The a16z Show - a16z Podcast: Decentralization and Crypto, the Big Picture

Starting point is 00:00:00 The content here is for informational purposes only should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi, everyone. Welcome to the A6 and Z podcast. Today's episode is on the big picture, given internet culture and history and evolution, of why decentralization matters. The conversation is moderator by Jessica Verilli, who's a founding partner of hashtag Angels, former vice president of CorpDev and strategy at Twitter, and is now a general partner at Google Ventures. And the discussion features Elizabeth Stark, the CEO and co-founder of Lightning Labs, which is developing an open

Starting point is 00:00:44 protocol layer that leverages the power of blockchains and smart contracts to scale transactions so they're cheap, fast, and available to anyone around the world. And the conversation also features A6 and C partner Chris Dixon, who is now a general partner on the AC. A6 and C crypto fund. Speaking of, let me just share the disclaimer that the content in this episode is provided for informational purposes only and does not constitute an offer or solicitation to purchase any investment solution or a recommendation to buy or sell a security, nor is it to be taken as legal business investment or tax advice.

Starting point is 00:01:19 And in fact, none of the information in this or other content on A6Cripto.com should be relied on in any manner as advice. You can also see A6Cripto.com slash disclosure. for further information. Okay, so now over to the discussion, which is originally recorded at our inaugural intro to crypto event co-hosted with hashtag Angels in April 2018. You can also find other sessions from this event as podcasts, where there's also an episode on the regulatory landscape in crypto, as well as on our YouTube channel, where there's also an intro to crypto basics deck available. We've heard a ton about what's going on right now, but I would love to get a little bit more

Starting point is 00:01:56 of a historical perspective on how the current crypto boom is situated in the broader context of open source software. And that's something that you've written about quite a bit, Chris. And then we'll talk about the cultural history of the open internet as well. Yeah. So I mean, so I would say, you know, everyone knows about open source software. I think it's actually kind of underrated in a way. 99% of the software in the world now is open source. Android phones are basically all open source, all the data center software you use. AWS is essentially a reseller of open source software.

Starting point is 00:02:29 So it's, you know, it's like 99% of the computers in the world are open source approaching 100% when you have IoT and self-driving cars. And I think what's so remarkable is it all began as this radical movement. It really goes back to the 80s, like Richard Stallman at MIT, and it was this kind of radical kind of like anti-copyright movement. And if you talk to people from the 90s, a lot of people dismissed it as, oh, these are these kind of strange, you know, people that don't believe in like paid software and things. You know, if you talk, if you go look at like the Microsoft, you know, all their discussions in the 90s, they were worried about Java.

Starting point is 00:03:01 and Linux never came up right and so because it was this weird left wing thing and I think of the crypto movement in a lot of ways as as as similar to this it actually sort of started a little bit I don't say right wing but a little kind of libertarian and and you know sort of this cypher punk kind of thing which a little bit can talk about and so I think that and it kind of got branded that way and a lot of people still think of it that way but I think of it in the same way that the open source movement kind of morphed into a tech movement I think that's what's happening here and and it's becoming much more. I mean, there's still these political elements, and it's very complicated nuance,

Starting point is 00:03:36 but I see it as a movement towards a new way to build digital services that are owned and operated by communities as opposed to owned and operated by a private company. And that's a very big general idea, and it's sort of a big tent that can include lots of different political orientations and, you know, technology orientations and other kinds of things like that. And Elizabeth, you've written about and talked quite a bit about the culture of the internet. Can you help us understand how what's going on right now has a richer, a richer, deeper history to it? Yeah. Thanks for being here. This is great to see everybody

Starting point is 00:04:12 here in the audience and also great to see like 80, 85% women here. So awesome. So with Bitcoin and the broader cryptocurrency movement, a lot of this resulted again from the 80s, interestingly. I actually was recently looking into this and reading some of the historical perspective. and it's pretty amazing. If you read some of the writings of people from the late 80s and early 90s, they sound so applicable today. You would not have guessed that they were written back in the day. So there was this movement called the Cypherpunk movement,

Starting point is 00:04:41 and the goal of the movement was to use the power of cryptography, known as crypto, that's what it used to be called. We're actually fighting a battle on our team because we still think crypto means cryptography in the technical world, but it has gained other meanings. And the perspective was that the power of this new, type of technology and cryptography could enable people to have greater privacy. It could be empowering and it enabled individual freedom. So there was this movement for this freedom-oriented cypherpunk

Starting point is 00:05:10 culture, but then there was actually this counter movement, which was the U.S. government. So in the 90s, the U.S. government actually banned the exporting of strong cryptography. Does anybody here, does anybody remember having to download Netscape and selecting whether you were in the U.S. or not in the U.S.? Does anybody? Am I? Right? And that was because you actually could not export this cryptography under U.S. law. So if you're outside of the U.S., you could not have stronger cryptography, so you couldn't have better privacy and better technology. So the Cypherbunk movement was really fighting against this.

