Cypherpunk Owns $500M of Zcash and 18% of Its Hashrate | CIO Will McEvoy

0:00 Welcome to Bankless, where we explore the future of Zcash and privacy. Today on the show, I talk to Will McEvoy. He is the CIO at Cypherpunk Technologies. Cypherpunk Technologies is on a mission to accumulate 5% of the total Zcash supply. But don't call it a dat. It's closer to a normal company that engages in non-MNAV strategies to accumulate ZEC.

0:22 one of them being the largest Zcash miner, controlling about 18% of the hash power of Zcash. But they also invest in the privacy space around Zcash 2 in value-accretive ways. I learned about Cypherpunk technologies when I was buying my first Zcash back in May and found the opportunity to invest in Zcash Alpha to be pretty compelling.

0:39 It has since become one of my largest holdings in my equity portfolio due to the incredible 400% run-up in price since August alongside Zcash's crazy price performance. So I wanted to learn a little bit more about the company, its goals, its leadership, and how it sees the world. So ladies and gentlemen, let's get into my conversation with Will McEvoy from Cypherpunk Technologies.

1:00 Bankless Nation, I'm here with Will McEvoy. He is the CIO and a board member of Cypherpunk Technologies, the subject of today's podcast. He's also a principal at Winklevoss Capital. Will leads the company, the effort to accumulate 5% of the Zcash supply. and also invest in their surrounding Zcash ecosystem.

1:22 Cypherpunk Technologies, I believe, is the world's largest miner of Zcash. We're also going to talk about mining today on the show. Will, welcome to Bankless. Thanks for having me. Yeah, it's great to be here. I want to learn quite a lot about Cypherpunk Technologies in this episode, but first, we first have to start talking about Zcash.

1:38 Why did Zcash go from $50 to $150 in about 13 months? I think that's the question everyone's asking. I mean, I think it comes down to... a handful of macro reasons, right? One is people are waking up to the importance of privacy. This is really, I think, dominated by just the awareness that AI is probably the most, most sort of important macro trend.

2:08 It has the ability to be the most pervasive force in everyone's life. And I think when you're, using models or using agents, you're sort of prompted to give it as much information about you as possible. So it just sort of, I think, starts to bring up the alarm bells, right? Of like, oh, wow, I actually don't have that much privacy.

2:31 And I think that's been pretty dominant And then it's just the awareness of, you know, in a world with AI, Bitcoin is fully transparent. And actually, you need a crypto asset. You need to be holding a store of value that is private in a world with AI, given the fact that AI can... parse transparent ledger like Bitcoin, it can tie that information and analyze that information alongside other information that's been leaked about you, whether it's, you know, your address or, yeah, whatever.

3:09 you know, close friends and family and phone numbers and social security numbers to de-anonymize your Bitcoin wallet. So I think that's scared a lot of Bitcoiners. It scared a lot of people in crypto and Zcash serves as the solution. But how do you account for the fact that Zcash was so dormant for years after we had AI?

3:29 Like AI came around in 2023. And granted, you know, it takes a while for society to really understand and adapt to the introduction of ChatGPT. And in 2023, AI was still kind of hallucinating. So granted, there would be some lag. But, you know, three, three and a half years of lag before Zcash woke up.

3:48 How do you explain why Zcash just felt so dormant for a while? Yeah. Yeah, it's a good point. I will say that the trend in AI has been exponential, right? So 2023 is not half as good as where we are with AI today. It's 5% as good or something like that. And then I think what people have noticed is that over the past couple of years, Zcash has attracted essentially...

4:19 the best cryptographers and security engineers in the world that are now battle testing the code. They're proposing upgrades to the network to make it more scalable, more usable, more accessible. We have great teams building applications in Zcash now, like Zoddle and Visor and others. So, yeah, I think part of the reason was, you know, people notice there's so much talent in the space.

4:48 Um, and, uh, you know, these crypto communities are not dissimilar from companies where, uh, it's really all about the talent. It's about the people, um, what's being built, what's being shipped. Um, and that gives, I think investors a lot of confidence. Again, similar to like a venture-backed business with a great team.

5:09 The Zcash chart just looks astronomical. There's been very few significant pullbacks, very few opportunities to buy back in. It went from like a $300 million market cap to $26, $27 billion, almost in like a straight lineup. It did have that kind of like accumulation period in the like $300 to $600 range, but it still looks like a blip.

5:32 Part of this I can certainly account for with just like Bitcoiners and the $1.7 trillion market cap of Bitcoin buying a very small market cap Zcash is why it ripped so much. Is that the only source of capital coming in to buy Zcash? Or is the privacy narrative, the concerns about capital confiscation that might be coming, the rise of socialism?

