Unchained - Chris Dixon on Why We Will Finally See New App Innovation in Crypto - Ep. 773

Episode Date: January 28, 2025

Chris Dixon, founder and managing partner of a16z crypto, joins Unchained to share why he believes crypto innovation is about to explode. From Ethereum’s potential to new crypto legislation, Chris delves into why the industry is poised for a major break out. He also discusses why the Biden administration’s “lawfare campaign” led to the memecoin craze, how AI and crypto together could transform technology, and why bad tech policy stifled the industry for years.  Plus, he shares his take on the executive order signed by President Donald Trump and its significance for the industry. Show highlights: 2:51 Why Chris feels like the Biden administration was trying to destroy crypto 7:16 Chris’s take on the Trump announcements and executive orders 14:18 What Chris would like to see in upcoming crypto legislation 21:37 How he compares the intertwining of AI and crypto with mobile, cloud and social 26:24 Whether an investing AI agent like ai16z could ever compete with A16z 32:05 How technologies usually evolve exponentially and how the AI x crypto craze will evolve 39:21 Why Chris doesn’t think the debate about whether Ethereum L2s are ‘parasitic’ is important 47:24 Chris’s opinion on whether Vitalik should be doing more marketing for ETH 51:29 Why Chris thinks native rollups on Ethereum could be valuable and promising 55:43 What he believes is important to pitch blockchain to Wall Street 59:39 Chris’s vision for a future multichain world 1:04:20 How the Biden administration’s “lawfare campaign” enabled the memecoin craze in 2024 1:08:08 Why Chris says that Coinbase has been very innovative 1:14:11 Whether ICOs are a recipe for fraud and scams 1:17:39 What apps and innovations Chris is excited about Visit our website for breaking news, analysis, op-eds, articles to learn about crypto, and much more: unchainedcrypto.com Thank you to our sponsors! Polkadot Somnia Network Guest:  Chris Dixon, Founder and Managing Partner of a16z crypto Previous appearances on Unchained: A16z Crypto’s Chris Dixon on How Blockchains Can Save the Internet Chris Dixon on How Trust Is the Best Lego Links Unchained:  President Trump Declares Crypto a National Priority in Executive Order 2024 Was Solana's Best Year Yet. Can It Sustain the Momentum in 2025? Chris’ tweet on the executive order  Learn more about your ad choices. Visit megaphone.fm/adchoices

So we have probably, I'm just, these aren't exact numbers, but I would say 30 to 40, probably app layer companies that have basically been blocked from building and launching what they want to build. And the ones that have launched, I think they really, what you see is half of what they wanted to build and not the full thing. And so what I think that what I'm actually working on like on a day-to-day basis, like literally having phone calls and talking about it with these folks is like how do we now in this new policy environment build the products we want to build and run the real experiment? right? And get stuff out there. So that's to me the theme. That's what I'll spend my time on this year. I mean, obviously there's a lot more work to do on the policy side that sort of two things of that. And then now that we have that, let's get the app player stuff really working because the infrastructure is good. Hi, everyone. Look at the Unchained. You're no hype resource for all things crypto. I'm your host,

Laura Shin. We are now featuring quotes from listeners on the show. Today we have one from Chomis Y3W on YouTube, who commented on the episode with Vivek Ramon of Ethereum. Thomas said, quote, Every transactional habit security rooted on Ethereum has been my refrain for years. I've had the same thesis around the road to adoption for Ethereum since well before the merge also. If is machine money, it's inevitable. There is literally no second best. Other platforms are just dodgy apps. Ethereum is building the rails for global GDP. To have your comment featured, write a review of the podcast overall or leave a comment on our video on YouTube or X.

This is the January 28th, 2025 episode of Unchained. Pocodot is the original and leading layer zero blockchain with over 2,000-plus developers, and the Pocodot 2.0 upgrade will be a massive accelerator for the ecosystem, making it faster, more secure, and adaptable. Perfect for GameFi and DFI to build, grow, and scale. Join the community at Pocodot.network slash ecosystem slash community. Did you know Somnia processes over 400,000? transactions per second with sub-second finality and sub-sent fees.

Somia is built to bring reactive mass consumer apps like gaming and socialify fully on-chain. Learn more at somnia.network. Today's guest is Chris Dixon, managing partner of a 16c crypto. Welcome, Chris. Thank you for having me. We're recording the day after President Trump signed an executive order, making crypto a national priority. You have been investing in crypto for over a decade. You've seen a huge range of ups and downs, and we're not even a week out from Gary Gensler's reign at the SEC. And here we are. We've had this

dramatic shift. So how did you feel upon it being signed? And what specifically about the order, if anything, struck you as being particularly notable? Yeah. So it's a big topic. You know, the, and happy to go into as much details you want. I've been spending a lot of time on this for a couple of years now out of necessity. So the last three years, four years were quite frustrating. I think we had a regulatory sort of a policy scheme that essentially not only made it very hard for good actors to build things in the space, but frustratingly went after the good actors, but very rarely went after the bad actors. And so I can sort of tease this out. But, like, I think, you know, the kind of most high profile example of that would be FTCX and Coinbase.

So, FTX never had a regulatory action, you know, obviously until after the, you know, it crashed. And, in fact, it was in good favor with the regulators, even though they were offshore. And, you know, like, I'd been on the board of Coinbase for years before that. And, like, it was clear they weren't doing all these things that you're supposed to do as an exchange. And, you know, and then, of course, Coinbase is now, you know, being sued by the SEC. And then there was a sort of deliberate strategy by various agencies, including the SEC of so-called regulation by enforcement. And the idea is just generally to create chaos. You sort of throw hand grenades over the wall and you do it kind of somewhat randomly, but also kind of focused on good actors.

And that creates confusion, fear. And, you know, I think we can walk through this. But not only does that have sort of first order effects of obviously the companies involved are tied. down, you know, with massive, you know, kind of headwinds having to hire lawyers and deal with that. But then there's a whole other set of companies that just basically never built their products or launched what they wanted to launch because of fear of that, right? So if you look at our portfolio, there's sort of a bunch that were under the sort of lawfare attack, another bunch that just basically didn't build what they want to build.

And then I think really the, in some ways, the worst impact of all this was all the people that didn't enter the space. You know, we saw dramatic, you know, I would say, you know, I've done this, been doing this for a long time. And, you know, I would say 2017 through 21, we saw many more kind of new builders and entrepreneurs coming in than in the last three years. And it's for obvious reason. I mean, I would talk to these people, right? I'd go into an event and I'd talk to them and they, you know, somebody coming out of college or something else. And they say, I'm thinking, you know, generally they're thinking about either AI or crypto.

because those are the kind of two mega trends. And their trepidation on crypto kind of understandably is do I want to spend the next five years in court? Right. And, you know, I remember there was a moment like, I think it was about a year or two ago. Like I'd always, in the past, I'd always argue with them and said, look, it's worth it, it's important. And then I think it was about a year ago, I just finally was like, you know what? I remember striking. To myself, it was striking because I've never said this.