Starting point is 00:05:43 Ultimately, luckily, they prevailed and they won. And Bitcoin and cryptocurrency more broadly really evolved out of that perspective. So along comes the year 2008, a major event in the history of the global financial world occurred. What was it? Bitcoin white paper. Right? There was also some other thing that happened that year.

Starting point is 00:06:04 And this pseudonymous individual or group of individuals named Satoshi Nakamoto releases paper to the world to basically no fanfare. Nobody cared. Satoshi sent this paper to a mailing list

Starting point is 00:06:16 and the response was nobody really noticed. A few days later, somebody responded actually saying that one of the biggest issues could be scalability, which is what my startup is working on. But to me,

Starting point is 00:06:27 it's really fascinating and interesting how Satoshi and those that were involved early on were influenced and they were, they really came out of the cypherpunk movement. And if I had to bet, I think those folks were on these mailing lists early back in the day and they were working with that community as well. It's amazing how things have changed. First, nobody cares and then everyone cares and maybe nobody will care again and so on and so forth. And Chris, can you elaborate a little bit on what historically has, the open source software movement historically has had this massive following and a, distributed groups of people all over the world have been collaborating to build software together.

Starting point is 00:07:03 But if you look at our current internet landscape, like, how has that group, can you just talk us through the transition of that group and what's sort of been missing and how crypto put some of those pieces together in a different way now? You're saying that sort of the current internet incumbents, kind of the landscape there. Yeah, and where we've landed in terms of concentration of power. Yeah. I mean, I think that sort of irony, right, with it. So, so the internet. is, you know, the original internet is designed with, uh, and governed by these decentralized protocols like TCPIP and HTTP and, and these have become, you know, massive, right? I mean, there's a,

Starting point is 00:07:38 there's tens of billions of IP connected devices. Um, and open source, as I mentioned before, is massive. Yet, uh, we live in a time where I think we have probably the greatest concentration of power, um, in, on the internet that, that, that, I mean, you know, or in the technology world since probably Microsoft at its peak in the 90s. Um, and that's Google Apple. Facebook, Amazon, companies like that. And we see the issues, you know, you see it in the press, right? You see these issues around, you know, how are these algorithms controlled? Who decides, you know, the sort of deplatforming, demonization.

Starting point is 00:08:11 You hear these kinds of debates, like who, you know, what's the process by which we govern these networks? I think people are starting to realize these networks, you know, are very important, right? I mean, they affect elections. They affect, you know, people's businesses. I mean, the media, talk to people in the media business and how it's affected them. And I think we kind of, you know, we kind of kind of stumbled into the situation without realizing it maybe as a community and as a world or whatever where we, these very important networks are governed in these kind of opaque ways that we don't fully understand. And so it's weird because on the one hand, yes, open source is so dominant and these open protocols are so dominant yet these large companies have managed to kind of take, you know, kind of subordinate.

Starting point is 00:08:56 those open technologies. And so to me, a lot of the crypto movement is a reaction to that. And it's interesting that a lot of it is coming, for example, out of places like Europe and Asia. And actually it's not really centered in Silicon Valley. And I think that's partly why is it's kind of a counter movement to what's happened. Well, and the early craters of the Internet, and there were a lot of utopian folks that were looking at this as a utopia back in the day, envisioned that the Internet would be this democratizing force.

Starting point is 00:09:22 I, you know, was and I'm one of them. But I think what we've seen is this evolution of centralization that has meant that there are a whole lot of gains that are concentrated in a very few number of people. So, you know, the cryptocurrency movement really is a reaction in many ways to that. Part of why I got so interested in it was I saw the power of open decentralized protocols. I didn't want all the power to be in the hands of a very small few. And I really do see this as a new opportunity. This is in a way a means to make up for the centralization that occurred saying the last decade or two. And we can kind of flip the switch and go the other way around.

Starting point is 00:09:54 And that's part of what gets me so excited about this. And this is one of those conversations. Part of what is fascinated me about crypto is there are so, because it is such a mosaic of a space, there are so many different narratives that coexist in crypto for which there is a community and there is truth depending upon what you're interested in. And so there's a narrative around crypto that's very money-centric, that's very get-rich-quick. And you may have seen that in press coverage of people who are now crypto-centi-million and people on the cover of Forbes and whatnot. And there's truth to that narrative. But that