5:56 Do you see, is there any indication that there's external capital that maybe was never previously interested in Bitcoin or crypto, but is now interested in Zcash and Zcash specifically due to kind of just the macro environment? Yeah, I think that's a good point. I think... I think there's some of that happening for sure.

6:15 Right? I do think there's people around the world that are... that are worried about, you know, just worried about their wealth being taken away from them. And I think that takes many different forms. But I think the people closest to this are some large Bitcoin holders, Bitcoin holders in general, that really love their Bitcoin and then have just woken up to this concept that like, oh, well, we are on this path for everyone to know very soon how much Bitcoin I hold, right?

6:55 One of the parts that was so compelling about Bitcoin was that it was pseudonymous, right? It was transparent, but no one really knew which wallet was yours. We're definitely on a path where that is not going to be the case in the very near future. So I think a lot of the capital inflows from Zcash has been that.

7:17 dynamic. It's been people waking up to that fact. But look, I think what you're also hitting on is that we are in a very chaotic, I think, global environment in general. And I think we're not in the 50s, right? It's very chaotic. You have governments increasing in power, you have wars, um, You have supply chain disruptions.

7:44 It's just a very chaotic world we live in. It's probably the most chaotic point in my lifetime, maybe also my parents' lifetime. And in a world of high chaos... Zcash is just a great asset to own. And I think that's what's attracting a lot of people. Do you think going to the large Bitcoin holders topic, I could imagine there's just like the top 100 holders of Bitcoin, active, alive holders of Bitcoin, not like Satoshi, but like the top 100 people who own Bitcoin.

8:17 with the advent of AI and the hacking of data honeypots out there, if you are a material holder of Bitcoin, you can probably put two and two together and be like, oh, well, there's sufficient amounts of data out there. AI is incredible at connecting the dots. Eventually, somebody is going to vibe code a website with the top 100 holders of Bitcoin, their name and even their home address.

8:44 Stuff like this is... reasonable to predict that stuff like this will come about. And so like, cool, me and my like handful of dollars that I throw at Zcash to ride the momentum of the trade might be one thing, but it's really like these massive Bitcoin whales that are perhaps spooked about this coming.

9:06 And maybe that explains the rise of Zcash the most. Would you agree with that? Yeah, 100%. I think one of the things I bring up is that I do believe that there's going to be more hacks and exploits across the digital economy in general, just because of AI, just because AI is so good at those things. And then, so more information will be available about you online.

9:35 People sometimes will comment back and say, hey, like my social security number is already out there. My address is already out there, whatever, who cares? Well, that's true today, but that's just because there's so much data out there that it's hard to actually use. How do you pick? Who do you go after or whatever?

9:59 You can only do so much manually. But if you have AI systems that are parsing through that data, connecting it with Bitcoin wallet data. And just coming away with like who, you know, what is the, what's the best target? Who can we exploit? Whatever. Like AI is going to be used for that, unfortunately.

10:21 So, so yeah, I a hundred percent agree. that that's like a major risk. It's a major risk today. It's only going to become a more significant risk in the future. And I think a lot of people in Bitcoin and also broader crypto, other transparent networks or other public networks, they're thinking about this too.

10:41 Bitcoin does have some solutions to Bitcoin privacy. It has CoinJoin services, which kind of operates like Tornado Cash, not exactly, but similar enough to be good enough for the listener. Do these privacy services survive in a world of AI or does AI kind of break these things? I think AI breaks a lot of these things.

11:02 I think like Zcash isn't the only community focused on privacy and crypto, right? You have other privacy products, protocols, things that make Ethereum more private and so on. But they all exist in like this sort of continuum or the spectrum of like privacy, right? On one hand, you have true cypherpunk privacy.

11:29 It's like you hold your keys, you have your shielded address, you know, you're in the, you know, you're in the Ironwood pool, you have like these core ZK backed privacy guarantees that can't be taken away from you. Then on the other side of this, and that's Zcash, on the other side of the spectrum is like a lot of people and a lot of groups trying to recreate Web 2 privacy in Web 3, right?

11:57 It's the same privacy guarantees that you have if like, you have your data at AWS or at Google. It's like, yeah, it's not public, but the government can subpoena it and maybe some random Google employee can see your information. So... I much prefer like true cypherpunk privacy and products and services that are like that.

12:20 Because yeah, I'm not so sure the web to private alternatives or options are gonna, you know, they're gonna be attacked quite intensely, I think, by AI. Let's talk about cypherpunk technologies. I think the closest correlate that users will be, listeners will be familiar with is just like cypherpunk technologies but also that it does a disservice to many, many, many of the other things that cypherpunk technology does.