But about a year ago, I was like, I kind of don't blame you because it is a, it is a, giant morass, right? I mean, who wants to spend the best years of their career on these, you know, brain damaged legal cases, right? So, so I think there was just really, look, I mean, I think it's remark. I mean, there's sort of two ways to look at the industry right now. Like, on the one hand, we've been at it for a long time and, you know, there's meme coins and this and that. And like, we haven't obviously gotten to the kind of the full promised land or realization of what we want. I think, you know, we have a long way to go. That's the negative way to look at it. The positive way is we just had a full out assault by the, by not just the SEC, by the way,

it's many other agencies in the Biden administration. And they went all out. I mean, the debanking, the SEC, the treasury, that it's like I could go through at IRS. I mean, there were probably 10 to 15 agencies that were sort of seemed to be spending full time just trying to destroy crypto. And, you know, given that, like, it's kind of remarkable where we are, I think in a positive sense of like, you know, the infrastructure has evolved, yeah, significantly. There's a lot of great builders who are very excited. The industry is not, it's not where I want it to be, but it's in a pretty good spot, given that it had, you know, the most powerful government on earth, essentially, you know, waging an all-out lawfare

campaign against it. So to the announcements and, you know, the new announcements, I think there's a lot of things to kind of follow here. You know, the first, I'd sort of maybe bucket into three things. There's the behavior of the agencies with respect to things like enforcement, number one. Number two will be, which hasn't happened yet, but I think we have indicators from the executive order yesterday, which is sort of rulemaking and guidance. We expect, you know, I would expect hopefully, you know, the next few months to see these agencies that previously were just filing all of these kind of, you know, chaos-inducing lawsuits to instead be putting out rules, which is what agencies are supposed to do, by the way, and it's law and they're supposed to do that. And they're supposed to be a comment period. and, you know, people can disagree and there's a whole kind of process. And those rules will say things like if you want to, you know, if you want to have a token,

you have to have disclosures and lockups and other kinds of safeguards and exchanges need to do certain things. And those things should be there. And we've always advocated for them. We have, you know, it's funny because some of the people say, like, we want to be deregulated. We live literally hundreds of blog posts on our website spelling out what we'd like. You know, the critics don't bother to go read the, there's an actual bill that went through the house called Fit21. which is very far from being not regulated. There's a lot of regulations, but they're smart regulations.

They're regulations that are designed in the 21st century for the 21st century world and not 1930s for that world, right? I mean, this is the nature of good policymaking is you look at the world, you look at the new technologies, you say, what are the good, what are the bad, how can we design policies that unlock the good and remove or significantly mitigate the bad, right? The same applies to AI, same applies to, you know, the internet in the 90s. And so that, you know, the EO is not, you know, in and of itself, you know, law or rulemaking, but it's a very strong indicator of where, you know, we should see the agencies go with that. And so I think, so I think the first thing is just having people in there who are sensible who they'll, you know, they'll obviously, you'll still see regulatory actions around bad actors and fraud and all sorts of things, as, of course, you should. But I think what we'll, what I hope we'll see and I expect we'll see, with the new commissioners at the SEC and other agencies is that they'll, you know, they'll target their enforcement against bad actors instead of good actors. So they'll flip the polarity back.

And then secondly, I expect to see kind of rulemaking following the EO. And look, the EO was great. I mean, it was, I think, you know, I highlighted this on Twitter. I mean, there was a lot of important language, including my favorite paragraph was around, you know, the right to build software, the right to run validators, the right to self-custody. Because for me, ultimately, you know, people say, you know, the old saying is Bitcoin wasn't invented to make you rich. It was invented to make you free. Like, this is about internet freedom. This is about shifting the power of the internet back from centralized services and,

and other kinds of, you know, big act, you know, what governments, big tech, other large, powerful players back into the hands of users and software developers. This is what the movement is about. And so I found the language. I mean, this is, you know, whatever. was a two-page document, so it's early, but I found the language to be very consistent with those ideals. And that was, I thought, very encouraging. The third thing, which we can talk about later, if you want in depth, is this is not really begun yet, but down the road, I think what we really

need is legislation. And, you know, for the engineers in the crowd, think of it as rulemaking is soft-coating. And if legislation is hard-coating, it's the way that you enshrine it, enshrine the kind of rulemaking in a way that will endure. And I believe that for, industries to get built, you need solid foundations. You need enduring foundations. The internet was built around some very smart, visionary bipartisan legislation in the 1990s, including, you know, most famously the 1996 Telecom Act, which has things like Section 230 and a bunch of other important rules. You know, like Section 230 is very controversial today. It's the, it's basically the indemnification for social networks. As long as they do certain things, they're not liable for the content

on their websites. Without that, you would not have social networks, marketplaces. You wouldn't have the modern internet. Had that not been in legislation, had it been merely rulemaking, it would have been a political football that changed every administration. You can't build an industry that way. So I think ultimately we need legislation. And like David Sachs was on TV yesterday talking about market structure legislation, stablecoin legislation. I don't recall, I don't think legislation was in the EO, but it seems like the signs are there that there's, you know, and look, the other thing I mentioned is, I think that it's not about the Trump administration is Congress. We have, you know, there was a market structure bill last year, Fit 21 that passed

the House of Representatives with, you know, in a very bipartisan way, 71 Democrats voted for it, including very important Democrats like Nancy Pelosi and others. One of the most bipartisan bills in years in Congress. We now have a much more pro-crypto Congress than we did then. And that's bipartisan, by the way. This is not, and this is not, you know, me trying to sound friendly and bipartisan. It's genuinely bipartisan. There's a lot of very, very, very, smart, pro-tech Democrats in Congress, both from last Congress, and then there's a bunch of new ones. So, like, for example, we supported in the Senate, Ruben Gallego and Alyssa Slotkin, who were very pro-Tech Democrats in the Senate.

Hey, everyone. Just a quick clarification here. Chris said, we supported Ruben Gallego and Alyssa Slotkin in the Senate, but he meant that fair shake, an independent organization to which A16 has donated, supported those candidates. You have Christian Gillibrand, you have on the House side, you have, as I mentioned, like senior leadership like Nancy Pelosi and also kind of up-and-coming Democratic members like Torres and Ockin-Clos and others. So anyway, so it's like it's just generally trending much, much better. To me, what's so exciting is if we can do that, if we can get good rules in place, you know, we can accomplish two things. We can reduce fraud and bad actors.

I mean, one of the, you know, the many failures of the Biden administration and the tech policy, I think it was just, you know, the worst tech policy I've seen not only in crypto, but AI and everything else in my lifetime. It was just abysmal. This is why the tech world was so upset about them. The one of the many bad things is, look, they, like, not only did they spend four years attacking good actors. I would argue fraud and bad actors are as high as ever, if not higher. Like, they didn't do anything about the bad stuff. You know, and that's, you know, look, it's obviously. Number one, that's bad for consumers and the people that suffer from those things. But number two, it's bad for the space. It's bad for the image of the space. Right. So, you know, I think that we're going to now, I hope, you know, see that, see, see that addressed. And then have the opening to build stuff. Like I'm so excited.

What's exciting to me is, you know, policy sort of step one. It's the enabler. But what's really exciting is, you know, I wrote a book about this read right on. Like there's just all this really interesting, important stuff you can build using these, you know, this new architecture. building services on blockchains that we haven't really gotten to do yet. And so I want to see that happen. And so, you know, that takes time. We know, we need to get the entrepreneurs, need to kind of, they're all kind of calling me and like, you know, can we build stuff now? We think so. You know, but then there'll be new people will come in eventually. And like, it'll take time to work itself out.

But I think that will be the really exciting time. Yeah. Well, I imagine, you know, after last weekend with the Trump meme, Trump and Melania meme coin. So it's probably like, well, you can do whatever you want. But so now that we do have this receptive administration, what would be on your crypto regulatory and legislative wish list? Yeah, I mean, so that, you know, people generally bucket. So there's, you know, there's what people call market structure, right? Market structure is how do you classify tokens and what under what circumstances is a token of security? Under what circumstances is a token of commodity? And then I think there's a third category, you know, think of like a, you know, a sword and a video game where it's neither. And it's just a, you know, it's a good, like anything you'd buy in a store or a kind of regular commerce. So there's sort of just like the real world, like it's software, you can build things that. like an Apple stock using a token, you can build something that's like a sword in a video. It's just, it's a very plastic, malleable medium. And so we need a way in the digital world to classify those things. And each of those, depending on the classification, it would then mean a different regulatory

framework would apply, right? So that's called market structure. That's really kind of the most important thing because that's where there's a lot of confusion, you know, people don't know what to, you know, they get different, you get different advice from lawyers. We now have a situation. I mean, this is one of the other problems of regulation by enforcement. is that what happens is there's no guidance.

