Tulip King on Selling Bitcoin For The First Time, ZEC's Exploit, Bitcoin & Quantum And More

Counterparty's own Tulip King joins Threadguy for the first interview on the new overlays to break down the Zcash exploit that rattled crypto: how a ZK-circuit bug let someone quietly mint phantom tokens, why the fix exposed a centralization problem most holders missed, and what it taught him about the value of a network that does nothing. He gets into the Bitcoin trade he swore he'd never make, his contrarian case for letting quantum run its course, where the real returns are hiding in low-cap crypto, and the privacy-by-choice thesis. Closes on why Bitcoin, for all the carnage, is still destiny.

Transcript

SPEAKER_01 0:00

How are you, man?

SPEAKER_00 0:00

Dude, I'm good. How are you? Big day for you, UPFT and brand.

SPEAKER_01 0:04

You're part of it, dude.

SPEAKER_00 0:05

First, first guest with the new overlays. First guest with the new overlay.

SPEAKER_01 0:08

I figured we break it in a little bit. Um market looks pretty good.

SPEAKER_00 0:14

Yeah. If you hold the right coins. The market looks good if you hold the the three good coins, yeah.

SPEAKER_01 0:22

So what do you like right now? You've been flip-flopping a little bit. Everybody wants to talk crypto. They wanted to hear from you. What do you what do you uh what do you like right now? What are you interested in? What are the what are the good coins? How are you thinking about it?

SPEAKER_00 0:33

Yeah, well, I mean, I I like hype just as much as everybody else. I was very, very in love with Zcash before kind of all of the all of the fuckery today. Um, and I am like so sick about Bitcoin I could puke. That's pretty much my my mental state right now. And then I have opinions on, of course, all the rest of the coins, but like as far as anything that everybody's talking about.

SPEAKER_01 1:02

I was gonna try to cover the Zcash thing myself, and then you were teaching me about it on our stand-up today, and so I was like, maybe just come on and talk about it for like 20 minutes. Can you give us the summary on what just happened as it relates to Zcash, the drama? You're I mean, you're fighting one of my biggest bags, one of my most beloved bags, and you're a I'm fighting one of my biggest bags. Yeah, you're like, I don't know. I'm reading it, I'm like, what's going on? Like, get give us the uh rundown on what happened with Zcash.

