WARNING: Crypto Must Prepare for Bunker Day | Santiago Santos

Santiago Santos argues that crypto investing should favor protocols with demonstrated fees, revenue, and product-market fit over projects relying mainly on narratives. He sees financial applications as crypto’s main prize, particularly perpetuals, options, and tokenized stocks. If more trading of non-crypto-native assets moves on-chain, he expects it to create substantial fee opportunities.

For Layer 1 networks to capture value, Santos says applications need to generate fees, but he doubts that enough fee-generating activity exists to sustain valuations across ten L1s. He has strong conviction in Solana and is less comfortable with Ethereum’s rollup architecture, which he believes can keep fees from accruing to Ethereum L1. In a Robinhood-on-Arbitrum example, he cited Robinhood capturing $100 million in fees compared with $10 million for Arbitrum.

Santos described Pump as one of crypto’s most profitable protocols, saying it had generated more than $1 billion in fees, including substantial fees during a bear market. The discussion put Pump at a $6.5 billion fully diluted valuation and Hyperliquid at $100 billion. The host argued that Hyperliquid benefits from liquidity-driven network effects that Pump lacks unless Pump builds a social network; Santos began to dispute the distinction, but the exchange cut off before his argument was clear.

One speaker presented Backpack’s unified liquidity layer as a possible way to limit fragmentation across trading venues. The speaker said Backpack offers tokenized stocks, other assets, real-world-asset on- and off-ramps, and licensed access, describing it as a low-cost way to trade tokenized stocks without wrappers. They cited a current fully diluted valuation of about $1 billion, an investment made at a valuation of a few hundred million, and the possibility of a 10x return if execution continues.

The speakers saw on-chain options as a major opportunity, with capital efficiency relative to traditional exchanges a key test for DeFi protocols. One praised Derive, formerly Lyra, for continuing to build through a brutal bear market and emphasized responsible use of capital. Another pointed to Hyperliquid’s 24/7 markets, including oil moving from roughly $75 to $83 during a weekend conflict, as an example of the activity those markets can support.

The host raised Justin Drake’s “Bunker Day” warning as the possibility that advances in mathematics could threaten cryptographic systems sooner than expected, without waiting for quantum computing. Santos cautioned that he might be misrepresenting Drake’s proposal, but understood it to mean that signing a transaction could expose funds to private-key recovery. He urged listeners to read Drake’s tweet and said that, under the precaution as he understood it, users should move funds to a new address after signing a transaction. He warned against panic, saying capable teams know about the risk and are working on it, while urging people to start thinking about it. He also said Bitcoin’s security budget, long treated as a distant concern, needs attention now.

Santos said Zcash could become bigger than Bitcoin but did not expect it to surpass Bitcoin’s market capitalization, while allowing that flows could shift from Bitcoin to Zcash. He cited Zcash’s rise from about $50 to $1,300 while remaining at a fraction of Bitcoin’s market capitalization, and described Bitcoin and Zcash as examples of scarce assets.