And so then you go to court and then the courts make decisions and, you know, we've had a bunch of rulings. And we actually have now different district courts with contradictory rulings on what makes a token of security. And those are sort of, you know, parallel level courts. And so eventually would get appealed and go, you know, so maybe some day to appeals court or appellate court or Supreme Court. But that takes many years. And so you literally go to a lawyer and you're like, well, it depends on which judge you ask. Like, this is the state of it. Right.

So having just really clear things will be hugely important. And like, I think there's a second order effect. People are really underestimating, which is it's not just important for entrepreneurs. It's important for all the other people we want to enter the space, including, you know, banks, fintech companies, media company, whatever, the whole world of people. I go and talk to these people. And after FTX and all the kind of terrible stuff that happened three years ago, they will tell, they'll say to you, like, they just won't do it until there's black and white rules, right?

They won't, you know, entrepreneurs might be willing to kind of take that risk and go to court and all that. But most people, most entities, most companies won't do that, right? So that will be just a massive. So market structure is a big one. The next one people talk about a stable coin bill. There's both legislation. And again, both for all these things you can imagine, you can, there will likely be rulemaking, sort of agency executive branch level rulemaking in the next hopefully six months that will kind of clarify these things. But then you hopefully also get legislation, which kind of enshrines it permanently. But so stable coin bill will specify, you know, if you have a stable coin, it needs to have these reserves.

these auditing requirements, kind of things you know, that are really, really important. And frankly, it's a little scary that this hasn't happened yet. And there's another failure of the Biden administration tech policy is that you have a bunch of popular staple coins, which don't have comply with those standards. And that's a time bomb, right? I mean, you sort of look and say, what could be the next FTX in the space? Like, that would be high in my list. And we shouldn't have that.

This is one of the rare cases I've ever seen where Europe is ahead on this. And they actually have, I think it was two months ago, instituted their. new stable coin regime. And if you look at it, like, you know, a lot of the exchanges switched off of, you know, other stable coins and switched to USC and the ones that are, you know, that, that, comply with the regulation. So the U.S. needs something like that. And again, that will have two effects. The first is obvious, which is entrepreneurs will have clarity and be able to do stuff. But I think the second one, I think people are underestimating is this will then just unlock many, many other organizations to enter the space. I think you could have a situation with stable coins.

I think it's a reasonable probability where it's a little bit like credit cards where you have sort of every bank and another kind of financial entity getting in the action, issuing a stable coin, marketing that, you know, kind of joining, you know, putting it on, you'll see it on on your checkout pages. And it's a network. Like all things, blockchain, it's a network. It's a network. It's a network. And there's a network effect. The more users, the more valuable it gets. And so having more, you know, unlocking through policy, and other 99% of the possible network participants is a huge, it's a huge deal. And so stablecoin legislation, there's a lot of questions around, I think you've covered this stuff. You know, the, what is they say like the federal government? I think no one actually knows how many agencies there are, but it's like 300 or something. And so you can keep going through the agencies. IRS just had a really bad ruling. I mean, this is just part of the lawfare campaign where it's effect, again, all these things are basically trying to ban crypto. And so they just made these ridiculous things that no one could comply with where like every piece of software has to issue a 1099

and things obviously people in you know crypto projects should pay their taxes like one one of the things we worked on a lot was a new corporate legal entity structure called duna which is now the law in wyoming which is built precisely for so that dows can can have an entity structure where they pay their taxes and do other kinds of things so there are ways to solve these problems that just that so you got to fix the irs stuff there's a lot of questions around AML bank secrecy act, you know, what, what the, you know, there's a, there's a, uh, one theory that is a, I think a very bad and dangerous theory that any smart contract is a money trans transmitter and, you know, which essentially is a de facto ban on smart contracts, um, because they can't, you know,

a piece of solidity code can't do, can't comply with those things. And so, you know, figuring that out will be big. Debanking is a big deal. Yeah. You know, I had a, We actually have a full-time person on our, it got so bad two years ago. We actually have a full-time person whose job it is to try to find bank accounts for startups. Like that's how about it is. Oh, my gosh. I hear these people like, the New York Times is like, oh, it's a conspiracy theory. Like, no, it's not a conspiracy theory.

Like, we've been dealing with it for years. Yeah, I was surprised when I saw that because I was like, wait, didn't you know this has been kind of going on since like 2014 or? I mean, everyone knows it's going. Like, even you talk to the bank, I've heard it from the banks a million times, not a million, but a lot of a bunch of times where they're like, look, we can't. They won't put it in writing, but they're like, we can't do crypto. And by the way, just to people know, that that's not, you know, they debank FTX.

This is literally a website that's not even going to ever have a token. Like, it's like a wallet provider or like I have had ones where they just literally have the word block. If you literally have the word blockchain on your website, like they will say, we saw the word blockchain and we're not banking you. And so that's just, that was unbelievable. So there's just, like, it's a huge, you know, there's state level stuff. There's international stuff. So there's kind of an endless rabbit hole of policy. But it's very, like, I mean, also a lot of this stuff flows kind of concentric circles out from the U.S.

federal government. I mean, it's, you know, most many countries follow our lead. And so it's just, it's, it's very, very important that we now have a government of, you know, policymakers that are embracing innovation and not fighting. Yeah. And I would say not even just like for the industry, but personally, I think for American competitiveness, you know, you saw how like other smaller smaller jurisdictions were trying to use this to give themselves a leg up. So we have, you know, so many things we could talk about on this score, but let's shift to something a little bit more

fun, which is AI agents. Obviously, that's been a huge trend of the last several months. And A16Z has, I don't know if, you know, intentionally, but almost like unwittingly, at least from the outside it seems, has been a key player in multiple ways. You know, obviously Mark recent sent Bitcoin to Truth Terminal last summer, which kind of kicked off a little bit of a frenzy. And then there was a launch of AI16Z, which, you know, to be clear, doesn't have any official connection to your firm other than they just wanted to use this name. But that is now one of the hottest Dow is that aims to be a challenger to, you know, a venture firm like A16Z, but have the investments managed by an AI. And I just love to hear, you know, how your firm got

into this whole AI and crypto craze. And then what you thought when AI 16C came out. Sure. Well, look, I mean, I guess if I could step back, I mean, look, obviously the stuff happening in AI, I don't think I need to think people are aware of this is profound. And, you know, it's amazing. And it's sort of the culmination of 80 years of work. I actually used to work at little.

I mean, I was an entrepreneur with an AI company, sorry, in 2008, sold it to eBay in 2011. So I used to be an AI. And I'll tell you back then, it was sort of this. you know, long time dream. There was actually an AI financial, public market financial bubble in 1980s, believe it or not, we're on expert systems. You know, veterans of AI will talk about summers and winters, kind of similar to the way crypto folks talk about it. And there was just a lot of people kind of eye rolling, you know, that, okay, you know, we've been hearing about this forever. Yeah, it's great. They can play chess. But like, is it ever going to really happen, right? And it's now

it's happening. And it's amazing. It's a miracle. And, you know, I think the work that those folks are doing on the AI side, you know, the kind of the AI labs and things, it's just remarkable. And by all signs, it's going to continue to, you know, improve dramatically. Like, it's going to be, it's going to be great. And, you know, it's also, you know, that by the way, as a side note, that's another kind kind of policy focus of ours. We're very pro open source AI. I think if we think without open source being protected, that it's, you know, you have this risk of kind of a cartel of a small number of companies that control this important technology. I think that whether, I think it honestly, if folks follow things like Deep Seek,

I think that that's already a foregone conclusion at this point. You know, when you have China putting out arguably the best frontier models, you know, that costs whatever fraction to train that's open source. Anyways, very excited about AI. And look, and I think my secondly, I'll say my experience, you know, having worked in the internet and technology my whole career, is that when you have these mega trends like crypto and AI, they tend to intersect and reinforce each other. So, you know, I remember 2000, I was an entrepreneur, whatever, the 2000s.