SPEAKER_00 1:32

Yeah, so essentially a like security engineer uh at Zodl or associated with Zcash discovered a uh a potential exploit in the ZK circuit that is used for the Orchard pool. So essentially, like when you take your Zcash and you shield it into Orchard, you're you're kind of putting it into like a smart contract of sorts, like that enshrines the behavior of the privacy pools, right? And so those have their own logic, right? Um, he found this bug and he was like, Oh, they're being pretty cheeky about the language of the bug saying, Oh, it like it would have been able to do like unvalid state transactions, which I I mean it seems like the honest way to read that is like there was a double spend bug, right? Like somebody could have exploited it to essentially spend the same amount of um they explained it, it had some amount of scalar math type stuff where I was like, okay, I mean, I don't really get it to be honest with you, but it's basically like um, you know, when you transition from like transparent Zcash to shielded Zcash, you're like playing by a different set of rules, right? Because they have to implement like essentially a new way for the coin to work, right? For it to be private, right? It you can't just copy paste the same code over, it has to like do all the ZK logic and stuff, right? So it's it's possible just that as you like you want it to behave the same way, send, receive, but just all in private, but you can like introduce a bug when you do that, right? And it seems like that was the case here. So they um what they did is first they did like a soft fork to censor um orchard transactions. So essentially what that is is they just rejected them. So I think it was about like a 24-hour time window, but for however long, they basically said, Hey, everybody run this soft fork software, miners, exchanges, wallet operators, and um it basically means if anybody went to do a transaction within the orchard pool, we would just pretend it like just ignore it, right? Like not include the transaction. The point of that was essentially like while they're trying to fix the bug, if somebody else would have discovered the bug, it's not gonna work, they could exploit it. But by blocking all transactions, it can't be exploited. So then they fix the bug, and then they do a hard fork that essentially moved the ZK circuit like to this new valid logic that doesn't have the exploit anymore. So there's a there's a lot of like different pieces. Like the first piece is like let's be clear, it's actually it's just not good. I I don't see how it's good that Zodl can ping everybody and be like, just ignore that these privacy pools exist, and they can like instantly get everybody to do that, and then that can also just like hit the network with a hard fork, and we're all just like on this new network now. Like, I understand the response where people are like, Oh, it was easy to coordinate because the bug was so serious. So if there was a hyper serious Bitcoin bug, maybe they'd coordinate too. But there is a hyper serious Bitcoin bug named Quantum if nobody's coordinating, right? So, like end of the day, like you just have to admit that like it's a concerning amount of centralization, even though they did the right thing, like it would have been worse to leave the bug in there for sure, right? But like it exposes and reminds us of like candidly, like the value of Bitcoin not doing anything. Like, that's problem number one is centralization. Problem number two is the the privacy pools, because there's actually Orchard is like a follow-up to some other Zcash privacy pools, right? It was one of the big upgrades that made it super dope. But they um they operate on like what's called the turnstile. Okay, so essentially if I deposit 10 Zek and you deposit 10 Zek into the pool, the the network knows that there's 10 Zek in the private pool. You and I can swap back and forth all day and it will be hidden, but they know the total amount that way. Like when I go to withdraw, I can't withdraw 30 Zek because I'll put in 10 and you put in 10. The network knows there's only 20 Zek. But imagine I used this exploit and I have like I really have 10 Zek, but I sent a bunch of other wallets in there I own 10 Zek on double spends, and then I could just drain the pool, like classic DeFi style. I could pull out all the way up and turn style. So what that essentially means, so like Zcash Network, there's still the same known amount of tokens, but in the privacy pool, it could have been the case where, say, there's a million deposits in there, some guy just went and created 17 million private tokens that nobody knows about because it's a privacy pool, nobody knows it was actually exploited. Now, he could only pull out the 1 million, but what happens if other people start to integrate? Like, oh, I can buy this thing with private tokens, and I don't ever have to leave the pool to buy a Chipotle burrito, or I don't ever have to leave the pool to do a near to do a transaction with near intents, and you never know.

SPEAKER_01 7:02

And so the it like the thing I always thought was funny about privacy coins, like one of my favorite bits was like no one actually knows what the supply of an arrow is because it's private. There's no way to ever really know if there was some sort of double spend, double mint function exploit that happened at some at some stage.

SPEAKER_00 7:20

Yeah. And think of it this way, right? Like, you could also there's reason to believe you wouldn't drain it right away. Like, if I had all that private Zek and I instantly pulled it out into the public pool, everybody would know, and the the exchanges would shut down, everybody would shut down. But why don't I just withdraw a thousand Zek every day and just pay myself a permanent dividend until that pool is slowly drained, right? Like, so the the the problem is, is like it just creates this uncertainty, right? And that uncertainty is kind of inherent to these private projects, right? And I think the Zcash turn style mechanism is is actually pretty clever because Monero, you could have God knows how many coins, not even right and never prove it. Zcash, Zcash, you can at least prove there's this many transparent possible coins, right? Which is which is good. So the exposure is is less, but like I don't know. I I I I don't think it should be underplayed the centralization and the level of concern that like this created, at least for me.

SPEAKER_01 8:24

The I mean the funniest bit about the whole thing is that it it pumped on this news. Everyone was blowing my phone up about it. I looked at the chart, I'm like, oh, it's green. Why is everyone asking me questions about this?

SPEAKER_00 8:35

I think I mean it it it basically says two things. It says one, people fucking hate Bitcoin right now, they don't care.

SPEAKER_01 8:44

People right now, I'll do anything.

SPEAKER_00 8:46

I'll do I'll do anything to get out of it, right? I'm like an indiscriminate diversifier of my Bitcoin, is is the first thing it says. The second thing it says is like people just don't really understand this like Zek dynamic. They see it as just like a network upgrade, which has been like very normalized by Ethereum and Solana and Hyperliquid, which is fine, but like the thing to remember is like those projects aren't money, right? Like, I you go to sleep at night holding Bitcoin like a baby because you know Satoshi isn't gonna post a blog the next morning saying, Hey, I froze all your funds overnight, you know? Like, that's why I sleep like a baby holding Bitcoin for all this quantum shit. But like, look, I I don't I don't want to wake up and see a blog from Zuko ever. You know, like the only I only want to see one more blog from him in the rest of my life, and it's like, hey, here's the quantum resistant plan, we've done the thing, or ZK's are quantum resistant, we're done now. That's it. That's the only thing I ever want to read from Zuko. You know, like it's it's a problem.

