OpenAI, Hyperliquid, and the Internet's Next Growth Phase | Roundup

This episode explores how AI, spearheaded by giants like OpenAI, is reshaping the internet's next growth phase, with crypto innovations like Hyperliquid and new treasury strategies emerging as critical downstream investment frontiers.

Jony Ive, Sam Altman, and the Future of AI Hardware

• The discussion kicks off with the hosts analyzing the recent video featuring Jony Ive (former Apple Chief Design Officer) and Sam Altman (CEO of OpenAI), signaling a collaboration on new AI hardware.
• Michael S. reflects on Jony Ive's legacy at Apple, where the Industrial Design group often dictated product form and function, contrasting with other hardware companies. He notes, "this will be kind of in my mind the test of whether or not um it was Johnny steering the ship or Johnny, you know, aboard the ship as it was taking off with iMac, iPhone, iPod, everything."
• Speculation abounds regarding the form factor of their potential AI product—whether it's headphones, a wearable, or a desktop device. This venture marks Ive's first major mass-market physical product without an Apple logo.
• Actionable Insight: Investors should closely monitor this Jony Ive and Sam Altman collaboration. It has the potential to define the next generation of AI-centric consumer hardware, possibly creating new ecosystems and significant investment opportunities.

San Francisco's AI-Driven Renaissance and Wealth Creation

• The Ive-Altman video is seen as cementing San Francisco's role as the epicenter of future technology, particularly AI.
• Vance highlights the immense wealth creation potential in SF, driven by anticipated IPOs from companies like OpenAI and Anthropic. He remarks, "if the Open AI IPO is the largest IPO in US history... it's like there's so much wealth that's going to be created in the city."
• The hosts contrast SF's burgeoning AI scene with New York City, which currently lacks tech companies of a similar "power law" magnitude. Sam Altman is increasingly viewed as a central figure in SF's tech landscape, especially with Elon Musk's move to Texas.
• Strategic Implication: The concentration of AI talent, capital, and groundbreaking companies in San Francisco is creating a powerful feedback loop of innovation and investment. This makes SF a critical geographical focus for anyone involved in AI and AI-related crypto ventures.

Crypto's Shifting US Landscape and Geographic Focus

• There's an observed trend of crypto professionals, including those from abroad, returning to or establishing a presence in the US, primarily in San Francisco and New York, despite ongoing regulatory ambiguity.
• Michael S. (or another host) notes a geographic specialization: New York is favored for finance-related crypto projects, such as Real World Assets (RWAs), due to its proximity to the traditional finance industry. San Francisco is the preferred hub for crypto infrastructure and AI-crypto crossover projects, benefiting from its deep engineering talent pool and AI ecosystem.
• Vance offers a strategic perspective: "if AI is driving the internet crypto is downstream of AI... it probably does make on a certain time scale more sense to be closer to where the tailwinds are emanating from."
• Actionable Insight: Crypto AI projects should strategically choose their US base. San Francisco offers unparalleled access to AI innovation and engineering talent, vital for developing and scaling AI-integrated crypto solutions.

Revisiting Past Crypto Ideas in the AI Era & Data Storage

• Michael I. (or another host) speculates that some 2017-2018 Initial Coin Offering (ICO) concepts, particularly decentralized storage solutions like Filecoin and Arweave, might have been ahead of their time but could now find strong product-market fit with the rise of AI.
• Filecoin/Arweave: These are decentralized storage networks that enable users to store data across a distributed network of computers, offering an alternative to centralized cloud storage providers.
• The increasing interaction with AI models like ChatGPT, which often involves sharing personal data, underscores the growing need for private and verifiable data storage solutions.
• Michael S. mentions "Space and Time" (with a disclosure of being an investor), a platform working at the intersection of data technology, AI, and blockchains. It aims to provide verifiable data understanding using technologies like zkTLS.
• zkTLS (Zero-Knowledge Transport Layer Security): A cryptographic technique that allows for proving the authenticity and integrity of data transmitted over the web (via TLS) without revealing the actual content of the data. This is crucial for private AI computations.
• Strategic Implication: The exponential growth in data generated and consumed by AI systems creates significant opportunities for decentralized storage and verifiable computation. Crypto AI researchers should explore how blockchain can address AI's unique data privacy, security, and integrity challenges.