12:50 Can you talk about the genesis of cypherpunk technologies, how it came together and what you guys do? Yeah. So we're not a dap. I like to, I like to put that out there at the beginning. So we are the only publicly traded company focused on privacy. So I'm, We're heavily focused on Zcash today. We hold about $500 million of Zcash.

13:12 It's about, you know, call it 320, 330,000 coins. And then we also hold or operate the largest Zcash mining operation in the world, where we control somewhere in the ballpark of 18% of the hash rate. So that's the business today. But the genesis of the business and where we want to go moving forward, and we've been talking about this since we launched, is there is just so much white space to operate in the privacy domain in general.

13:45 So Zcash is a great option for preserving privacy in your business. in your financial world, in your financial life. Financial life privacy is probably the most important avenue because from it you can derive so much about you, like what you like and where you go and essentially who you are. But you're going to want very strong privacy guarantees when it comes to communications, internet browsing, the use of AI.

14:17 So these are all spaces that we're going to be working in. And then in terms of what those actually look like, I think some of them are going to be very early stage, like Zodl, like we're investors in Zodl, which is the most widely used e-cash wallet. Some of them are going to be more mature businesses where we can sort of invest a large sum of money and maybe acquire it or generate cash flow from it, receive cash flow from it.

14:48 And then I think that the third bucket that I'm most excited about is that there's a ton of opportunity for us to be building in these categories also. I think we have, we've been attracting a ton of great talent that wants to work on the privacy mission. And like we mentioned, yeah, at the beginning, we've been attracting a ton of great talent It's all about talent.

15:13 It's all about team. So that's sort of what we've been thinking about since we've launched. And these are concepts that Cameron and Tyler have been thinking about since the launch of Zcash 2016. And we've been thinking pretty deeply about over the past handful of years. Is there a mandate with Cypherpunk Technologies to only look at privacy in the context of Zcash?

15:42 Or if there is a privacy related startup outside of Zcash, outside of crypto, something privacy just related broadly, is that also interesting to you as a potential investment? Yeah, no, it's definitely still interesting. I think we want to be open-minded in terms of the technologies that we're investing in and building.

16:00 I will say, though, that Zcash is really the money for your private digital life. So if it's the money... and the money is the base layer, it will be and it should be integrated in all these privacy applications, right? If you have a private AI platform or private AI tool, you really should be paying for inference, paying for tokens in Zcash.

16:26 It makes no sense not to. So very open-minded. There's a ton of different interesting privacy technologies to be digging into right now. Remind me, you said how much Zcash Cypherpunk Technologies holds on the balance sheet. How much was that? About $325,000, $326,000. And how much is that in dollars?

16:53 The price fluctuates quite a bit. It's about $500 million, a bit under $500 million. What's the market cap of Cypherpunk Technologies? So we calculate both market cap and enterprise value. Enterprise value is a bit cleaner of a calculation for us because we have outstanding warrants. And if you include the warrants, we trade at like a billion dollar enterprise value.

17:16 I see. I see. Educate me about just the dislocation between the market cap and the enterprise value and why enterprise value makes more sense. Sure. Yeah. So market cap only takes into consideration or chiefly takes into consideration your outstanding common stock. Whereas enterprise value takes into consideration warrants or essentially options that investors hold.

17:43 So... We have a lot of great investors that are very long-term oriented. They also hold warrants. And so it's really just sort of a financial calculation. Actually, I see. Okay, so I was doing my due diligence around Cyberpunk. You guys have three pillars. Hold Zek, mine Zek, and invest in Zcash, invest in privacy.

18:09 Holding Zek seems pretty simple. Even simpler than holding ETH because it doesn't produce a yield. It's not a yield-bearing instrument, so you simply just buy and hold Zcash because you think it's the private money for the future. I don't know if there's too much more of a conversation there. What I think is really interesting is the mining of Zcash.

18:28 You said this Hyperpunk Technologies holds 18% of the hash rate, a pretty hefty chunk. And then I also know that you guys have invested in future hash rate coming online as well. Can you talk about just like the endeavors for expanding the whole mining Zcash side of Cypherpound technologies? Yeah. So Zcash mining is very interesting.

18:52 There's a massive opportunity in Zcash mining. One, it is extremely profitable. So right now, if you try to calculate Zcash mining on like a profit per megawatt hour basis, it's earning about $1,000 per megawatt hour. To put that into context, Bitcoin mining is earning less than $150 per megawatt hour.