Starting point is 00:10:28 conversation, to me, is appealing to some and maybe obnoxious to others. And then there's a narrative around a political ideology, part libertarian, part anarchist, and depending upon your views, that might be inviting or it might be sort of something that doesn't appeal to you. But then there's also a narrative in crypto, and this is one I feel like you both have been incredible educators to me around technology, distributed software, global groups of technically minded people collaborating in some fashion, and maybe trying to build a more equitable distribution of power. And what is it in our industry? And I spent almost nine years at Twitter and I led many of our acquisitions around the world and saw how much of our industry is actually dictated by access

Starting point is 00:11:18 and a relatively small number of people that hold influence. And part of what's exciting to me about crypto is those very ideas are being debated and innovated. And folks are trying to change, I think, in some ways, build things that feel like they're more accessible to people all over the world. And you don't need to be on just Sand Hill Road to fundraiser. You don't need to be in Silicon Valley to necessarily build a company. And Chris, on that note, you've mentioned before that part of the promise of crypto is it's sort of this open, the principles of open source software, but with a business model.

Starting point is 00:11:56 Can you talk a little bit about app tokens and sort of how that stitches together? Yeah, I mean, so you alluded to the, you know, the sort of the ICO craze. And there's a lot of negative elements around this. And, you know, some of the press narrative is true that there's sort of this get rich quick aspect. On the flip side, you know, if you look at how, you know, Wikipedia every year, you know, has to put these banner ads up that sort of ask for money, right? Like, so it's, there, you know, it's this amazing, wonderful resource, right? I mean, it's, you know, anyone in the four billion people now have smartphones that can

Starting point is 00:12:25 instantly get all this information. And the fact that they have to put a banner ads, it's just, you know, it's, it's kind of depressing, I think. And then, you know, where you look at there, there was a famous bug in SSL called Heartbleed, which is, you know, SSL is sort of the main encryption protocol. And it was, you know, it turned out that that bug happened that there was a half a developer working on that project or something. It was like, it was woefully underfunded, right? So, so the flip side of the dark side of all the kind of get rich stuff around crypto is that this is

Starting point is 00:12:51 also now, finally, we have a financing model for these open networks. And I think that's, that's a very positive thing, right? And if and open networks can now enjoy the same kind of economic flywheel that for profit companies have, you know, if you can look at the companies like Twitter and Facebook, one of the reasons they can get so large is they get this feedback loop where they get bigger, they raise money, they generate revenue, they feed it back into R&D, and they have these giant R&D budgets. And so now what's so exciting to me is that the open world now has a similar, potentially a similar economic flywheel and can kind of compete on a level playing field. So recently I was quoted as saying we're back in a Bitcoin, not blockchain world, because so

Starting point is 00:13:30 back when I was fundraising for my company Lightning Labs, nobody cared about Bitcoin and cryptocurrency. People would laugh us away. They wouldn't take meetings with us. Things have changed dramatically in the last really just 12 months. And that is the nature of this type of thing, right? So one of the key components, you know, a lot of folks want to say, oh, blockchains only, but actually when you have the incentive mechanism that is tied to this base layer currency or token, if you will, that actually maintains the decentralization of the network, this part is key.

Starting point is 00:14:00 And I think people are finally coming to realize why this is so significant. But from my standpoint, part of what got me interested in this whole world in the first place, It's not only the decentralization aspect, but it turns out the early creators of the internet envisioned or the web especially that there would be a way to pay online. So if you wanted to give like 50 cents to a musician whose song you listen to, if you want to pay somebody that wrote an article, it could be built in at the browser level. We actually didn't have the technologies to make this possible and the financial industry didn't build and they didn't innovate.

Starting point is 00:14:30 You know, why do I send a Venmo payment to my friend and it takes three days for it to get to their bank account, right? That's super inefficient. We can do all sorts of other things on the internet. but it turns out it takes us three days to send money in this country. Other countries, I will say, do have a little bit of a more efficient system. So one thing that I'm really excited about with the technology we're building with lightning is the ability to have this native transaction layer of the internet,

Starting point is 00:14:52 a way to send and receive money, have a new model for the internet where it doesn't necessarily have to be dependent upon advertising, where artists and creators can be paid by the end users. And also a means for developers to build on top of this. There was no way to build value directly into the internet back then. And now we finally have the possibility to do it. And we are, though, in the early days, again, in the last year, you know, if you told me that, you know, my lift driver on the way over, we were having this fun conversation about Bitcoin.

