Binance founder, Changpeng CZ Zhao, has a rough year. The United States jailed him for breaking securities law. As the new year starts, CZ is moving back into the spotlight with his views on the crypto industry and where he sees things going.
Of course, in my view, crypto has to be mentioned in the discussion with AI. Evidently, CZ has a similar perspective. He believes cryptocurrency will boost artificial intelligence.
This is a drum I have been beating for a while.
What we are seeing is the advantages that crypto offers starting to align with AI. As the latter progresses further, the turning to crypto will be the natural move.
Another interetstng view is the idea that AI will also bring broader utility to crypto.
CZ: Crypto Preferred Currency of AI
The screenshot above was CZ responding to someone on X. It not only states his conclusion by why AI will prefer crypto over other forms of currency.
- Low cost
- Fast confirmation
- Decentralization
These are concepts that are foreign to the traditional financial system. Due to the fact there are so many intermediaries, we see things bottled up along with costing a fortune. That is not to say crypto is without its faults. There are times when transactions fees are ridiculous.
That said, the reduction in friction that crypto has over traditional finance equates to lower overall prices and settlements that are in minutes (or even seconds) instead of days.
Another factor in this is the ability to expand rapidly. WIth crypto networks, we are dealing with a lot of open source software. That means not only can develop accelerate but the bringing of more capacity online. For example, we could see 1,000 forks of Ethereum, with the code being places on tens of thousands of servers. How quickly can the banks expand?
When looking at AI, volumes increase dramatically. Anyone who looks at the number of stock transactions over the last 40 years can see what automated trading did.
AI agents will do the same thing...with everything. This means network capacility has to increase at an accelerated rate. AI is not going to wait around for budget meetings or some manager to sign off on a purchase request.
Crypto Overtaking All of Finance
For years, there is the ongoing debate of gold versus Bitcoin. There seems to be a divide among those who favor the advancement of technology against the hard metals people.
This was brough up to Brian Armstrong recently. He highlighted these features.
Brian Armstrong later took to X to highlight that Bitcoin also had the advantages of being fungible, censorship-resistant, and decentralized.
It is a similar viewpoint to what CZ was saying.
To me, this all breaks down to bits versus atoms. There is simply no way around the fact that bits operate at a speed that is orders of magnitude higher than atoms. The expansion of the digital world is the hare in the race. So far, the physical world is even below the turtle; more like a slug.
Taking this analogy one step further, in the turtle-vs-hare, AI is like a rocket. Hence, something is required that can keep pace.
When it comes to money, we are seeing a massive shift. This will be the basis of a future article. One key takeaway is the monetary supply is no the central premise. For decades we heard about the quantity theory of money and what it means for things such as inflation.
In the world we are talking about, this is inapplicable. The basis of the economic system is bandwidth. We basically are looking at the automation of digital services. It becomes a situation of how quickly can things move?
All of this stems from the fact we are dealing with ledger based systems. AI is basically operating on top of that, producing transactions at nearly incalculable rates. A monetary system that constrained by intermediaries, regulations, or board meetings simply will not keep pace.
Another analogy is the digital download of music compared to stamping out records and shipping them out. The gap between the two in time is enormous.
With AI and currency, it is the same thing.