And I remember, you know, people would sort of in the same way they talk about AI and crypto. They would talk about mobile social cloud. Those were the three things. And by the way, the same thing, a lot of eye rolling and, oh, you're hyping it up and this and that. Of course, you know, of course we weren't. I mean, I mean, it was real. You know, it takes time to play out. But the point I'm making is that it was a mistake to look at the three separately. the three were deeply intertwined and mutually reinforcing. And so mobile was what took computing from hundreds of millions to billions of devices and made them, you know, and took the engagement from, you know, I think it was sub one hour

to five hours a day. Social was kind of the killer app on those phones that drove that engagement. And cloud is the, you know, infrastructure that enabled in the back end. And so, you know, the smart way to look at it in retrospect, right, was to look at all three and to look for entrepreneurial and other opportunities at the intersection of those. And so I feel the same way about crypto and AI, a number of recent investments. I don't think we've announced it yet, but one I just did was, you know, an AI kind of related to AI and stable coins and payments and things.

A lot of, I think a lot of our recent investments have been, I don't think they're all announced yet, but basically have those themes in them, AI and crypto. And I expect that will be a major theme going forward. So generally very excited about it. And then secondly, I'll say I love to see the experimentation with all the kind of AI agent bots. I mean, like, this is what's fun about permissionless innovation, right? Is that you just have interesting stuff that kind of surprises you. And, you know, we were not connected with AI 16 Z. I believe he's changed the name. The process of changing it. We've asked him to. Oh, really? Yeah, I think it's like a Liza now. I don't know. I don't know if it's fully changed yet. It just was creating a little bit of confusion. But I think it's cool. And, you know, I haven't followed it like the results and everything. closely, but I know there's like a whole wave of these and people are excited about them. And, you know, so, so I, you know, I'm excited about all the experimentation, innovation, and see where it goes. And do you think that an AI could do better than A16C when it comes to investment? I mean, like this, so maybe I have policy on my brain. There's a lot of policy

questions about this. You got to get, you got to make sure you set it up in the right way and a way that protects people. And like, there's all these rules around like a credit investors and like if a random person's buying tokens and is making investments. And so you need to figure all that out so that people are protected. But, and you know, you can argue venture capital in some ways is, is the beneficiary of rules that, I mean, like the way that the laws work right or wrong is that you have to be their venture capital firm or a millionaire to invest in startups. It's like, that's the credit investor roles.

And, you know, that makes, I like, I've always thought I was like a seed personal seed investor and Kickstarter back in, gosh, 2009 or something, I've always believed that kind of in the wisdom of the crowd's idea that sort of the, that, you know, that sort of this priesthood class that I'm part of doesn't have special knowledge, that we have, you know, we have access to capital and brand and other kind of, you know, and regulatory moats. But, but I, yes, I, so I generally believe that kind of the, that, you know, in democratizing, investing. And, you know, and, you know, and that I'm sure there are lots of smart people around the world that can beat professional investors in many cases.

So I think to the extent we can broaden the access to that in a way that doesn't, you know, that it doesn't lead to scams and other kinds of bad behaviors. You've got to make some balancing act. I think that's generally a net very good thing. Yeah. I mean, honestly, my thought was because, you know, part of. what VC is, is like also connections and human relationships. I was a little bit like, I could see it, yeah, competing in a certain way, but like not the same way. So.

Yeah, like, I don't, I don't like worry about it for myself. I mean, like, I think that in my own case, like I, what I hope and expect is that people actually want to work. Hopefully they hear good things about me and want to work with me. And so, you know, and that gives you some advantage. And so I look, I mean, that was the whole thesis of Andreessen Horowitz from the start, Mark and Ben's thesis was venture capital is changing, capital's becoming fungible and, you know, commoditized and that the value will come from, you know, from providing value and services and help. And that's how we've always looked at it. And, and look, in that, I think that's defensible, you know, it takes years and years to build up a reputation and the expertise to help people. And so, you know,

I don't worry about it for myself. And I think it's good. Like, to the extent we can broaden access to that. Look, the reality is that, I mean, it's a lot of wealth is, and a lot of the kind of wealth disparity in the world is created through investing. And so to the extent you can democratize investing, I think that's a very good thing. These are hard, they're hard questions. Look, I mean, there are hard questions because you will have scams and bad behavior. Like, there's a reason for these laws. But I think the question is with new technology, can you use, you know, other kinds of, you know, can you find the balance in other ways? And so I think it's exciting that people are exploring it. All right. So in a moment, we're going to talk a little bit more about where this crazy is headed,

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Again, if you want to hear your comment featured on a show, please write a review or leave a comment on an episode on YouTube or X. Back to my conversation with Chris. You have talked a lot about how when technologies first launched, they tend to be schmorphic or they tend to look like a toy. And skimorphic is where it's sort of like copy and pasting what is already existent into this new format. And it's only after a while that the inherent new features and qualities of that new technology

become apparent and how to fully utilize that technology becomes apparent. So if we were to project out, you can pick your time frame. Like, where do you think this AI agent craze is headed or this intersection of AI and crypto? What will it look like when it's mature? Yeah. I mean, the point, like the idea that sort of the, that interesting things emerge from toys, I think it embodied, I mean, I guess I would make a few comments there. One, it doesn't mean every toy becomes interesting, right?

That means that some interesting things start off as toys, right? And the example I gave, like in the original blog post, the most, this is a very famous example is, you know, the original telephone. The telephone created by, you know, Alexander Bell, at the time when it was started, it would only go, you know, it was very short distances and it had poor sound quality. And, you know, Western Union, who was sort of the dominant telecom incumbent at the time, had the opportunity to buy the patents and passed on it because they didn't see the value because, you know, their business was sending telegrams from. from, let's say, you know, long distances to schedule train, you know, freight shipments. And the phone couldn't do that. And they didn't see, you know, did look, our best customers, our business customers don't need this. What they, you know, what they, of course, underestimated. And by way, there's many cases of this in history. And it's easy, you know, in retrospect,

they always look silly. But at the time, like, it was a reasonable thing. It was like actually probably was a pretty crappy demo. Right. And so, so, so, but of course, you know, In retrospect, what they misunderstood was that the phone would get much better. And they would follow this kind of exponential improvement curve. And so the point of the kind of next big thing starts off as a toy is when you see a toy, you need to ask a follow-up question, which is, you know, what's the improvement curve? Is it following kind of an exponential improvement curve? And the reason this pattern occurs a lot in technology is technology has a lot of exponential

curves, right? The most famous one is Moore's Law, you know, just the fact that every, you know, year, 18 months or so, you know, you get whatever it might be, you know, it varies, but let's say double the compute. And so, you know, you live in a world where everything is just kind of doubling every 18 months and you're going to have a lot of exponential curves. Now, more, more is a lot really not the only exponential curve, right? There's, you know, networking and storage and other kind of computing resources of all those curves. But there's other very important ones like network effects, right? So social network, as you get more, you know, the first thousand people, you know,

it's sort of valuable. And when you have 10,000, it's, you know, orders of magnitude more valuable, right? Composability is a very important one. I think it's underestimated. So composability is what has powered open source software. You know, 25 years ago, open source software was this very fringe toy-like thing. It was so toy-like that, you know, Linux was started in, I think it was like 93. And, you know, if you go back and read the press or look at like, for example, one in one interesting case data point is the Microsoft antitrust trial,

Linux isn't even brought up as a competitor, right? It's all Java and sun and things. That was eight, nine years later. Now Linux is, I don't know what the latest numbers are, but it's got to be 90% plus of the operating systems of the world. Android phones, every credible server runs on some kind of variant of Unix. And so, you know, why did open source win, right, against these very well-funded companies is because of composability.