19:17 It's like 130 fluctuates, about 130. Now, because Bitcoin mining was earning so little, so many of the, as you know, so many of the Bitcoin miners, they unplugged all the Bitcoin machines. You know, they outfitted their data centers for AI and HPC. And they said, you know, Anthropic, come in and plug your GPUs and just, you know, pay us for that.

19:42 So that's like AI co-location. AI co-location is making like $240 per megawatt hour. So most Bitcoin miners, a lot of them, they went from like 130 megawatt hour business, dollar megawatt hour business to earning 250. So definitely a good step up, but it's nowhere close to Zcash mining at $1,000. So that's sort of step one, like Zcash mining is extremely profitable.

20:10 Then you ask sort of like, you know, why is it so profitable and why is this such a great opportunity into the future? Well, the core reason, one of the core reasons is that the supply for Zcash mining equipment is so tight and so inelastic. There's only one manufacturer of Zcash mining equipment. It's Bitmain.

20:34 They can only make so many machines a month. It's likely in the low thousands, thousand units per month. And if you place an order with Bitmain today, you'd be very hard pressed, I think, to get those machines plugged in in less than, call it seven or eight months. I think it's probably longer than that, but I think seven to eight months is like a good estimate.

20:57 So, yeah, we can get into sort of the supply side of the machines if you want, but that's how I sort of frame why the opportunity is so compelling. Yeah, and it's probably worth stating that Zcash, the mining schedule for Zcash is identical to Bitcoin. Correct me if I'm wrong, but it just follows the same curve.

21:15 Yeah. Very notable that Zcash started in 2016 where Bitcoin started in 2009. And so Zcash is just seven years earlier in its supply reduction history. I don't know how the rate of Zcash per block was. But with Bitcoin, there's about 1 million Bitcoin, I think, left to be mined about. With Zcash, there's about 4 million Zcash left to be mined, which is 20% of the 21 million cap.

21:46 And so in terms of just mining, the arc of Zcash mining is still far more in its infancy. And to me, as an investor, that's interesting to me because if you're telling me that Cypherpunk Technologies already has 18% of the current hash power, that means you know, naively extrapolating, 18% of that 4 million Zek will eventually fall into the hands of Cypherpunk technologies.

22:11 But I think, Will, if I'm reading between the lines, you're alluding to the supply constraint of new Zcash miners and how inelastic it is. What does the going forward look like for Cypherpunk technologies, which with future Zcash hash rate have you guys made big orders for miners from Bitmain? If you're at 18% now, can you guess, do you have a goal of what that number will be in one or two years?

22:37 Right now, we haven't announced any new miner orders. What I have said and what I can say is that we feel really good at being around like the 18 to 20% number. It's, again, like I mentioned, it's very profitable. It's a very meaningful business for us. So we're going to defend sort of that network hash rate.

22:58 I think that's a good place to be. It's compelling from a revenue perspective because of its size, but it's not overly burdensome for the network in terms of concentration. Yeah. So that's sort of how we're thinking about it. Obviously, more machines are going to come online. We need to be leveraging our relationships on the ground with Bitmain and sort of the whole ecosystem of...

23:30 You know, Zcash mining equipment brokers and so on, such that we have access to those machines. And I think we, you know, we have a great team in place that's able to do that. But to your point on the Bitcoin comparison, yeah, we thought a lot about this. It's very similar to mining Bitcoin in 2016 and 2017.

23:56 This was like the heyday of Bitcoin mining, right? The supply of machines was sort of opaque and there weren't a ton of players and it wasn't clear. Truly the Wild West of mining. It was the Wild West. It was the Wild West. It really rewarded people that were able to like be on the ground and figure these things out.

24:17 Um, and, uh, at the time, Zeke, uh, Bitcoin mining, we went back, it was doing between three and $400 per megawatt hour. Um, so Zcash said, you know, it's over double that right now, but that's, I think a good sort of mental model without getting too over our skis. And, and that, um, yeah. That was, again, a great time for Bitcoin mining.

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27:39 I think it's worth kind of comparing the price rise to the hash rate rise. So one year ago, 13 months ago, Zcash was $50. At that time, Zcash hash rate was, I'm going to need your help with the annotation, 7GS a second. What's a GS? A giga? GigaSoles. GigaSoles. What's a sole? What's a sole? solution to the Equihash algorithm.

28:03 Okay, gigasoles, so one gigasolutions a second. So just to reiterate, Zcash was $50, Zcash hash rate was seven gigasoles a second. Today, Zcash is $1,500, maybe a little bit less, but 1,500 is just a nice round number. And Zcash hash rate is 25%. So from 50 to 1,500 and from 7 to 25. So the ZEC price has 30x'd, hash rate has 3.5x'd, which means envelope math, Zcash mining has become 8.5 times more profitable in the last year.