Starting point is 00:15:22 If you had told me that even a year ago, I wouldn't believe that. But it's gone mainstream. And yet we're still in the early days and there's still so much potential to build us out. And for anybody that thinks, oh, I'm too late, you're not too late. We're really just still at the beginning. And would you mind breaking down? I mean, I think one of the most profound things about this broader movement is the notion of an incentive structure that aligns the people that are doing the early work of a platform. And traditionally we've seen this in terms of developer ecosystems that are created alongside centralized companies. But it's creating an incentive structure where the developer community and also the early adopters can benefit as owners of a broader network. Can you break down just a little bit about how that works and what the promise of that is? So I'm actually an ICO skeptic. I tweet a lot about my skepticism of a lot of what's out there. I see actually some different incentives. So the community, so I'm very involved in the developer

Starting point is 00:16:15 communities. And people are actually very motivated by both ideology but also social change, which I really think is amazing. And a lot of the open source communities in the past, we'd seen that people were not contributing for money. They were contributing because they love what they were doing. Now, of course, that excludes people that couldn't afford to contribute otherwise. So I think there's a happy medium that needs to be struck. But there's a world in which, okay, you know, there have been ICOs where on day one, the folks involved made, say, tens of millions or more of dollars and they hadn't even shipped a product. So I would argue we're way too far on the scale on the other direction of things. Personally, so in my experience, a lot of the technical community

Starting point is 00:16:57 that I work with, they want to work on something that they really believe in in a project that they're passionate about. So for my startup, we've raised a normal seed round. And in terms of recruiting, we found that if you get people, you give them ownership in our company, you know, we give people equity, which is like so old school of us. You know, that can really get them involved and motivate them. And one thing that I will say I absolutely love about being in this world is people really are so passionate. This is not just something that, you know, they do once in a while. It's something they really believe in.

Starting point is 00:17:27 And that's what kind of gets me up and going in the morning and gets me excited every day. You mentioned the passion people hold for this space. I, in my last chapter at Twitter where I was leading acquisitions, I would spend all my time with entrepreneurs. And I would try to figure out where is the world going? Where are the most independent, brilliant technical minds working and meet those people and try to figure out what they're building? And I would just try to learn and understand. Crypto is fascinated me partially by how passionate these communities are, as you mentioned. And I've wondered openly, is there something, I think Priti maybe used the phrase earlier, referring this as a movement, is there something bigger going on around the globe that if anything living in San Francisco, we're maybe under exposed to where people almost feel a sense of identity with this space?

Starting point is 00:18:16 And are we going to, in five or ten years, have a bunch of folks coming of age where they conceptualize of their identity in a slightly different, more global manner? Does that resonate in terms of the communities you are both a part of and no? So, yeah, no, I think for sure. I mean, and by the way, it's, they're pros and cons to this. So you have these sort of tribal wars that go on in, in the crypto world. There's a lot of drama. Yeah, there's a lot of drama, a lot of tribal. That's sort of the negative side.

Starting point is 00:18:44 I think the positive side is people are very passionate. If you just go to like the subredits or the telegrams or whatever, each of these projects, you know, this is much more than just sort of a regular kind of level of passion for these things. And a lot of these different like cryptocurrencies embody different kind of ideologies. And so there's many more things kind of uniting them. And it's also, you know, I think of it kind of as uniting some of the great powerful things about the internet, which is the ability to create kind of these communities, sort of affinity groups, you know, using kind of social networking and things, but also open knowledge sharing, sort of the open source side.

Starting point is 00:19:19 And so you're sort of uniting those two very powerful kind of streams of, you know, of, sort of momentum of the internet and together. And then you're adding onto this layer with all these other kinds of interesting technology and money and everything else. And so it definitely is a very powerful mixture. And hopefully, that'll go in the right direction. And then interestingly, in terms of the community, a lot of it reminds me of back in the 90s when I was first getting on the internet.

Starting point is 00:19:46 So we have the Slack community for Lightning. We have 2,000 developers and testers on there. And I don't know where, you know, the folks are. You know, they have pseudonyms. Right. And they, for example, we have one member of our Slack. Her name is Molly. And she tests the lightning software every day. And she just loves it. Like, this is her passion. And she like, we know that like if something goes wrong, like Molly's going to catch it. Right. And we have, I don't know where people are located. You know, they have these pseudonyms. And they're all

Starting point is 00:20:14 just united around this belief and this passion for the technology. And I think that's really cool. Like we don't care where you went to school, where you're from, how old you are. There's a 14 year old in the Bitcoin world, his name is Salim Rashid. He's found multiple vulnerabilities in various hardware wallets as well. And he's like, I'm just 14, you know. So it just doesn't matter. And then even as a company, you know, we care much more about what you're capable of doing and being a fast learner.

Starting point is 00:20:40 You know, we have folks that dropped out of college. We have folks that have degrees in CS. But for example, to apply for an internship for us, we say, okay, contribute to the open source code. We don't necessarily care about your background. We just want to see what you can do and how you can contribute. And that's actually been an awesome way to get some really talented people that we wouldn't have found otherwise. And you're seeing, Chris, on the investment side, the teams that traditionally venture folks pattern match quite a bit, or there's a certain lore about that.

