Oct 14, 2026 · 60 min
Crypto’s next era tests security, economics and scale
Why Crypto Buybacks Are 'the Wrong Way to Allocate Capital'
As crypto moves toward broader adoption, its biggest constraints may be security, sustainable value accrual and infrastructure rather than speculation.
- 1Quantum threats and operational vulnerabilities could push crypto users from self-custody toward exchanges and institutional custodians.
- 2Lorenzo Valente argues token buybacks often prioritize price support over growth, distribution and stronger protocol economics.
- 3Tokenized equities, agentic commerce and stablecoins could expand on-chain activity, but networks need far greater throughput and durable liquidity.
Don't miss
Lorenzo Valente explains why token buybacks may support prices without creating the growth, distribution or durable value accrual protocols need.
The brief
ARK Invest’s Lorenzo Valente sees crypto moving beyond experimentation, but argues adoption will depend on solving security, value accrual and infrastructure problems.
Quantum attacks, phishing and hardware-wallet weaknesses challenge the assumption that self-custody will remain dominant; exchanges and institutional custodians may become safer defaults.
Valente is increasingly skeptical of Ethereum’s economics and says token buybacks can distract protocols from growth, distribution and building durable demand.
The conversation links tokenized equities and agentic commerce to a much larger on-chain future, while warning that layer-1 throughput must improve by orders of magnitude.
The standout tension is strategic: crypto wants institutional scale, but its networks must first prove they can protect users and allocate capital productively.
What was said on this episode
30 statements · 12 positive · 13 negative · 1 mixed · 4 neutral
2026 will mark a pivotal transition for the crypto industry.
“I think 2026 is going to be a pivotal year”
Listen at 2:23
The crypto industry is undergoing massive consolidation.
“I think we're seeing just massive consolidation in the industry.”
Listen at 2:34
Finance-related applications are currently crypto’s strongest product-market fit.
“payments, cross-border payments, trading. All basically adjacent topics around finance, which is, I think after basically 10 years, I think Ethereum launched in 2015. It's kind of the core use case and best PMF for crypto right now.”
Listen at 4:32
AI is driving crypto integration and development costs toward zero.
“the cost of integrating, the cost of developing with AI, it's essentially going to zero”
Listen at 5:30
Tokenized stocks, fixed income, and real-world assets will capture substantial growth.
“the bigger part of the market right now, and we'll receive like a lot of growth, is just like stocks, equity, you know, obviously equities, fixed income, RWAs in general.”
Listen at 7:03
Quantum computing is forecast to arrive on a 10-to-20-year horizon.
“we see more like in the 10 to 20 years kind of forecast in terms of where it's coming”
Listen at 10:53
Crypto self-custody is slowly declining, and the decline is accelerating.
“self-cost city is slowly dying. And I think this is just accelerating.”
Listen at 12:41
Centralized exchanges are currently best equipped to handle quantum and security threats.
“some of the centralized exchanges are actually best equipped to deal with this”
Listen at 18:37
User-facing custodial platforms will onboard marginal crypto users and be best equipped.
“The Coinmises, the Robin Hoods, the people that really abstract the crypto complexity, they're going to onboard the net marginal user and they're going to be best equipped.”
Listen at 19:05
Crypto exchanges, brokers, and widely used infrastructure will outperform intermediate businesses.
“Either the ones that sit very close to the user that owns the user relationship, like the exchanges, the brokers, or basically crypto infra that can get, that is infrastructure and then that will get used by like a TAM that is massive”
Listen at 20:37
Security and regulation are becoming increasingly important competitive moats for exchanges.
“security and regulation is starting to be a bigger and bigger moat”
Listen at 22:30
Bitcoin developers and stakeholders will transition before quantum attacks become practical.
“I think they'll find a solution before kind of Q day and there will be a transition.”
Listen at 25:45
Hardware wallets are exceptionally difficult to secure and operate safely.
“the hardware wallet space, honestly, is very, very hard”
Listen at 28:00
Marginal crypto users will primarily adopt centralized or non-self-custodial custody.
“I think it's going to be through kind of centralized exchange and other forms of custody, basically, that are not like self-custody.”
Listen at 29:55
Ethereum’s current value-accrual model is substantially broken.
“the value accrual is pretty broken”
Listen at 31:07
Ethereum is unlikely to accrue several billion dollars under its current model.
“imagining... a world where Ethereum accrues several billions of dollars is just very hard to imagine, if not clearly impossible”
Listen at 31:10
Growth is no longer occurring at Ethereum’s layer one.
“growth is not happening anymore at the Ethereum layer one”
Listen at 32:27
Ethereum layer one may become primarily a proof-posting data-availability layer.
“I don't see why Ethereum L1 just doesn't become just a layer where you post proof”
Listen at 33:24
Some layer-one networks may become highly valuable despite generating no revenue.
“there's a non zero probability. I think that some of these layer ones actually don't make any money and become like very, very valuable networks over time”
Listen at 36:53
Startups should not allocate all revenue to token buybacks and burns.
“it's clearly not the right way to allocate. capital if you're a startup.”
Listen at 39:17
Founders should invest capital in growth opportunities rather than token buybacks.
“I would rather a founder come to me and say, hey, my stablecoin is $5 billion of supply. I see a clear market or pathway to becoming $50 billion. I'm going to use the capital to do this. 100%. I'd rather have that instead of buying back the token.”
Listen at 40:27
Buyback-oriented tokenomics were not a good use of capital for several failed projects.
“the DYDX, the OpenSeas, the Blurs, some of those companies have similar tokenomics, and clearly... They're dead now. So it wasn't a good use of capital at that time.”
Listen at 41:01
The perpetual-futures market will become highly competitive.
“I think Perps is going to get very, very competitive.”
Listen at 43:27
The perpetual-futures market will become increasingly regulated.
“I think it's a market that is going to become increasingly regulated.”
Listen at 43:30
Hyperliquid should preserve resources for competition instead of token buybacks and burns.
“I think you want to be in a position where you have resources to be able to compete, right? And not buying back and burning the token.”
Listen at 43:45
Programmatic token buybacks do not inherently increase investor confidence.
“it doesn't give you any more confidence that it's programmatic”
Listen at 44:41
Stablecoin supply will grow by more than 40% annually over the next few years.
“I think stablecoins, again, I think they're going to continue to grow probably like 40 plus percent Kagura a year, like compounding over the next few years.”
Listen at 48:07
Current blockchain throughput is far below the 10–100 million TPS needed for agentic commerce.
“We're still very far away in terms of throughput. Matthews, I think it's the CEO of Cloudflare. We're talking about like 10 to 100 million TPS. And so we're very, very far from that.”
Listen at 52:28
Tether and Circle benefit from liquidity network effects that support many ecosystem companies.
“They're kind of liquidity supernovas where they power so many other companies in the ecosystem.”
Listen at 56:31
Launching a stablecoin network that scales into hundreds of billions is extremely difficult.
“people are heavily underestimating how hard it is to launch a stablecoin network that is big, right? That scales into the hundreds of billions.”
Listen at 57:15
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.