So composability is the fact that you can write software once and reuse it, So someone writes one little thing, a little math library, and somebody else, you know, takes that and build something else. And so you have this compounding kind of, it's kind of the compounding interest of software. And so that's an exponential curve. And so like the way I kind of look at the world is like, what are the interesting exponential curves? There's Moore's Law. There's kind of network effects. There's composability.

And then and then say, okay, where are the toys that out there that are kind of interesting, whether they be, you know, AI agents or meme coins or whatever it might be. that might benefit from one of these exponential curves. So you've got to kind of look and track that out and sort of see where it might lead to. And so, you know, specifically one of the things that excites me about crypto and blockchains, right, is you have these natural exponential curves. So specifically like a blockchain is, you know, in some ways, a social network, right? It's a, they get more valuable. The more developers you have, the more users you have and so forth.

All kind of blockchain software is open source. And so you have the benefits of composability. I mean, blockchains have another interesting property, right, which is not only have software composability, but you have service composability. So you can build a smart contract and someone else, and it can, you know, have information and tokens or whatever it might be. And then someone else can build another one on top of it. It's kind of like with Lego bricks, right?

And so all these pieces of software kind of assemble into Lego bricks. And that's a very powerful thing. So I think you've got to kind of dig into the details and look at like, is it, is this something that's kind of silly right now? But these exponential curves are, it's riding on could make it much more. I think defy is a good example where a lot of people in the world dismiss things like Uniswop and Compound and Aveas toys when, you know, like I think the main blocker for those things, not being dominant throughout our economy is policy, right?

It's just basically been illegal for anybody to use them outside of crypto. And there's many things like that in crypto, which is like Uniswap is clearly a, better way. You know, the AMMs are clearly a better way to do, to do, you know, just kind of asset trading and things than kind of legacy systems. I mean, there's just no question, but they just, you know, they haven't been able to integrate them with things outside of crypto. And so you have this kind of appearance as it's a toy. But you got to say, okay, well, what would happen if we unlock that policy? What would happen if we, you know, allowed all these other actors to get involved? And you've got to benefit from the exponential curves of network effects and composability and things.

So, but, you know, where the AI crypto trend is going, like the way I imagine it is I could have my own personal AI that I program and I can say, you know, I don't have time to manage my finances, but here are the things I'd like you to do for me and like give it some principles to follow. I don't know. Is that just too basic or like where do you imagine it's all going? I mean, you already see these agents like, I mean, Open AI just yesterday released this operator, right, which is a, and I think all of the labs and your startup, you can see a bunch of startups. You're going to see a bunch of startups do this where you have these agents that are running on your behalf. And this is already happening, right? Now the question is, can they do more than just sort of type stuff into websites? And can they actually have economic activity?

Can they exchange resources? And can you have this kind of AI economy, right? And that's where I think the blockchain side comes in, right? Is that you can have them trading micropayments and stable coins and all sorts of other things like that. And so I just think it just unlocks a whole, a much wider range of behavior. for AI agents, which is already a clear and important trend. All right. Let's move to Ethereum, which has seen so much hand-wringing this past year.

And one of the major questions that's been a point of debate is whether or not layer twos are parasitic to Ethereum. And just to set context for listeners who may not be aware, Chris's firm is an investor in Coinbase, Mark Andrews and Stolenboard, Coinbase also has an Ethereum L2, which is base. So, Chris, you know, what's your perspective on this? about whether L2s are parasitic to Ethereum. Yeah, I don't, I mean, I guess, look, whenever these debates of like, you know, the kind of the, what I would call zero-sum debates of like, does this, does this L2 take away from the L1? Does Sala take away from Ethereum?

You see a lot of these kinds of debates on, you know, on Twitter and crypto Twitter. I, you know, I kind of, I guess I, I, my general view, is we are at like 1% adoption. I mean, what are there like, I think something like, let's say tens of millions, probably maybe, let's say we're 50 million. It seems like a reasonable thing. If you look at the data, kind of active blockchain users, but that I don't mean people that hold crypto.

I mean people that actually, you know, have a wallet and use and do various other kinds of verbs, playing a game, you know, sending, you know, validating, sending something using a DFI, whatever it might be. 50 million is roughly 1% of the internet, right? I mean, it's 5 billion internet users. we're so early. And so the key thing, and this is what I've been laser focused on, is like, how do we unlock and get the other, you know, 4.9 billion people on board? And like just to give you, and I think the answer has been, as we've discussed earlier, policy, we, you know, had to get

through these hurdles of essentially being blocked from doing that. And so let's just take a simple example, stable coins. It's like, if we get a stable coin legislation passed, like right now, I forget the latest numbers, but it's, they're big numbers of stable coin volumes. I mean, it's hundreds of billions a month, I believe. Maybe you can correct me, but I haven't seen the latest numbers, but, but it's still a tiny, tiny portion of, of the internet. Imagine if we had good stable coins legislation and this became, and stable coins are clearly, clearly better for many use cases than legacy payment systems. And so if you, you know, if you get the right policy in place, you could see very quickly see significant adoption, that will, you know, 100x,000 X, maybe more,

the usage of blockchains, it won't matter. Like, first of all, in that case, you're going to be very glad you had L2s because you need them, right? Like, there's just no way the way Ethereum's architected, you could really scale it without that. Secondly, like, you're going to see just like a surplus of demand for Solana for Ethereum for L2. Like, I just don't, so I think these tradeoffs, kind of these debates that happen.

I think they're, I think they're really anchoring on a, on a kind of zero, they're kind I'm thinking it through a zero-sum kind of game, which is really just a product of, I think, bad policy that has blocked the growth of the space. Yeah. I mean, I understand what you're saying, and I agree to a certain extent, but I feel like probably because we are on the verge of, you know, more of a mass adoption phase that for, you know, for Ethereum and for Salon, it feels more existential because, you know, I saw this meme the other day where it might have been Mert posted, you know, a logo of MySpace and then face.

And I forget all the other ones that he had, but there were so many where, you know, there was like kind of an original. Like Yahoo! Gmail was another one, or Google. And it just kept going. And, you know, one of the ones that he posted was Ethereum and Solana. So I feel like that's why they view it. That works. You know, there's Facebook. I mean, how many are successful and worth tens of billions of dollars? Facebook, Instagram, YouTube, Snapchat, TikTok. I mean, LinkedIn. There's, I believe, 10 to 20 that are worth 10 billion, let's say, up to a trillion dollars. Like, it's, that's my point is that when something really takes off, you know, that there's usually many winners. Like, there won't be 100 probably, but like there will be, there will be many. So you feel like even though I guess, so what happened basically, and, you know, I know that you know internet has been much better than I do. So please feel free to correct my characterization. But if you look at

how Facebook initially displaced MySpace, all those other social networks, they didn't exist at that time. You know, Instagram. Someday. It's someday. LinkedIn YouTube did, but yeah. Okay. So it felt like it was almost like the category needed to be proven or something before kind of the rest took off. I could be wrong.