Starting point is 00:21:07 Are you seeing the teams that you're backing and that are working in this space, do they fit the old patterns? Or to what extent are the teams and companies you're investing in? I feel like they're cut from a slightly different mold in this space. Yeah. So my feeling is it's kind of come in different waves. So in sort of 2012 to 14, there were kind of the more ideologically driven founders, you know, kind of the cypherpunks, et cetera. And then kind of with the rise of Ethereum and this sort of idea that you could have these

Starting point is 00:21:33 other kinds of protocols, the types of entrepreneurs became, they're very technical, but kind of interesting distributed systems and protocol design. I think there's now a new wave starting. I'm starting to see, which is kind of I've been working at Google or Facebook or some company like this. You know, I moved out to the valley to like do something cool and new. I'm working at, you know, X large company and I'm doing, you know, I'm employee 8,0002 working on ad targeting or whatever. And like I just not, this is not, you know, what I signed up for.

Starting point is 00:22:01 This is not like the kind of the Wild West, the pioneer, you know, the frontier kind of thing. And I, you know, I've been hacking on whatever, pick your project on the weekend. And, and this is, this feels new and fresh and fun. And so I get that a lot now lately. And I think it's the beginning. I think I hope of a giant wave of talent entering the space. You know, you never until you see it, but I get that sense. So. And are you, to some extent, these crowd, the ability to crowd funder do an ICO is a different model than traditional venture funding. And you chose to raise equity. I'd be curious, to what extent, to what extent do you feel like firms will adapt? And we publicly know that some firms are

Starting point is 00:22:46 participating in ICOs. It's that sort of to be feared or embraced. And could you imagine in the future you're potentially launching a token and doing a crowd sale there? Is it just too early to know how that will all play out? Well, I've said publicly there's never going to be a lightning ICO. It doesn't make sense for our technology. And in fact, one of our former interns wants to release a post about how all the ICOs that are coming out, you can just build with lightning instead. Now, who knows, we may go public on a blockchain.

Starting point is 00:23:14 There's a new wave of what are people are calling securitized tokens or security assets on blockchains. And there are some really interesting legal discussions and happy to chat afterword of folks are interested in that. But no, we're not planning on doing a token because our technology doesn't need it. We are more of the cypher punk variety, but we also are big into designing protocols and distributed systems. And from my standpoint as a founder, we chose to actually, we did a normal seed round, which was like contrarian in this world. And we got angel investors in seed funds. And the experience has actually been amazing. All of our investors have been super supportive back, you know, back when there was Bitcoin Winter

Starting point is 00:23:54 and the price was like $200. Things were very different than now. But I can see that not everyone has access to those types of connections or investors. And there are, we do need new models to fund projects, but they shouldn't be models where founders are able to cash out or they raise way too much money. And in fact, there can be perverse incentives because now there's so much money and they're not actually able to ship a product. one thing that we recently announced our fundraise when we released the beta of lightning

Starting point is 00:24:22 for the main Bitcoin network, the first implementation to be used with real Bitcoin in data. And people tweeted like, wow, a blockchain company raised a normal amount of money and shipped a product. So I was like, isn't that what startups are supposed to do? I guess so. Now we're being the anti-startup. So, yeah, I'm a big fan of crowdfunding in general. I think, but I think it's a very powerful thing, but it has to be done right.

Starting point is 00:24:45 So, for example, like if you look at Kickstarter, I think crowdfunding works fantastically well in certain categories. So, for example, independent video games and books are great categories where a lot of the contributors are avid fans who know the author, say, to take books as an example. Like, it just makes so much sense to me that the fans of an author would fund that author and not have to go to a VC or not a VC, you know, we don't fund books usually, but a VC type person. But like, you know, a publisher, a publisher is kind of like a VC, right?

Starting point is 00:25:12 Like, you have to go to some intermediary who decides. So I love the idea of the fan, you know, I think, I think the, you know, a restaurant, instead of going to a bank and having some impersonal process, should be funded by the, you know, the people that live in the neighborhood. Like I think crowdfunding can now it can go wrong for sure. And some, and a lot of the ICOs have been like that, you know, where, or even in traditional crowdfunding where, you know, people order an electronics product that never get delivered, right? So we need to figure that out as a community, like what, you know, how do you harness that force in a positive way? But, but I think the idea that you have these sort of gatekeepers that. decide on what gets funded. I would love to see that replaced with a different model. And I think crowdfunding is very promising. And we've talked a little bit about the duality of some of these narratives. I mean, crowdfunding is one where there's different perspective. And it's all quite nuanced. Are there other media narratives around this space that you think really represent what's going on? Or are there narratives that you feel like are sort of missing the point or any myth that you think is worth debunking. I see a lot of narratives missing the point. That's why it's so great to be here today.

