

  It's all about chaos engineering.

• 59:08Anthony Pompliano?

  Chaos engineering, exactly. All right. Listen, thank you so much for doing this. I hope that people really understand kind of what's going on in China and the larger Asian market after this. And then we'll have to do this periodically so you can keep educating everyone.

• 59:22Speaker 02

  Yep. Thank you, guys.

• 59:24Anthony Pompliano?

  Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.