But anyway, I think that at least that's how I. It could be right. I just think it's like, look, I just think you can kind of cherry pick history and you can say like, look, maybe it's Facebook, you know, maybe it's Facebook YouTube or maybe it's Facebook MySpace, right? I mean, and I think you got to look. And so like the meme you describe, I think is just looking at it from one angle. I think another angle is you can look at it as, you know, is the real thing we got to keep

our eye on, in my opinion, is how do we unlock, you know, the 99% of users who aren't using these things? Like that is what we should be laser focused on. So you actually feel like long term the L2's quote unquote being parasitic or not to a theory is not going to matter. What's more important is to make sure that the category succeeds. And if the category succeeds, then multiple different variations on this will succeed. Yeah. And it's this concept of induced demand, right? Like you build more highway lanes and it actually ends up, you know, you actually have to end up with more traffic. Lily Liu, the president of the

Salana Foundation, came on the show recently and called base a corporate L2 and said it was hypocritical for people to call Salon as centralized when L2s like base were even more centralized. And And I should let people know that, you know, your firm is also an investor in Salon. So I was curious what your thoughts were on her comments. And like I guess I would say a couple things. Like centralization is a process. Like everything starts out centralized by definition. Some bitcoins would claim this is blasphemy. But like Bitcoin was centralized in the beginning. It was like by definition. It was one person set of code that centralized. Everything has to be. And so it's a process. And it's a sometimes takes. time and it's, you know, hard to do and it's messy. And a bunch of these projects are different stages of that, right? And, you know, like, I think Ethereum is very decentralized. There's, there's, you know, hundreds of different projects building things on top. There's multiple

L2s, including base, optimism, arbitrum. And, you know, Solana has become increasingly decentralized. There's many other projects building on top. I don't know. Like, I just see this stuff as I kind of ignore a lot of these kinds of debates again going back to the fact that this is all kind of pregame like it's it's a zero sum early stage kind of sniping and that what's really important is unlocking the next stage of growth and like I think the other thing I'll say is I think infrastructure kind of for the first time in the last year or two is now at a really good point like you can like it's not the bottleneck anymore like three years ago it was a bottleneck right or maybe four years ago.

Like, Solana did a lot. Ethereum, you know, finally getting L2s with, you know, with the cheaper blob space gas fees that happened like a year ago, whatever that was, a bunch of other interesting L1s. Like, we now have really good infrastructure. And the thing we really need now is now that we hopefully are fixing the policy is we need, we need more traction at the application layer, right? We need stable coins. We need games.

We need social networks. Yeah. We need to broaden the user-based. So defy and just all these other kinds of interesting things you can do with blockchains. Like we need to see that happen. And then, as I said, I think if that happens a whole bunch of these projects, these infrastructure layer projects, will do very well. Okay. Well, one thing I also did want to ask about Ethereum is I'm sure you saw on social media a number of Ethereum community members were expressing angst over Vitalics and the foundation's leadership.

And I know that your firm focuses a lot on founders and obviously help. them with leadership type issues. So I wondered what you thought of the EFs and Vatelix leadership and if you had any suggestions for them. Well, I'm not close to the details of the EF. I will say, you know, like, Vitalik is a genius inventor. I think his, you know, like his blog posts, particularly the technical ones, I think are really visionary.

And I think he plays a really important role. And my understanding as the EF supports that and they have, you know, researchers and folks like that. I think they do other things and that some of the controversy. But, you know, and that, I think it's part. positive and important. Ethereum is very decentralized now and there's hundreds of venture funded projects on top. There's, you know, vibrant L2 ecosystem.

Like, I don't think people should be looking to the inventor of a decentralized system 10 years into it to, you know, to go and like whatever they want, like do marketing and things. I think he's doing what he should be doing, which is he's providing technical, you know, visionary technical leadership among a community of people. But ultimately, look, if that happens, if that happens, you want to have kind of more of a corporate marketing thing that I think that should happen maybe it happens from base or from another L2 or for some other projects right there's so many

other projects there that someone else can pick up that mantle and do the kind of more corporate marketing kind of thing that's just not what you're going to get out of a metallic type technical visionary it's not what he's not it's not his job and it's not you know it's probably not what he wants to do and so I don't know I feel like it's kind of unfair these criticisms I think they're just looking at the wrong place and that the real answer is is you know building interesting applications on top and people at those application layer taking up that leadership and doing the marketing. I mean, look at Bitcoin you had. I mean, Bitcoin's a good example. I mean, Bitcoin has had incredible marketing as a community. And it happens, you know,

from everything from CZ to Brian Armstrong to, you know, pomp to like all these, you know, influential, core developers. Yeah, I mean, it's just like a zillion interesting people. Some of them are kind of more libertarian. Some are more, you know, I don't know, digital gold. Some are more like the Michael Saylor's, like the kind of business folks. And that's how you get a really powerful movement going, right? As you have a whole bunch of people with different angles and different audiences who, you know,

are excited about something and explaining it to people, right? And sort of authentic evangelical community marketing. And I think Ethereum has a lot of that. And I think just sort of more of that is what is, hopefully. And these things are kind of flywheels. Like as you get more users and more people coming in, you'll see more of that, right? I think a lot of, I think a lot, I don't know, I mean, there's sort of, there's a little bit of a cranky sentiment on crypto Twitter these days. I think some of it is too, it's just like, you know, it's been a rough couple of years, as I described, like every sort of under attack

and like, yeah, I think it'll get a lot better. I think getting, you know, I think the policy improvements we were just discussing will bring new fresh people into the space who will have kind of a fresh perspective and that will help brighten things up a little bit. Yeah, but the Ethereum one was a little different because the angs continued after the election. But, you know, this week they did announce Ethereum, which, you know, is meant to be this institutional marketing and product arm for Ethereum. They're talking to different institutions about tokenizing. I mean, does Bitcoin have a foundation that does?

I don't think you need to, I don't know, I think it should be done by the community. But look, I mean. Yeah. Yeah, and it's separate, but Vatolic and the foundation did provide funding. I haven't gotten a chance to read in detail, but I browsed a little bit his blog post yesterday, and I think the technical leadership is really interesting. Like, the native roll-up stuff is very interesting. And that is, I think it's important.

Like, they continue to advance that. Yeah, well, I did want to ask you about that. So for listeners, Vatelik published a blog post on Thursday, and he, you know, basically admitted, okay, LTs have problems, but this is where we're at, and we're going to continue. with this type of roadmap. And he laid out a few different plans to scale further via blobs, improve the L2 experience with better communication, decrease the withdrawal and deposit times, et cetera, et cetera.

But, Chris, I did want to ask you about at the end where he had some proposals for the economics of ETH, such as making it the primary asset of both L1s and L2s and encouraging L2s to support ETH with some percentage of fees. And of course, as you mentioned, He just also suggested based roll-ups in which the L-1 would be the sequencer. So I just wondered what your thoughts were on all those proposals. Well, it just came out yesterday, and I only, I didn't get to really study it.

So just with that caveat. But I, and I saw mostly the native roll-up stuff, which I think is interesting. And as it's been explained to me, could be valuable in that you sort of get, it's like a nice balance where you still get. You have some common code base across the L-2s, which provides better user experience and interoperability and things. but still enough is left up to each L2 to allow kind of a heterogeneous experimental kind of environment. People can, you know, try different technical approaches.

And I think that seems promising. On the economic side, like I haven't looked at detail. I think generally, I mean, the way I look at it now is like things like optimism. I mean, essentially you are, I mean, you're, you know, it is every transaction batch buying gas, buying Eath and, you know, to settle on the L1. And so in that sense, you know, you could look at it as a percentage of fees are going back to the L1. I think you could imagine, you know, tweaking that in the same. Like, I mean, there was, you know, EIP 1559.

I think that was three or four years ago, which was a, which is a sort of rethinking of the L1, Ethereum L1 economic model. I think it was very successful. Well, I feel like it was successful until Duncun, then it became less successful. because we just saw the burn just decreased after that. Is that bad, though? I mean, I guess, well, with the burn, I mean, I think. Yeah, sorry. And then there were more periods of ETH being inflationary after that.