Starting point is 00:26:18 So, for example, in January, the New York Times published a piece about cryptocurrency and how all the men were getting rich on cryptocurrency. And it's a boys club, right? I had spent nearly an hour on the phone with that journalist. And she didn't include anything I said in the article, nor did she mention me. And I actually went on Twitter, as we like to do on crypto Twitter. and was like, I'm a busy CEO. I spent 45 minutes on the phone with you, and you didn't even include me. And now you've written that it's all boys. Um, so actually that narrative to me is very tired. There are a lot of really amazing women in the cryptocurrency world. And there are just a lot of really amazing women in the space. There was a glamour article. And I never actually thought I'd see the day that I was in glamour magazine that came out yesterday, um, that profiled nine women. I was one of them in the space. And to me, talking about the work that women are doing is what is needed. Not like, what is it like to be? a female in blah. No, I just want to talk about what I'm building. So that was awesome. And then I think the media likes to focus on the prices. You know, it's like, oh, like Bitcoin is up, Ethereum's up, Bitcoin's down. That is the catchy thing. But the narrative is so much broader and

Starting point is 00:27:28 the potential is so much broader. I think it's easy to get caught into this whole price narrative. But to me, like for my team, we say, like we have this saying, ignore the noise. Like we just kind of try to not, you know, look at the bullshit. And the price, prices will go up, they'll go down, but the long-term potential of this technology is real. It's here. And so it would be great if people could really talk about the broader vision and less about just prices and get rich quick schemes, but it's hard to sometimes sell the media on that. Yeah, I think we have a lot of work to do as a community to kind of get the, the proper narrative out there. And there is a lot of focus. I mean, it's just naturally focused on kind of the, you know, some of the negative things and the prices.

Starting point is 00:28:07 And look, the tech, the tech stuff is, it's a, it's complicated. And, you know, it's, a lot of it hasn't been realized yet. So, you know, you talk to reporters. You're like, look, this is what this could do. And it hasn't happened yet. And so, you know, I'm very focused on doing what I can to help see those, those things happen. And like what Elizabeth is doing is fantastic. And like, if, you know, if you get out there and we start getting lots of people using lightning, that will help us change. And that'll be a great case study to change a narrative. So I think that's, to me that we're in this kind of weird kind of early phase where we don't have enough things to point to to kind of say, hey, look at this other thing. It's not just about money. There were some great articles from the mid-90s where people wrote like, the internet will never be a thing, right? And like some interesting quotes around. So the internet's impact on the economy will be less than that of the fax machine. And I think we're seeing some of that now as well where you're always going to have doubters. But there's so much potential. And yet we just need time to really build it out. And I would also remind folks, in terms of narrative, I have learned

Starting point is 00:29:13 so much listening to both podcasts and writing that Chris has done and a bunch of the work that Elizabeth has done in interviews she's given to. And so there's a ton of more rich stuff to dig in from both of them as well as all of our other speakers. Maybe we'll wrap up on one or two points and give you all a chance to ask questions. We started on a historical perspective of a deeper history that's led up to where we are now. Can you help us understand where we are now relative to perhaps what's to come? Is it still really early days? Are we in the infrastructure cycle?

Starting point is 00:29:45 Is it overhyped? How should we think about where we are now relative to kind of the potential of the space? So I think we're in the mid-90s when it comes to, say, internet time, right? So 1995 was a year that Netscape IPOed and the year that was seen as, say, the web going mainstream. So, you know, there were people using it, but it wasn't like everyone in the world. was on the web yet. But it was still, you know, if you look at the historical arc in the context, there was still so much left to come.

Starting point is 00:30:14 I think a lot of people actually wanted us to be more in the, I don't know, the 2010 realm, and we're just not there yet. And building this stuff takes time, right? I mean, so in terms of the tech we build with lightning, people are like, oh, why isn't it ready yet for a while? And it was like, well, one, there aren't that many developers in the world that can build this. And there's actually a big passion of mine is now a developer education and getting more

Starting point is 00:30:36 people involved and educated, but then also building protocols and this core infrastructure technology takes time. So I am seeing more interest in building out the infrastructure, but we can't put the cart before the horse. I think a lot of people wanted to build certain apps that just where the infrastructure wasn't ready yet for them to exist. So now we're seeing people finally realize that and hopefully invest in building the infrastructure to make all of these use cases possible in the future. But like I said, it's still so early that, you know, it's definitely not too late to get involved, you will still be on the early side of all of this. I totally agree. I think it's very early. I think people now, they think that a lot of people

Starting point is 00:31:16 kind of remember this revisionist history that the web kind of came out fully, you know, you had YouTube and it was not at all like that for people that are old enough to remember that. It was like this incredibly slow loading thing. And it was like, it's actually funny to go watch movies from the 90s because no one used the internet because no one had phone nothing. And when they do, it's like, I'm going to go on the internet. And it's like this event and you have these noises come out of the computer. and then they go and they check their AOL email and then they leave and it's like,