SPEAKER_01 9:56

It's a good take. It was it was crazy, it was green. So, what did you do? Did you you sold Zcash?

SPEAKER_00 10:03

No, no. So, okay, so yesterday I had uh I have to I've I have to break news to anybody who's actually a tulip fan. I uh yesterday I had this I trimmed some Bitcoin. I I did you really do it? I did it. I did it.

SPEAKER_01 10:17

Have you ever sold Bitcoin before?

SPEAKER_00 10:19

No, no, it's like it was it was it was I hope I sold the bottom. Looks like I didn't, unfortunately. But um no, I I I I just like it's you've never sold Bitcoin ever.

SPEAKER_01 10:34

Ever. You know, one of the reasons I told Malcolm we have to hire you accountable is you came on the stream and I asked you what percent of your net worth was in Bitcoin, you said 150%. I said, What does that mean? You said I'm on margin.

SPEAKER_00 10:46

I'll never Yeah, so I I literally went from like well, I I so basically it's kind of been an interesting like story for me. I yeah, before like during that interview, I was I was like 150, 160%, you know, depending on the price, whatever margin, right? Um and then you know, we got into like stocks and all that other stuff, and like it's kind of funny. I I basically have been on like one of the greatest trading hot streaks of my life, and I was like, for the first time ever, I was just turning profits into hype instead of into bitcoin. So my kind of like my you know, Bitcoin went from 160 to 140 to 110 to 90, just normally, just by not even by selling any, but just by making money on all of these other assets, right? And uh after essentially closing the last of my Bitcoin-based margin and then uh trimming the position, it's it's like a third of my portfolio right now. What it's crazy. Yeah, in the last year I've gone from like 150% Bitcoin to like 30% Bitcoin. It's nuts.

SPEAKER_01 11:51

Whoa. What what push you over the edge? I felt bad because I felt like I was responsible. I'm not gonna lie. I felt like I was partially responsible and I felt bad this morning. I'm gonna be honest.

SPEAKER_00 12:07

Well, I I think like so one, I I think the first time like with Zcash was the first time I was actually really hedging Bitcoin. Yes. Where I was like, I'm holding some Zcash because um either Bitcoin doesn't fix privacy, which look now based on the coin audit, I'm not even sure if Bitcoin should try to be private. Maybe maybe AirMass is right, and we should all just hide our Bitcoin from the IRS and mixing pools, and then it's functionally private. You didn't hear that from me. Um, and then as far as like quantum goes, I'm also starting to think look, maybe we let the quantum get hacked, they full port, full stack all the coins, liquidate Sailor, take Bitcoin to 4K, one last holy distribution, and then we rip it back to 2 million. Like, like funnily enough, what Zcash is teaching you right now is there is actually something to be said about the network doing nothing ever. If you have it's funny, it say quantum's happening in five years. If you have a seven-year time horizon, that's a problem. If you have a 70-year time horizon, look, those coins will get stolen, but then they'll get distributed, they'll get sold, right? And then problem again, right? You've solved quantum, you're still proof of work. There's been zero soft forks, there's been zero asset seizures, and even the quantum transactions were playing by the rules. So it still remains the most fair crypto ever made. And now it's secured by quantum compute, and it's like secured by basically quantum hash, real hash. So, but long story short, you know, I hedged with the Zcash, right? Um, and I just it became we reached the point where it's like the first time is like it's not so easy as you can buy Bitcoin and do nothing.

SPEAKER_01 13:56

Which is probably for the better, by the way.

SPEAKER_00 13:59

Yes, that's why hype is going up.

SPEAKER_01 14:01

It's only it's it's like the markets don't work like this, is what I've learned. Is you can't just like buy the guaranteed thing, log off for four months, and guaranteed make the money forever. Otherwise, it'd be too efficient, there'd be no opportunity to make any money.