Yeah, I think that, well, that goes to this sort of these religious battles of like, is ETH. Should Heath be, you know, ultrasound money or should it be, you know, the kind of this, I mean, like, lower, I mean, generally, I think lower gas fees is a good thing. I mean, it means that it's, you can build more applications and more people can use the blockchain. And it's a better user experience and it's cheaper. Now, the flip side of that, of course, is you are burning less and it means you have, you know, potential inflation or less deflation. And so are you, are you like not necessary? Are you not an advocate for the ultrasound money? I mean?

I'm an advocate. I'm a tech person. I'm an advocate for building products used by billions of people. I think when you build products, my experience, I have never seen in 20-something years building products for billions of people and not having it be worth a lot of money. So I just don't worry about the worth a lot of money part. Okay. Like I just worry about, like, how do we build things that a billion people use every day? Like that, I think you do that and everything else takes care of itself in tech. Like that, that has been the lesson of 70 years of computing, right? Right. But yeah, the crypto economics will affect the price, which affects the security. I'm not saying it's not important. You know, look, sorry,

I think there's, I'm responding to your question about ultrasound money and like the, the decline in gas fees or something. Yeah, I think these questions of like, I,

like, I didn't, again, I didn't like study the blog post, but I think it makes sense to me that at some point you would, you know, as we've now had L2s

out there for a number of years and you have a lot more data and a lot more evidence, it makes sense to me that folks like Ethereum, sorry, the Vatelic would be thinking, you know, hey,

is there a way to do a one, 559-9-like upgrade to the economic model, right? Because it's a set of trade-offs as to like how the kind of the economics work. And so, again, I don't know the specifics, but it broadly makes sense to me that you would have some rethinking of the economics. So one other thing that I wanted to ask you about was I'm sure you saw after the ether ETFs underperformed the Bitcoin ones by a lot more than people expected. I heard a number of people say that there wasn't a clear narrative to sell.

to Wall Street or there wasn't a like a quick and easy way to to explain what Ethereum was to them. So for you, what do you think would be the best way to explain Ethereum to Wall Street? Sorry, I'm saying like a broken record, but it's all about getting like, like how do you explain AI to Wall Street? You say go look at chat GPT. Okay. And like that's why everyone, that's why Nvidia's stock is worth $3 trillion and all the other kind of financial stuff is a consequence of usage. Everything is a consequence of like great product. Like tech is. is all about great products used by lots of people, period, like in my view. Right.

And so it's always how do we get to these great products that people love? That's how I look at the world. And like, what are the blockers to get there? And like right now, the blocker was policy in the last three years. Hopefully that will go away. And the next blocker will be, you know, enough great entrepreneurs working on interesting stuff or whatever it might be, right? I think that's how you explain to Wall Street.

I mean, like right now, like a lot of these people on Wall Street probably aren't using crypto apps every day. So they don't get it. Right? if you build things where they get it, that will change. And so, you know, it's like it's just night and day trying to explain AI to Wall Street pre and post chat GPT. If every day, you know, their kids are, you know, you know, earning NFTs in the video game

and they're using stable coins to buy things on the internet and, you know, and they're doing international wire transfers through stable coins and like all these other kinds of things that, you know, that we envision, like they'll say, oh, what is. is the thing that enables all of this? Like, oh, it's these programmable blockchains, such as Ethereum and Solan and everything else, right? So that, I don't know, like, I mean, again, like this also goes to our investment. Maybe this is like an investment time horizon thing. Like, we have a very long time horizon. So maybe this is a, you know, affecting the way I'd look at it. I just don't, okay, like the, I didn't even know the ETSF until you told me. I don't look at that stuff.

I don't, it doesn't matter because it's just like, okay, like, I mean, I've, look at the stock market. It's like this, you know, it's, Warren Buffett has always great. essays about it. It's just like your crazy, your crazy uncle or whatever. And like today it's in a bad mood. And today it's in a good mood. Whatever. It's just, it's just, it's kind of stochastic and random and just, you know, gives you brain damage to study it. And so I just look at it more in terms of like, you know, we make investments. We hold them for a very long time. And we try to build great products to get used by lots of people. And then everything takes care of itself. And now, of course, I skip, you know, there's a lot of details that go into the great products used by lots of

people, but that's, that's kind of where I spend my time focusing on it. You know, I would be worried about Ethereum and Salon and these things if, you know, the tech wasn't good or the developer community wasn't good or there weren't interesting entrepreneurs building stuff. I don't see any signs of those things. And so, you know, I, I think it's very healthy in that way and they're making lots of progress. And look, and there's new, and there's new interesting, you know, like the move blockchains are interesting. We're investors and, but we're investors in probably everything to discuss just for disclosure. But the, you know, Aptus and Suey and a lot of all these and other kinds of new stuff.

So there's just a lot of innovation happening, and I think it's exciting. But the real blocker was policy and now I think it's application layer, building more applications for people. Yeah, it reminds me I got into a mini debate with somebody on Twitter. And I can't remember what they said to me, but they mentioned that they thought like, basically institutional adoption was a major signal and that crypto Twitter and prices were not. And I was like, wait, the institutional, that's like they're the followers. They're not the signal. That's like so downstream of like where all the action is. I was like,

how are you saying that that's important? Anyway, well, you know, as you mentioned earlier in the discussion, you feel like the whole category that Ethereum and Solana and all these other chains that you just mentioned represent will coexist in some fashion, I guess. And, you know, as we just discussed that, I think there are some people who are worried it will be more zero-sum. But describe what that future looks like to you where Ethereum and also Solana and also Aptos and Suey and, you know, whatever all exist, is it just that each chain becomes, you know, used for different use cases or how are you envisioning that? Yeah, it's a great question. I mean, so if you, if you look at other areas in technology where you have, you know, multiple winners,

sometimes it's sort of different use case. It's like we were talking about social networking, right like so LinkedIn is like a obviously like a work context and you know whatever Facebook and Instagram maybe more social and you know match.com is dating and so there's so sometimes different use case so you could imagine a scenario where you know maybe Solana salana wins on gaming and social networking and Ethereum wins on decentralized finance and that might have to do with some of the tradeoffs made in the architecture you know maybe so for example having everything on sort of one central blockchain might be beneficial for certain use cases and having them, everyone having their own L2 and being able to scale that way might be better for other.

I mean, you can imagine sort of different ways this could play out with different sort of quote unquote workloads supporting different architectures. Like look at move. We mentioned the move chains. Like one of the benefits of move, the negative of move is a new programming language. And you have to go learn that.

And developers don't like to do that. And there's all sorts of network effects around programming languages with libraries and other kinds of tools. the positive is it's got a better security model. And, you know, so it in the language itself will kind of prevent you from from making a lot of errors that would lead to hacks. So you could imagine, you know, if Goldman Sachs issues a stable coin that they may want that security level and be willing to pay for, you know, the higher cost of building that, right? So I think institutional institutions might want different things, you know, maybe, maybe Ethereum ends up being the kind of the more

consumer hacker chain and, you know, sort of different cultures. You can imagine different geographic splits. You know, maybe Asia has different chains than the U.S. So I think in the world where you have sort of billions of users doing lots of things, I mean, first of all, you're going to probably need a lot of chains. I mean, I know people are optimistic about the scaling, but like if you really get a lot of usage, like, it's probably going to, you know, in all of the winning computing markets, demand has just sort of been insatiable and outstripped supply. Right. And so, you know, you may just need a lot of different, you know, just literally different chains running just for different stuff. But I think you could very well, probably my guess,

is the most likely kind of breakdown is either by culture or, you know, culture, class of user, like institutional consumer. And then sometimes you could imagine different architectural tradeoffs. Like maybe you get higher levels of security arguably on something like Ethereum. And then maybe you get higher performance arguably and user experience on slana or something like that. and maybe institutions want or willing to make the, you know, do new programming languages like move. I don't know. I'm just speculating here, obviously. And you feel like interoperability or it's just that fragmentation won't be an issue? Good question. It's like for some, like, you know, I think you could sort of walk through different use cases.