Starting point is 00:31:39 it was like, it's kind of like the way this world is today, right? I mean, it's like there's a lot of work to do. And, you know, hackers, the movie, great movie. Yeah, yeah, there's a lot of great, but yeah, there's a few 90s movies about like the net and hackers and things. But for the most part, it's this like thing

Starting point is 00:31:53 that doesn't, you know, it barely registers, right? I think Netscape at their peak was like 50 million users or something. I mean, it wasn't, I mean, the numbers, like, crypto's probably above that right now. I don't know. I mean, the scale now is so different, people expect, if you don't have four billion smartphones, you're like nothing or something, right?

Starting point is 00:32:07 But so I think it's super early. So if, you know, people here are thinking about getting into it, I think it's super early and there's tons of opportunity. And it's, you know, obviously, I think it's going to be fantastically. I think it's going to be an awesome, you know, kind of space. And in terms of getting involved, so if folks are encoders and aren't technical, there are actually so many ways to get involved. So, for example, in our community, there are people that help with testing.

Starting point is 00:32:30 They help with UI, UX feedback. They help with documentation. there are just so many different ways for people to contribute, helping educate others, even just educating yourself. So one really cool thing is, in terms of getting involved in this world, there's nobody that has 10 years of quote-unquote blockchain experience because blockchains have not actually been around for 10 years. I mean, the Satoshi White Paper, exactly, except for Satoshi.

Starting point is 00:32:57 The Satoshi White Paper came out on Halloween in 2008. So we're getting there. We're very close. But the point is, it's actually the, barrier to entry that, you know, in certain other fields where you might have to have like a decade or more of experience, we don't have here. So that's part of why I think there is this really massive opportunity. With that, we will open it up if folks want to ask a couple of questions before we wrap. Hi, I'm Lauren. Thank you guys so much for being here and for hosting this event.

Starting point is 00:33:23 You guys talked a lot about how are the history of cypherpunks and how there's been a lot of centralization like Facebook, Apple, Netflix, Google. This is kind of a really, reaction against all of that. How do you reconcile that with kind of what I view is like there are a few companies in the space that seem very powerful and centralized where everyone does their transactions through them like Coinbase, which is a great product. I'm sure a lot of people here use it. So how do you see the space going forward? Do you think it will continue to centralize or will there be more competition? Yeah, it's a great question. It is a risk that the, you know, that all of this sort of utopian stuff we're talking about ends up, you know, ending up, we end up 15 years

Starting point is 00:34:04 from now with the same kind of outcome. You know, in this particular case of Coinbase, I'm involved with Coin Bay. I'm on the board of Coinbase. The, I will say, I mean, I think they're phenomenal company doing incredibly well, but they are relatively, I mean, there's a lot of exchanges. There's a lot of, you know, things that happen off exchanges. So it's still, you know, I mean, they're a great company and they're doing super well, but it's still, it's a very, you know, broad space.

Starting point is 00:34:26 And I would say, I would argue pretty, pretty fragmented today. But, but it's a good point. I mean, I think one thing, there's a lot of discussion in this community around. on things like governance they talk about, which is the idea. Essentially, let's make sure we get these models right so we don't end up in the same place 15 years from now. And then instead of, you know, Mark Zuckerberg, it's whatever, Vitalik in front of Congress or something. Or Satoshi here. I don't know. Agreed. Awesome question.

Starting point is 00:34:50 So this is something that I certainly struggle with as well. And I think a lot of it actually comes down to some of the issues around usability. So in the world of cryptocurrency, there's a new paradigm where your private keys represent money. And as a result, if somebody were to compromise those keys, well, your money's gone. And the base layer of these protocols are irreversible such that if your money's stolen, you can't just call a bank and say, okay, please give me back my money. And that's part of what makes them so interesting and cool, but there are certainly risks around that as well. When it comes to the broader security infrastructure, for example, I've had a variety of friends

Starting point is 00:35:25 whose phone numbers have been ported because it turns out the cell phone system and the carriers don't have good security in place, and then people try to get access to their email and whatnot. By the way, anybody involved in this community, please call your phone provider and put a password on your account. So I think a lot of that is going to come down to usability. There's this kind of divide between usability and security. And if you want to make, say, your key secure

Starting point is 00:35:51 and hold currency in a decentralized way, it turns out that can actually be more difficult than having Coinbase store it. So to me, the answer in this lies in developing better ways for things like key management, but then also just generally better user experience and better usability for those that want to have a more decentralized model. And we're working on it. A lot of us are thinking about it. As Chris mentioned, getting the folks that say maybe we're doing UX at Apple, Google, Google, Facebook and coming into this world that can really think