Consumer Adoption Waves and the Role of Blockchains

• Michael S. references Ben Thompson's (author of the Stratechery blog) framework on technology adoption waves, identifying distinct eras: PC, Internet, Mobile, and now AI.
• He posits that blockchains, much like Software-as-a-Service (SaaS), are currently more aligned with enterprise applications rather than mainstream consumer technology. AI, however, is poised to be the engine for the next wave of consumer applications.
• The hosts discuss how different generations perceive AI tools like ChatGPT: older generations see it as an advanced search bar, millennials as an on-demand conversational partner or information source, and younger generations as a 24/7 assistant or even a friend.
• Vance expresses more optimism for consumer-facing blockchain applications, citing the speculative trading of memecoins on platforms like Pump.fun as a form of quasi-consumer activity.
• Actionable Insight: While direct-to-consumer blockchain applications face significant adoption hurdles, the proliferation of AI-driven consumer apps could indirectly fuel demand for blockchain-based infrastructure (e.g., for decentralized identity, data management, or micropayments). Investors should look for these second-order effects.

The State of Consumer Crypto and Coinbase's Strategy

• Michael I. points out that the vast majority of on-chain application revenue (approximately $1.7 billion out of $2.1 billion in the last quarter) is still generated from trading activities.
• Michael S. distinguishes between two main types of consumer apps: free-to-use (typically monetized by advertising, requiring massive scale which crypto lacks) and subscription-based (paid for content or services). He argues that crypto currently has no breakout successes in either category beyond speculative use cases.
• Vance perceives an internal tension at Coinbase regarding its consumer strategy. One faction seems to be aggressively pushing consumer-oriented features, such as integrating Farcaster (a decentralized social network protocol) into Coinbase Wallet. He voices concern that this push, if premature, could "torch" users with volatile, ephemeral coins. The other faction at Coinbase reportedly favors listing assets with stronger fundamentals.
• Vance states, "the more we lean into consumer uh as the paradigm before it's ready, it feels like the more people we're going to torch and confuse."
• Strategic Consideration: The drive towards consumer crypto applications, while holding long-term potential, carries immediate risks of user disillusionment if product-market fit and sustainable economic models are not carefully developed beyond speculation.

Hyperliquid's Ascendance and L1 Strategy

• Michael I. introduces Hyperliquid, a decentralized exchange for perpetual contracts (perp DEX) that is notably building its own Layer 1 (L1) blockchain in reverse order—starting with a successful application and then developing the underlying L1 around it.
• Perp DEX (Perpetual Decentralized Exchange): A type of decentralized exchange that allows users to trade perpetual futures contracts, which are derivative instruments that track the price of an underlying asset without an expiration date.
• L1 (Layer 1): Refers to the foundational blockchain protocol itself, like Ethereum or Solana, upon which applications are built.
• Michael S. suggests Hyperliquid's ambition extends beyond being just a DEX; the goal is to establish an L1 comparable to Ethereum or Solana, but with an application as large as Binance at its core.
• Vance emphasizes Hyperliquid's impressive fee generation, reportedly around $2-3 million in daily buybacks, which he suggests could be significantly higher than Solana's effective buybacks benefiting stakeholders. He remarks, "watching that asset go up in a straight line, uh, was like excruciating. And it kind of feels like that same thing is happening with Hyperliquid."
• The discussion also touches on Hyperliquid's potential to surpass Solana in market capitalization, driven by its efficient fee mechanics and a comparatively tighter token float.
• Actionable Insight: Hyperliquid's "app-first" L1 development strategy, coupled with its strong revenue generation and direct buyback mechanism, presents a compelling alternative model for blockchain value accrual. This warrants close observation from investors looking for innovative L1 designs.