28:39 I think that's why there's been what you're alluding to is like this is the 2016 of Bitcoin mining where this is going from truly hobbyists learning to hack their GPUs to do GPU mining of Bitcoin turning into and then in a few short years, it'll turn into a very real robust industry. Just paint a little bit more color on what needs to happen over the next two years to make the Zcash mining industry more robust.

29:04 Surely an ASIC producer other than Bitmain has to come online. Surely other Bitcoin miners are clamoring to get their hands on Zcash miners because why wouldn't they if it's more profitable? What's going on out there? Yeah, well, certainly you have a lot of demand for Zcash mining equipment. You have people sort of coming out of the woodwork to build relationships with Bitmain.

29:30 But what I would say about Bitmain is that Zcash is a relatively small business for them. They're a large Bitcoin equipment producer. They don't want to sort of upend their supply chains. They don't want to significantly alter their... allocation at TSMC, right, to swap out Bitcoin for Zcash, right? Just because there's just so much more demand for Bitcoin machines, even at like such a low, you know, margin on Bitcoin mining.

30:05 That's only going to get... And that's not going to change if you're of the mindset that Bitcoin is going to be higher in a year from now and there's just going to be more demand for Bitcoin mining machines. It will be interesting to see how Bitmain sort of adjusts their supply. And then, yeah, certainly there are people that want to start designing and making their own Zcash mining ASIC.

30:36 That's a whole sort of can of worms in and of itself. That's true semiconductor design. and comes with a pretty hefty price tag. And you're also competing for allocation at the semi-fabs, whether it's TSMC or Samsung, with the most, and most capitalized, and best capitalized, yeah, exactly, companies in the world, which are the AI companies.

31:00 So that's why, like, I'm sure in the future there is a point at which the supply of machines increases and maybe the profitability comes down a bit. But I think because of these forces that I've, you know, I've highlighted, it's looking very tight and it's looking very tight for quite a bit. You know, we're talking years.

31:19 We're not talking months. Okay. So you have 18% of the hash rate, of the ZCAS hash rate. You said you want to defend that 18 to 20 level. Let's just say that that is a stable number. Do you model out the future amount of Zcash that Cypherpunk technologies will hold, given the constant of something like 18 to 20% of the hash rate over the given years?

31:40 Do you think, okay, there's 4 million more Zcash to be mined? I don't know how much is mined in the next four years, but that's kind of what the timeline is of being economically relevant. Do you think... Cyberpunk technologies will have 20% of the new Zcash supply that's mined over the next four years.

31:59 Is that how you kind of model things? Yeah, that is our goal, right? And our goal is also to be in a cash balance sheet position where we can hold as much Zcash as possible. So far, we've held all of the Zcash we've mined and we intend to continue to do so. I think that's very different from a lot of the other, not that there's a lot, but other Zcash miners who are essentially selling their Zcash or have sold a lot of Zcash.

32:29 So I think that's a very sort of high level, you know, that that is the implication that if we remain at 18 to 20% of the hash rate, we will end up with 18 to 20% of the emissions. There is a cut of mining rewards that go to developers and community grants and so on. So it would be reduced by that much.

33:00 But yeah, that's our goal. Is there a notion, so CYPH, ticker CYPH is the equity behind CyberPank Technologies, has done incredibly well alongside the price of Zcash. CyberPank Technologies has gone up about 400% in about 50 days. Is there a notion of playing a premium to nav game that we're kind of familiar with, with Bitmine or MicroStrategy?

33:24 Or do you guys leave the equity alone and don't use that as a tool to accumulate Zcash? How do you think about these things? Well, certainly I don't think MNAP makes any sense anymore, right? Because we have $500 million Zcash, but I think we have a very valuable mining business also. And analysts should be valuing the business from a sum of the parts perspective, right?

33:50 So that's the first thing. The second thing is that, I mean, we're certainly open to raising capital, right? It's not, I don't think it should be thought of as like a, you know, sort of all raising of capital is like this dilutive exercise. Like, you know, some of the best companies in the world, they raise capital.

34:12 And the goal is to put it into accretive projects and investments. So we will always be considering raising capital to buy more Zcash, to buy more mining equipment, to invest in other privacy technologies. I think that's sort of just the nature of this business. And so far, I think it's obvious but notable, you know, the capital that we've raised is the capital that we've raised has been highly accretive to shareholders, right?

34:45 We've been raising capital and our first, you know, sort of investment round that we did with outside investors, we raised, you know, about $60 million and we started accumulating Zcash in the low hundreds, you know, just about when it crossed over into triple digits. So that's sort of how we think about it.