SPEAKER_00 14:14

Exactly. Exactly, yeah. Yeah, and I think like you know, it used to be so simple as like Bitcoin is essentially the crypto ETF. And if you wanted to get cute, you would like buy some ETH or buy some Solana. But we saw that you can't blindly hold ETH. Obviously, you can't blindly hold Solana, so why would it be the case that you could blindly hold Bitcoin either? You know, and at this point, like hyperliquid, which is where all of these crypto tokens want to trade, anyways, like that's a better crypto index than Bitcoin, right? Because you have exposure to just crypto market cap and therefore volumes growing, which generates more fees, and you have exposure to the growth area of like equity perps, RWAs, like hip for creating options contracts. Like it's an it's like an ETF on Bitcoin, it's an ETF on everything, basically. So yeah, I mean I I'm like a third Bitcoin, a third hype, a third Zec.

SPEAKER_01 15:13

It obviously changes just based on the it also um I'm kind of like straddling right now on the private put a pin in the privacy thing. I part of me feels like like listening to you talk about it, part of me feels like rather than a default private currency, you would rather just have like existing currencies with an ability to shield the transactions, like they like the near type of process where you can like make individual transactions private. You can go private by choice if you want, but the currency doesn't have to be private by default because it comes with a plethora of problems if you start private.

SPEAKER_00 15:52

Yeah, yeah, yeah. Well, this is this is the near thesis, right? And this is the uh yeah, get back, get back, get back. I mean, this is uh this is the near thesis and this is the rail gun thesis, right? Is like um make it you tap into privacy and then you tap out of privacy, and it can just exist at the protocol level, it doesn't need to exist uh at like the base layer, right? Yeah, and then competing protocols can have competing implementations, people pick the most secure one with the best integrations, the best liquidity, and we move on. I mean, I think like um I can I don't hate that conclusion, honestly. Yeah, damn.

SPEAKER_01 16:29

Okay, give me like a uh mini alt season take if you have one on people want people want some bull some bull porn. What what do you what uh what do you like? How do you think how do you think it plays out from here?

SPEAKER_00 16:42

Yeah, I think you essentially at this point um the you need some hype has to continue performing, right? Like the what hype is telling the market is that like okay, revenue actually matters. The other thing that it's telling the market is like buybacks and caring about the tokens matter, right? So like Helium Foundation kind of rugged everybody, right? Um, what was the one deal where like Axelar was bought by Coinbase kind of rugged everybody, right? Like, no more of these like toxic acquisitions where the holders have no rights, no more of this. Oh, I'm gonna turn buybacks on and off, right? Like, put the revenue on chain, put the buybacks on chain, and just swap the token at Infinium, right? Like that is becoming like the winning tokenomics model, which is exactly what like we've all kind of always wanted to happen. So, first and foremost, like hype just needs to keep going up. If it does go up, then the real bull case here for anybody who like wants to get back to like meme coin level returns is like there is an army of like crypto projects that actually make decent money and like make really decent money compared to their market caps, right? Like I to avoid like shilling small tickers, just go on DeFi Llama and look at like the revenue tab and see which of these projects actually make money, right? Now you have to be careful because like you have you're making two bets, right? That they're making money and it will continue to grow, and that the team is going to like make the right decisions to align that revenue to the token, right? So, like one example of it going the other direction is like collector crypt cards. I mean, you have their official handle tweeting that this is like a valueless meme coin. I think they're being maybe kind of cheeky because they keep like signaling some level of concern about the SEC and stuff. So look, if they're scared of being sued, whatever, I guess. But like that's a revenue generating project that like told you it's a meme coin. Like, I don't know why anyone's buying that thing, right? Like, that's the most toxic like investor relations you can imagine. So, like, it's an army of minefields, but there is a whole range of tokens in that like 10 to 50 mil like range that like honestly, like if they just did the right things and like showed that they had steady leadership, could all re-rate like 10x, right? Like, uh they're not gonna be like multi tens of billion dollar protocols like hype, but their margins are good. Why not trade at 100 mil or or 80 mil, right? Like, there's multiple after multiple to be found at these like low revenue generating projects if the teams can just get their heads out of their asses.