Starting point is 00:36:19 through these problems and develop compelling user experiences, I think is going to be a big part of it. Hi there. My name is Sierra Peterson. And I am interested in your thoughts on crypto's application to real assets. Obviously, Andresen Horowitz made a recent investment in Harbor, but even Harbor is looking to partner with broker dealers and other service providers. And so what do you see as the evolution of this services layer for real assets? Let me do this. So, no, I think the idea, so that's some people call this traditional asset tokenization or something. So taking like real estate assets or something. And I think it's a really interesting area. It's sort of different than a lot of the other stuff. It's a little more kind of,

Starting point is 00:36:59 you know, real world meets crypto world or something than some of the other stuff. But, but, you know, to me, the benefits like, you know, to have, you know, a lot of the benefits of an open network would be realized this way. So you could have, like, so Harbor has this idea of our tokens, they're kind of tokens that are, that can only be traded under the right. They have to check the regulatory status of the counterparty and things like this. But you could imagine getting many of the benefits of an open network where you have. sort of competition among exchanges and data providers and you have sort of global liquidity. And I think that could be, you know, I think it could have a democratizing effect on kind of

Starting point is 00:37:35 the ability to raise money and the ability for people to invest in things. And so, you know, I generally, I think it's, I think it's exciting. And there's, I think you see a lot more people working on that problem. Yeah. I think it's a really interesting space as well. It's a hybrid model, right? Because you do have to trust, for example, let's say I want to invest a thousand dollars in real estate. Well, I need to trust that actually I'm investing in the real estate and it's not like some scammer coming along and pretending that I am. So it does have a different trust model than Bitcoin, but what these technologies can do is enable, for example, if you want to invest $1,000 in real estate now, you just can't really do that. So I think there's really interesting

Starting point is 00:38:11 potential to democratize the ability for people to invest in these assets where previously would only be available to, you know, people that are very rich or accredited investors. And we're seeing both traditional assets being tokenized and then the idea of securities tokens, like Why not put equity on a blockchain? Right? So I think that's going to be a big trend moving forward in the next two years. With all the talk about decentralization and how the focus of crypto is towards that, the two big currencies you have on the market right now are ruled by benevolent dictators.

Starting point is 00:38:42 Satoshi owns a major chunk of the Bitcoin equity. So there's Vitalik on the Ethereum side. And you see that if that doesn't happen, then malicious groups end up taking over a chunk of the original issues and then try to use price manipulation as the recent scandal that broke out with the haven currency. So what do you see as a progress towards currencies or even technology that actually is decentralized without the need for someone to hold the bigger chunk and kind of punish the bad actors until the currency requires big enough scale? So there's a little bit more nuance there. Bitcoin is not ruled by a benevolent dictator. So Satoshi the creator, Bitcoin actually left

Starting point is 00:39:25 the community in very early 2011 and has not been seen since. One thing that I think is really fascinating is that there is no leader. The Ethereum community does have a bit of a different structure with more known leadership. But I think in a lot of ways, this is all new. I mean, one of the things that I love about what I'm doing in our team is like, we're doing things that nobody's ever done before. Like there was a software we were working on and we didn't know how long it would take. And then it turned out, of course, it took longer than we thought it would. And we were like, wait, nobody's ever built this. So we just, didn't know, like, how long it would take. So we're really seeing these, like, issues of first

Starting point is 00:40:00 impression. As mentioned, there are different models for communities, and I think it'll be interesting. I mean, Satoshi didn't want to be a benevolent dictator. I think Satoshi didn't want to be in a spotlight. There are, some people believe Satoshi owns certain coins. I mean, nobody knows. It's really one of the modern mysteries. Like, we don't know who Satoshi is. I'm perfectly happy for that to stay that way, unless Satoshi ever wants us to know who he, are they, is there are? But if anything, of course, there are going to be potential attack factors. I think one of the most fascinating things about being in this world is we haven't seen the types of major attacks that we could have seen on the base protocols. Nation state actors could come in.

Starting point is 00:40:39 They could try to attack the network. They could try to buy up hash power and a variety of networks. They could try to manipulate markets. And I'm sure there's certainly some market manipulation going on now. But to me, one thing that I think is so fascinating is the incentive structure is built such that there are so many people that are incentivized to not have the network the network be attacked that we have not seen that happen as of yet. And I believe as these communities and these currencies grow, we'll see even more of that where there will be a lot of people who in whose interest it is to not have the network attacked. And that will enable these communities and networks to stay secure. Chris, do you have any of that? With that, unfortunately,

Starting point is 00:41:19 we're going to have to wrap up this panel. But I will thank both Chris and Elizabeth for their time and then welcome. So it'll only pick back up.

The a16z Show - a16z Podcast: Decentralization and Crypto, the Big Picture

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