35:06 I think we want to remain... very financially flexible and very nimble and very fast paced as opportunities come our way to raise capital and then deploy them into these very accretive opportunities. And I mean, it's worth noting that just like having a publicly traded asset on a public stock market, why do you do that?

35:31 So that you can access capital. And so this is like normal company things doing normal company things. I think there's been this extra color, thanks to Sailor, about buying a DAT-like company when there is such a strong premium to Nav. I know the math isn't so clean because only one of the three pillars that we've talked about is buying and holding ZEC on the balance sheet.

35:55 But how would you explain to someone why they would be interested in buying Cypherpunk technologies instead of just the Zcash ETF? Like these are different instruments. And sometimes the value of the Cypherpunk technologies will be at a massive premium to the underlying Zcash. And so how do you think about these things?

36:18 Maybe some people just want to buy Zcash through the ETF, but why would somebody buy CYPH alternatively? Yeah, well, first off, I would recommend everyone to buy Zcash and, you know, go onto a crypto exchange and buy Zcash and move it to a wallet and shield it. Yeah, right. And actually, like, participate in the network because every ZEC that goes into the shielded pool increases the privacy for everyone else.

36:42 And it's a great network effect that way. So, but for people that want additional exposure and people that want something in their brokerage account, the way I think about Cypherpunk is in the short term, our goal is to be... is to be alpha to Zcash, right? So we'll be, we are, we've been, and we'll continue to be like accretively accumulating Zcash.

37:09 We're mining Zcash at a significant profit. That should result in us, you know, having some alpha above Zcash, at least hypothetically, right? And in the long term, though, we're an asset that we want to provide shareholders with exposure to the privacy theme, right? We are in a point in time where we probably have the least amount of privacy that we've ever had, maybe as like a civilization, if you will.

37:46 And if you are of the mindset that we, like we are, that demand for privacy is going to increase dramatically and we're at this very low sort of scarce supply of it, I think we're really the only option in public markets that can provide that exposure over the next five or so years. Somebody, maybe some analyst is asking me some of their first questions, as I guess I'm kind of doing right now, and say, hey, I want to buy a bit of cypherpunk technologies.

38:15 what am I actually buying? How would you like give them the one to three sentence explanation of like the actual constituent parts of value inside of Cypherpunk? Yeah, so I sort of gave the high level just there, but to make it even more concise, it's we are public privacy company providing exposure to...

38:36 to sort of privacy technologies in a time when privacy technologies are highly critical. And the core component of that today is Zcash, the technology that shields your financial privacy. Is there like a pie chart that you can break down for me? So like $100 into Cyberpunk gets you like $18 of Zcash on the balance sheet.

38:59 It gets you a mining business worth of this amount. Does the pie chart question make sense? It does. I can sort of go through it sort of at a high level. So just at a high level today, if we're trading at about a billion dollar market cap company or enterprise value, we have about $500 million of Zcash.

39:22 And we have, that would sort of imply that the market is valuing the mining business at, call it about 500, to get to that billion. And then, I don't really, you know, I think some investors are putting, are sort of thinking further out already and saying, what's the value on sort of a very high performing, you know, privacy-focused venture portfolio.

39:53 And so I think you can sort of, you know, put like a, you know, whatever slice in that. But the two core parts are today in terms of how the market is valuing the business, Zcash and then mining, probably 50-50. And, but I do think, yeah, I think there should be actually a pretty large carve out for other privacy technologies.

40:22 people to start thinking deeply about. Right, okay, so the last bit that you were referring to is kind of like a venture style. You guys have investments into Zotl. Will Zotl produce a material outcome for cyberpunk technologies? Unknown. What is useful is that, well, Zotl did produce a material outcome for Zcash, the asset, which you guys hold.

40:45 So maybe that's one way it comes back to the equity, the enterprise value of the business. And you can think about that line of business in that way. There's future technology investments, privacy investments. Maybe they directly have a large liquidity event to which Cyberpunk profits, but also maybe the value gets captured back in Zcash the asset which you guys hold.

41:07 Yeah, exactly. If we do a good job and we execute on the investment strategy, there will be two ways to win, right? One is what you said where we're going to invest in things that are synergistic with Zcash, that either increase adoption of Zcash, exposure of Zcash. And so that will drive value to our treasury and our mining business.

41:31 The other way we're going to win is if we make good investments and they exit and they IPO and sort of running a typical venture strategy or maybe like a sort of a typical growth equity investing strategy. Or something that people don't understand about Zcash or something just maybe you think is under told, underrepresented, under discussed about Zcash.