SPEAKER_01 19:39

That's a good take. Also, the live life TV. Thank you for the five gifted. I I'm not even gonna say pump fun. I'm not gonna say it. Um, I like your I like your the way you think about it. I I think uh I think hype has to perform. I think if hype stops performing, we have uh big problems on our hands. This is why I get scared every time there's like a mini run, and then it's like, okay, we're buying WorldCoin. Okay, we're buying every like we're buying grass, we're just like ripping high, high, high max beta alts. Um, also, thank you for coming on and giving us your Zcash thesis. You gotta give me give me like sign off with like a Bitcoin thesis from here. Like, I know you kind of talked about it, but like you know you are like you a decent amount of my conviction. Like, give me some like yeah, yeah. Like a little bitcoin sauce before you leave. I'll let you go after, but give me something, dude. Give me like it don't say 4k again, don't do that again. Give me something before you go. Just a way to think about it, a mental model. Give me something.

SPEAKER_00 20:36

Yeah, dude. I don't want to hit it with the like the world is gonna end, so you have the long Bitcoin, but like it remains the same. Like, this is like um it is the like hardest, most pure asset. It is like resistant to like political forces, to screw it. It might even just ignore quantum. Like, it might just like it's kind of bullish, actually. I think if it says fuck it, we don't care about quantum, we're just gonna plow straight through it. Hack the coins, market sell them. Next 10 minutes, there's gonna be a block. And 10 minutes after that, there's gonna be another block. Fuck you, we're not changing the rules, right? Like, that's actually like that. Take it or leave it, which by the way, has been the entire value prop the whole time, right? And like society, like, dude, like money is like what you get for like spending your time on shit. Like, like you work on things and you like give things your attention and you like put time and brain power to this stuff, and your reward from society is like money, which is then your claim to like other people's time and attention. It's actually so like deeply important to the species that we have like a fair and equitable money that like is as hard and resistant and like true as as possible, right? That like doesn't ever change the rules, right? And so, like, we're all playing the same game no matter where you are in the world, no matter who you are. That's like you still have to believe that it's actually so deeply important for society and and humanity, and is going to make the world so much of a better place. How could it not go to a million, right? And then 10 million, and then a hundred million, and eventually pick your line where one BTC equals one BTC, right? Like, we we actually, as bearish as I am, and like as much as I didn't want to sit through this price action because I'm having like just a trading hot streak, like it's destiny, like like it's it's going to go to a million because it is actually just still better than everything else ever invented, right? Like, thank God for Satoshi.

SPEAKER_01 22:54

There he is. There you go. There he is. There's like a parallel universe somewhere where you are Michael Saylor and you never did the like weird dividends shit.

SPEAKER_00 23:07

I'll tell you what, if I was Michael Saylor, I would have fucking died before selling. I would not, I would they'd have to drag me out.

SPEAKER_01 23:15

Ah, thank you, bro. Uh Tob King, you're the goat man. You by the way, you want for the chat as well. He is on a genny trading streak. I'm not gonna lie. He's on a genny trading streak. And Pharma next. Pharma next. We're ripping Pharma next. Yeah. AI Pharma. I like it. I like it a lot. Um, dude, you're the any any anything final? Thank you for coming on for like a quick I I think it was it was it was time for a quick little a little binker. Anything else you want to add? You're the goat.

SPEAKER_00 23:41

No, that's all I got. It's uh it's a pleasure. Let's uh let's enjoy the new brand and the new overlays, everybody.

SPEAKER_01 23:47

They want to know what that book is, mind you.

SPEAKER_00 23:50

Um this book, more money than God. They can't see that one. Um and then that one they want to know. This book, uh Damon. It's about like an AI that takes over after some guy dies.

SPEAKER_01 24:03

Oh, nice, nice man.

SPEAKER_00 24:06

Yeah, very topical, very topical research.

SPEAKER_01 24:09

Cool, dude.

SPEAKER_00 24:09

Yeah, yeah, yeah. And then this one's a tour book of Japan. So multiple books. Beautiful.

SPEAKER_01 24:13

You're the goat. Till up, you're the fucking man, dude. Thanks for coming on. It's always a pleasure. Yeah, yeah. All right, brother. We'll see you on our call in like a couple hours. Yeah, we'll see you in like 20 minutes. I'll see you in like 30 minutes. Yeah. All right. Peace, brother. Yeah, yeah, yeah.