Comparing Hyperliquid's Revenue to Other Chains

• Michael I. presents data indicating that Hyperliquid's application revenue has been significantly outperforming other exchanges.
• The founder of Hyperliquid, Jeff, formerly of Hudson River Trading (a high-frequency trading firm), was reportedly motivated by frustrations with existing offshore exchanges.
• Vance stresses the importance of comparing Hyperliquid's L1-level fee capture (which directly funds buybacks) with the transaction fees paid to validators on chains like Solana. Citing data from DeFi Llama (an analytics platform for DeFi), he suggests Hyperliquid's effective chain revenue directed to buybacks is substantially higher (e.g., $2 million for Hyperliquid vs. $150,000 for Solana in a given period).
• Strategic Implication: Hyperliquid's transparent and direct revenue-to-buyback model offers a clearer and potentially more attractive value proposition compared to the more complex tokenomics of other L1s. If its growth trajectory continues, this could attract substantial capital.

The Rise of Crypto Treasury Vehicles

• Vance discusses the emergence of publicly traded companies, such as Metaplanet in Japan, that function as acquisition vehicles for crypto assets, mirroring MicroStrategy's Bitcoin strategy.
• These entities typically raise capital through equity or debt offerings to purchase cryptocurrencies, thereby offering traditional investors, including bond investors, exposure to crypto assets or crypto-linked returns.
• Vance underscores the scale of this trend: "these things are real like these things are cults and they're like big and they're like spreading and there's going to be one in every country... these things are just going to buy a ton of digital assets."
• Michael S. explains that these vehicles are creating a new pathway for the traditional bond market to access the crypto industry, an asset class that has historically been difficult for debt investors to engage with directly.
• Actionable Insight: The proliferation of these crypto treasury vehicles represents a new and potentially significant source of demand for major cryptocurrencies like Bitcoin and Ethereum. This could influence their price dynamics, market structure, and accessibility to a broader range of institutional investors.

BNB Tokenomics and Hyperliquid's Potential Launchpad

• The conversation shifts to BNB, the native token of the Binance ecosystem. Michael S. points out that a key utility of BNB currently involves users staking it on the Binance platform to gain early access to new token launches and airdrops. This mechanism has reportedly generated substantial returns for BNB stakers (anecdotal claims of up to 75% APY from the value of airdropped assets).
• BNB: The utility token of the Binance exchange and BNB Chain, used for fee discounts, participation in token sales, and network transaction fees.
• Michael S. speculates that Hyperliquid could adopt a similar "launchpad" model. By staking HLP (Hyperliquid's token/points), users could receive airdrops of new tokens launching on the Hyperliquid platform, potentially with greater transparency than existing models.
• For such a model to succeed, Hyperliquid would need to cultivate broader retail adoption, as its platform is currently geared more towards sophisticated DeFi traders.
• Strategic Consideration: If Hyperliquid can successfully expand its retail user base and implement an effective launchpad mechanism, it could significantly enhance its token's utility and ecosystem value, potentially emulating some aspects of BNB's success in user engagement and value capture.

Hyperliquid's Ecosystem: Integration vs. Neutrality

• Michael I. raises a strategic question: should Hyperliquid aim to vertically integrate by building its own native ecosystem components (like stablecoins or lending protocols), or should it focus on being a neutral L1 platform that encourages third-party development?
• Vance believes Hyperliquid is already fostering a permissionless ecosystem, supporting third-party money markets and stablecoins like USDC and USDT. He argues that the ultimate determinant of L1 status is the "moneyness" and widespread adoption of its native asset for denominating value and transactions.
• Michael S. highlights that Hyperliquid's initial airdrop to active platform users (primarily high-volume traders) was crucial for bootstrapping liquidity and early success. He suggests that future airdrops could be strategically used to incentivize the development of a broader range of DeFi applications on the Hyperliquid L1.
• Actionable Insight: Hyperliquid's journey towards becoming a recognized L1 will heavily depend on its ability to cultivate a diverse and vibrant DeFi ecosystem beyond its core exchange. Its community-building efforts and developer incentive programs will be critical factors for investors and researchers to monitor.