41:54 With Zcash, the biggest part of the story that no one's talking about is the team, for sure. Like, you have people in the community that are literally world-class cryptographers, security researchers, engineers. that are super motivated, super ideologically aligned to the mission, and that are just shipping and operating at just like breakneck pace.

42:23 It's pretty crazy. And to sort of verify that, I would sort of invite everyone to take a look at those those folks. You can take a look at Dave at Valor. You can take a look at Sean Bowe at Tachyon. You can dig into the team at Zoddle. The folks building the Visor Wallet also. Like, I think there's enough content online on these folks.

42:52 But these people are like world-class developers and engineers. Yeah. And that's, it's just super important. It's like any other business. You need the best team. Whereas, yeah, I don't see that in a lot of the other teams building a crypto. Put me in your shoes during the Orchard bug. So this was the, not the exploit, but the potential exploit that was identified that could have minted I think, an infinite number of Zcash inside the shielded pool.

43:26 And we do not know because of the nature of its shielded. We don't know if that exploit was ever exploited. So far, all the data, all the indicators point towards it was not exploited. And we kind of have a, in the future, we will have just increasingly strong assurances that it was not exploited. But nonetheless, it could have been.

43:43 Yeah. Z cash dropped from I think like $600 down to $300 in that moment. Were you nervous? Were you scared? Or alternatively, were you aware that or already feeling strongly that this had not been exploited? Put me in your shoes in that moment. I try to like approach these things very unemotionally and just let's get down to like actually what's happening here.

44:07 Um, so, so yeah, the, the first thing we did was just, and this sort of dovetails nicely off of your last question. It's like, we called up all the smartest people that we, that we know in the Zcash community to get their, their thinking on it. And it, it became pretty clear, um, that one, uh, One, the Zcash community is moving super fast to patch the exploit and come out with a solution.

44:36 So that already gave us a ton of confidence. So, and it was also clear that in talking with folks and also taking a look at the data ourselves, that the chance of it being exploited was exponentially low, right? So it had went undiscovered for years. It had only been discovered because one of these great security researchers in Zcash had a developer version of Opus 4.8.

45:08 The day Opus 4.8 was released to developers... And they had found it within a matter of hours. So for it to have been exploited, you would have had to have like maybe like if some actor had an even more powerful AI model sooner or something could have been found. And then if you also just take, if you were to take a look at the price action leading up to it, it did not appear as if someone was like minting Zcash and selling it.

45:39 And that would have been the economic, that's what you would have done, right? You wouldn't have wanted to sit on your shielded Zach, that wouldn't have made any sense because you would have been scared that someone else could have founded and exploited before you if you're a bad actor like that. So we sort of put it all together.

45:55 We stayed close with, again, these engineers in the space. And just the pace that they had fixed the exploit essentially immediately and that the pace that they were moving to this sort of verifiable standard where we could have even more assurance that there weren't any minted Zcash from the exploit.

46:23 It just gave us a lot of confidence. And we knew pretty quickly that it was going to be a buying opportunity, I think. Did you guys buy in that moment? We did, yes. Yeah. Nice. Nice. Yeah. Very cool. Tell me a little bit about you, Will. What's your background? Before launching, so we launched Cypher Punk at the end of last year.

46:45 Before that, and even to today, I support Cameron and Tyler at their family office, Winklevoss Capital. where I help them run a fairly broad investment strategy. We do a lot of early stage venture. We do some later stage stuff. We invest in funds. We do some public market stuff also. And we're very generalist, right?

47:10 So we're looking for what are the most interesting opportunities being sort of propagated by... the most world-class builders. So it can be in crypto like Zcash. It can be in health, defense, robotics, semiconductors. We look for the talent and we go after world-class folks and we partner with them. So we've been doing that for a bit.

47:39 And before that, I was working for Tom Lee at Fundstrat. So writing Bitcoin research, some macro stuff, other crypto research. We did some good DeFi research. And then before that, I was in TradFi. And I got a bit disillusioned by the central banks and the money printing. And... and made the jump into crypto.

48:10 Well, Zcash has definitely captured the spotlight of the entire crypto industry. It kind of seems like it's taking a front and center role. And Cypherpunk Technologies has a front and center role with Zcash itself. So seemingly a pretty good spot to be in. You're going to be at Cypherpunk Technologies for the foreseeable future.

48:27 It must be a pretty exciting time over there. Yeah, it's super exciting. I certainly, this is the mission I want to be a part of. And it's just been so great to see, like we've built an amazing team so far also. We have Kevin who joined us on the mining side, world-class mining operator, has built some of the largest Bitcoin mining operations.

