Measures of Decentralization with Chris Dixon
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As part of that journey, we bring in some of the best and brightest minds working on the cutting edge of tech to speak to our community. With our Crypto Speaker Series, co-hosted with Coinbase, we’re sharing lectures on blockchain and decentralization. Follow us here to get updated when we put out new content.
“I believe that the two things I own on the internet that will exist far into the future are my domain names and my crypto assets,” says venture capitalist, Chris Dixon. Chris is a general partner at Andreessen Horowitz where he invests and sits on the board of companies like Coinbase. “I have crypto kitty number 15. And I will own it as long as there is a copy of the Ethereum blockchain. Everything else I have online is probably going to change or be taken away. That is a deep level of trust. That is a very powerful thing.”
With Chris’s background, he could be working on almost anything he wants, and he’s choosing to invest with Andreessen into crypto and blockchain projects. He started programming as a kid and he was a professional programmer after college at the high-speed options trading firm Arbitrade. He also has a BA and MA in Philosophy from Columbia and an MBA from Harvard. The world of crypto today combines much of Chris’s background: new models for fundraising, incentives, finance, governance, and business. He recently joined us at SPC to talk about why he’s so excited about decentralization and discuss the evolution and potential future of the internet on blockchain.
How Did We Get Here?
“I think it’s obvious that the internet is the most important invention of the century,” said Chris. “What are the mechanisms that govern how all this works? To me there are very important societal, political, and economic questions, and meanwhile, we kind of backed into this current system.”
Today we live in a world where the internet looks increasingly controlled not by individuals but by large companies like Google, Apple, Facebook, and Amazon (GAFA). While these companies have done great things for the world, a kid used to be able to start a company in his garage and turn it into Apple. Now, Apple controls the distribution of his idea via the app store.
“You can’t put the genie back in the bottle when it comes to the way systems like social media work today, but there will be new bottles. Things like, who controls AI?”
Do we want these new bottles and the internet at large to be like Disneyland where one company controls the whole experience? Or do we want them to be more like a vibrant New York City. While cities today strike a balance between public and private to create dynamic “user experiences” for visitors and inhabitants, the spaces we populate on the web feel more like Disneyland. Everything that happens on youtube is controlled by YouTube.
Luckily, engineering the internet isn’t like building a bridge that’s static when complete. Instead, we can tweak, change, and rewrite more rapidly than any platform that has come before. With crypto and the decentralization movement, we now have this whole new set of parameters and tools that can be mixed, matched, and rebuilt over the next 2–10 years, leading to an explosion of new ideas and business models.
Where are we now?
Chris looks at the progress in crypto through the lens of talent. The first cryptocurrencies were fungible, like a grain of rice. One grain of rice is the same as any other; one bitcoin stores as much value as any other bitcoin. With the advent of NFTs (Non-Fungible Tokens), each token has some unique property that is valuable in and of itself. Crypto kitties was the first use case where a token (a kitty) was unique and graphics demonstrated the “individuality” of each token. Adding graphics to tokens attracted an additional 1–2M people to crypto and blockchain because of the possibilities they open up in gaming. That shift can expand outwards to affect all sorts of other industries, creating new models for plenty of creators to monetize their work in yet undiscovered ways.
“In 2008, VCs were absolutely certain that games were a terrible category that couldn’t be monetized. Fast forward to today…League of Legends had $2.5B in revenue selling virtual goods last year. These are cosmetic goods! They don’t even make you better in the game. Sometimes crypto kitties and games seem silly, but these things can have all these second order positive effects.”
Looking backwards, it’s easy to see how League of Legends makes so much money today. Chris believes that we may have the same sort of hindsight moments with journalism and music because the fundamental supply and demand is in place. People create and consume music and words. The problem is that everything in the middle extracts value away from the creators. New models and decentralization represent an opportunity to once again create a new bottle that isn’t owned by Google or Facebook.
“When people tell me it’s ridiculous that musicians will sell digital goods on a blockchain, the reality that Fortnite made $300M last month selling digital dance moves is more ridiculous.”
So where are we in terms of the internet timeline? Is it 1999 and the dawn of a Web 1.0 like bubble, or are we closer to Web 2.0 where real companies are about to emerge?
Bitcoin is 10 years old, but in Chris’s mind, the real movement started in 2015 with the launch of Ethereum and the idea that any arbitrary software could be decentralized. We’re probably only 2–3 years into it: many companies and projects have raised a lot of money and have yet to launch.
Today, he thinks we’re in a bit of a holding pattern, but the good news is that, compared to the internet, we don’t have to build out any hardware. The broadband cables are already there, and software can evolve much more quickly than something physical.
Is Crypto Too Isolated?
“You’re either crypto or you’re not,” said Chris. Today, most people are either all in on the future of blockchain, or they treat it as some fringe experiment still being conducted by libertarian hackers. Many of the smartest minds in the valley and around the world are working on blockchain. With new talent and less isolation, we will soon see more hybrid models emerge, where things like games use crypto goods but they don’t rebuild the entire infrastructure of gaming on blockchain.
Similar to gaming, Chris gave other examples of how Web 1.0 protocols allowed services like Gmail to both create a great email experience while still ensuring that the service is kept in check. “The core layer, the naming layer is decentralized, while the rest of it is centralized. It says that there are certain political powerpoints, where if you just decentralize that point, you get the benefits of decentralization, and you can centralize the rest of it. I think we’re just beginning to explore those points.”
Is it too big to think that we could reimagine ISPs as one of those points? “My personal experience is that you have one choice when it comes to last mile broadband connection. That’s a giant point of failure for a bunch of stuff on the internet. There is a long time dream where we use mesh networking rather than broadband. I pass through your phone and you pass through mine, and we transfer a bit of crypto to move data across our devices. Some people are trying to figure out how to use crypto principals to do it.”
While that dream may or may not become a reality, what’s clear from listening to Chris is that there is an untold amount of potential to create incredible new technologies that shape our future in ways we don’t yet fully understand. If the past is any indication of where we might go with blockchain, the internet and many of those companies controlling it may look like flip phones in the rear view mirror.
Check out Chris’s full interview here.
You can read more about why Chris thinks decentralization matters here.
Learn more about South Park Commons here.