Structure and Risk of Crypto Treasury Vehicles

• Michael I. draws a comparison between the new crypto treasury vehicles and the Grayscale trusts from previous cycles. He notes that MicroStrategy's financing model, which relies on equity and convertible debt, generally poses less direct liquidation risk to its Bitcoin holdings compared to structures that might use more direct leverage against the crypto assets.
• The hosts mention several such entities: Soul Strategies and DeFi Development Corp (focused on Solana), Cantor Fitzgerald's Bitcoin fund, Trump Media & Technology Group (DJT), and SBET (a vehicle associated with Joe Lubin for Ethereum).
• Vance humorously refers to the financial engineering involved as "tradfi crime," suggesting these vehicles often operate through regulatory arbitrage or by exploiting loopholes. However, he emphasizes their primary significance is in demonstrating the substantial latent institutional and retail demand for crypto exposure.
• Michael S. distinguishes these new vehicles from earlier Grayscale products by noting their accessibility; many are publicly traded stocks available on retail platforms like Robinhood, offering a form of levered exposure to crypto for a wider audience.
• Strategic Implication: Investors must carefully scrutinize the specific financing structures of each crypto treasury vehicle. Models based on equity or convertible debt carry different risk profiles than those employing direct debt or leverage collateralized by the crypto assets themselves.

Circle's IPO and BlackRock's Interest

• Michael S. highlights BlackRock's reported interest in acquiring a 10% stake in Circle (the primary issuer of the USDC stablecoin) at the time of its Initial Public Offering (IPO).
• The rumored valuation for Circle's IPO is said to be significantly high, potentially reflecting strong institutional demand for regulated and compliant crypto infrastructure providers.
• Vance interprets Circle's choice to list on the New York Stock Exchange (NYSE) rather than the Nasdaq as a strategic move, possibly indicating a positioning towards more traditional and established financial markets.
• Actionable Insight: Circle's IPO, especially with BlackRock's potential involvement, will serve as a crucial barometer for institutional sentiment towards stablecoins and regulated entities within the crypto space. A successful IPO could encourage more crypto-native companies to access public markets, further bridging crypto and traditional finance.

Kobe's Sonar Platform and the Evolution of Token Distribution

• Michael I. introduces Sonar, a new Initial Coin Offering (ICO) platform launched by crypto personality Kobe. Plasma is slated to be the first project launching on Sonar, which aims to democratize access to early-stage crypto investments, positioning itself as an alternative to platforms like CoinList.
• ICO (Initial Coin Offering): A method of fundraising where new cryptocurrency projects sell their native tokens to early investors to raise capital.
• Vance views platforms like Sonar as a positive development, potentially disrupting traditional airdrop models by requiring participants to have "skin in the game" (i.e., invest capital). He argues, "Airdrops are kind of cancerous... having people with zero cost basis is a real issue."
• Michael S. concurs, citing that a large percentage (e.g., 90%) of airdrop recipients tend to sell their tokens quickly. He advocates for models where users either earn tokens through active contribution or invest capital, as is the case with Plasma's offering on Sonar (reportedly at the same terms as venture capital investors).
• Strategic Implication: The emerging trend of shifting from purely free airdrops to token distribution models that require investment or active participation (like Sonar or incentivized staking/validation) could lead to more stable token launches and stronger, more committed early communities. Researchers should monitor this evolution for its impact on tokenomics and project sustainability.

Reflective and Strategic Conclusion

This episode underscores AI's pivotal role in shaping the internet's next evolutionary phase, with crypto innovations like Hyperliquid's unique L1 strategy and the rise of crypto treasury vehicles emerging as key downstream investment themes. Crypto AI investors and researchers should actively track AI's growing influence on demand for crypto infrastructure and the ongoing evolution of token distribution models.