48:51 He also launched some of the largest Zcash mining operations a handful of years ago. So I love being around the team that we've built. They're great. This is the mission I want to be a part of. And yeah, it's a super exciting time. And it's exciting in Zcash right now. And I think it's going to get also pretty exciting on the privacy front also.

49:13 So yeah, it's been a great year. And yeah, we're looking to continue the momentum into the future. And I think we're doing a pretty good job of that. Do you guys think about Zcash in terms of a percentage of Bitcoin's market cap or a US dollar price? You guys don't really seem like the types of people who would sell, but do you guys have price targets, price estimations?

49:38 How do you think about just future projections of the value of Zcash? Yeah, so we haven't given out any targets yet. we're an ultra long-term holder of the asset. So they don't really make sense. And I think it's very difficult to predict, you know, price, you know, five, 10 years out. I mean, sort of the data that we've been sharing is just, you know, in relation to Bitcoin and other assets, right?

50:07 10% of Bitcoin seems like fairly reasonable given the quality of the tech and the privacy features. Right. I think if you get to 10% of Bitcoin, it fluctuates with Bitcoin, but that's something like a $10,000 Zcash price. I think that's maybe a good place to check in or sort of an intermediate term target.

50:33 Um, not that we're not that we would sell at that price, but I think that's, that's totally reasonable. And then I think sort of the larger buckets of capital are gold and there's just also so much, so much capital tied off in like offshore wealth, right? People hold, you know, art, uh, all around the world really just for like a, to have like a private store value.

50:55 And, um, so these are, these are obviously, you know, tens of trillions of dollars of value. And yeah, it seems totally rational and totally reasonable for Zcash to hold, you know, a meaningful percentage of those markets also, given the fact that Zcash is literally designed to be the digital technology that serves that purpose, serves as a private store of value.

51:22 One of the things we've seen recently is I think we've seen indications that the Lazarus Group is starting to use Zcash for its privacy functions. Now, I've like facetiously, but also not so facetiously talked about how the Lazarus Group is kind of just like a bullish indicator of the quality of the product.

51:39 like Tornado Cash was an incredible product, proved by the fact that Lazarus Group used it so much. And now you're actually seeing Lazarus Group go in and out of the shielded Zcash pool to whatever degree we can see that. Which is exciting in one way, also terrifying in another. Bitcoin, at one point in time, was talked about to be this...

52:03 thing that would grapple power out of the hands of the government. It would take the ability to mint money out of the hands of the government. It would offend everyone in government. And governments would ban it. That turned out to not be the case. It was actually absorbed into the nation-state structure pretty reasonably well.

52:21 I don't see that same future being so easy for Zcash. Granted, there is a Zcash ETF, so there's something there, but I would expect as capital controls get larger of an issue in the West and then China cracks down even more so in the East, there's no big... Both superpowers are going to be extremely offended by Zcash, probably.

52:46 How do you think about contending with this very big, bearish issue in the future? I mean, this stuff is very difficult to predict. I do agree that Zcash is very sort of, it's a much bigger issue in China, I think, given the level of control that they seek. in the United States, I'm much more optimistic.

53:09 Like, privacy is literally, like, foundational to our country. It is a prerequisite for the Bill of Rights, right? You can't have freedom of speech or any of the other rights espoused in the Bill of Rights without some level of privacy, right? Because, like, If you don't have, for example, if you don't have like freedom of thought, like, and if the government can sort of know what you're going to say based on your thoughts, they can just sort of cut you off from speaking in the first place before you even go to exercise your freedom of speech.

53:46 So freedom of thought, privacy of thought, these things are... literally foundational to the country. So I'm just optimistic in like the American spirit and the fact that regulators and government officials will be aware of that. This was certainly talked about and was aware to all of the founding fathers.

54:11 And maybe we've sort of drifted a lot since then. But I'm excited and I'm optimistic of like a resurgence in that sort of... sort of freedom privacy ethos here in the United States. Yeah, so I'm very optimistic. Well, it's been a pleasure bringing you on the show today. I think the arc of Zcash is probably one of the most interesting things that we have in crypto and also in society as well.

54:38 So thanks for coming on and educating me about cypherpunk technologies and I wish you guys the best. Good luck getting to 5%. Thanks. Thanks for having me. You guys are at how much percent right now? Just under 2%. Okay, so you guys got a while to go. We'll check back in as you guys get to three and four.

54:55 Yes. Yeah, yeah. Let's do it. Bankless Nation, you guys know the deal. Crypto is risky. You can lose what you put in. This is the frontier. It's not for everyone, but we are glad you were with us on the Bankless journey. Thanks a lot.