Like for a game, you know, maybe the game, it's fine to have, you know, your game running on a single blockchain. and then you have, if you want to take some assets over or move money over like stable coins, you have bridges, right? And that's, you know, it takes a little couple more clicks and maybe cost more money. And so, you know, so you'd have most of the single game experience running on one chain and then you'd have some ability to move stuff. So you'd have to think that through. The bridges, you know, stuff like Layer Zero, which another investment of ours, like a bunch of other bridges, like they've gotten pretty good. And I think it's just the, the UX needs streamlining and stuff, it's still kind of, you know, more power user level.

But, but, but, but, you know, I think, yeah, so I think it will sort of depend on the architect. I mean, that's, that's sort of an old debate people have been having is like to what sense, to, to what extent do you need people call it like synchronous composability, like the ability to sort of compose, have the Lego bricks all be on the same shard or Shane or L2 or whatever it might be. Or can you have sort of asynchronous, like crossing a bridge, composability where they send stuff? And it's really kind of a technical question as to how it's architected. Yeah. Well, let's go back to something that came up very briefly at the beginning.

You know, we were talking about how things initially start to look like a toy. They, you know, tend to be schumorphic at the beginning. And we saw that meme coins were a huge trend this past year. There are some theories that that only happened because the SEC was going after projects that were trying to actually build something useful, which you kind of alluded to earlier. And so some people say that this kind of artificially pushed the industry more toward this, like, what people are calling a gambling type of culture with the meme coins. What do you think is the value of meme coins? And how do you think they might be used in the future that is potentially different from how they're used now?

Yeah. And by the way, that wasn't a theory. I mean, the stated policy of the Biden administration was that meme coins are legal. I mean, the way they enforced it through the Howie test and other things was a same. Essentially, they went after everything where you started to, you start with a meme coin. You start with a token. And to the extent you add value to it, that's what they would go after you for. Right.

And so you go to a lawyer in 2023 and you say, what's the safest thing to do? They would say create a meme coin. I've talked to a bunch of lawyers. Every lawyer I've talked to has said they don't see any legal issues with a meme coin. Like meme coins are basically, I mean, like you can still, with anything in the world, there could be fraud and other things. And by the way, there need to be rules around it. I think there should be disclosures around lockups and holdings and also, you know,

you need marketplace rules and things like this. So but it's absolutely the meme coins. So what happened was essentially you had this lawfare campaign that went after everything that wasn't a meme coin in 2022 and 23. And what happened in 24 is you had the crypto world focusing on meme coins. My own view on meme points, like I'm not, I think the nature of permissionless innovation is that you want experimentation and that sometimes, you know, things start off as meme coins. I mean, I think early on you could argue Bitcoin was a meme coin. Today, it's clearly not a meme

coin. It's very important. It's an emerging global standard for digital value. So to be clear, I think Bitcoin is not a meme coin today. But you could argue in the beginning it was. And so, you know, and it had you back in 2009 said, oh, meme coins are bad, we should ban them or something. You would have, you would have, you know, lost that branch of the tech tree evolution. And that would have been a bad thing. So you don't know where these things are going to go like dogecoin. You know, I don't follow it closely, but it's been around a long time. It's a big community. It's, you know, maintained value. I think there's, you know, interesting stuff that happens around the community from when I can tell. There's, you know, plenty of other meme coins that have

gone to zero and fizzled out. So I think probably most, you know, if not the vast majority, have fizzled out. So I think it's as unpredictable and you got to sort of see where these things go. To me, the problem is not meme coins. The problem is that we have. had policymakers that blocked everything else, right? Like, I think in the in this in the end state, crypto should look like the rest of the internet. Like you go to YouTube and there's like silly, frivolous stuff and there's serious stuff. This is how the internet's always been. There's frivolous stuff and serious stuff, right? Crypto should be like that too. There should be silly stuff, and there should be serious stuff, stable coins, finance, you know, all those other

kinds of things like AI products. The problem we had is that we're looking at this, you know, kind of artificially, you know, kind of distorted view of the market right now because we had this just, you know, backward policy that blocked everything but meme coins. So what I'm hoping is sort of nature is healing that this year will have, we'll be able to, I can just tell you in our portfolio, we're going to have a lot of interesting projects that just simply couldn't launch are going to launch this year. And they're not meme coins and they're doing interesting stuff. And I hope that happens throughout the space. So that's kind of my thing. All right. Yeah, I'll ask you about that in a moment.

moment. But first I want to ask you, you know, as we mentioned, you invested in Coinbase all the way back in 2013. And it kind of started basically as just a FinTech app that is connecting the traditional banking system to the crypto economy. And then the last few years, that's kind of shifted. You know, we've seen the rollout of Coinbase wallet, base. And it's doing more to get people to directly participate on chain and succeeding. At the same time, it's continued to serve the Tradfai world through custody, such as for the ETFs. And so here we. kind of see it straddling this wide gap. You know, it's a centralized entity, and it's also catering to centralized entities,

but it's also trying to foster this decentralized financial system. So I just wondered from this point forward, you know, what do you think Coinbase does next to continue to foster this world of open finance? Yeah, I think they've really gotten there. I mean, I think the general sense I feel is that they've last couple of years kind of really gotten their groove back or something and really have been doing innovative stuff. I mean, I think what's so impressive what, you know, Brian has done and Emily and the whole team there is, you know, they have the kind of core business, which has grown and been successful. And then they, you know, they have a second, if you go read the filings, they have a second very large business now in the stable coin business with USC.

And then they have this third emerging kind of thing with base and the wallet product. And they've done some really good, I think, product work there. And so just, you know, to be able to do both kind of the core and keep that healthy. and strong and then also kind of layer these other things on. I think they've been really impressive. When I hear, you know, I just meet folks that work there, used to work there, and just sounds like the vibes are good, the culture's good, you know, just kind of generally feels like an exciting, cutting-edge, innovative place.

I think they've been just a really positive influence on the space and a kind of a pillar and the, you know, a source of strength in the storm. They've been great partners with us on the policy side as well. And so, yeah, I don't know. I mean, like, I think the stuff with base, I mean, they play a very, as you said, they play a very important kind of bridging role, right? I mean, so that, like, how do you get in? How do you first kind of enter the crypto world?

Like, you need to go through the traditional rails. And that's always been their kind of core thing. And they think, I think they do a very good job at that. There are other folks doing it now, you know, that do it too. But I think, I think Coinbase is kind of, I believe, is the most popular for that. And then, you know, I hope they continue to grow base. I think base, you know, along with Solana and other, you know, some of the other blockchains we mentioned would be very credible blockchains to build on as we

hopefully see kind of more adoption, more traditional institutions coming in. So yeah, I don't know. I mean, I guess happy to answer more specific stuff, but I think just generally they've been very innovative and particularly the stuff around base, which they seem to be continuing to invest aggressively in. Yeah, I feel like they're very interesting in the sense that they've take on things that could potentially disrupt them in some way. But I get the feeling they're probably strategizing about when the world is more on chain, how to be big players in a more decentralized world of finance. But it might be too soon to really dig into what that looks like at this moment. I've known Brian a long time. Brian is like whenever there's a, like we and I work

with this team a lot. And whenever there's like a policy question or something else, like, if you go to Brian, he always reorients it towards like what's best for the long term of the space and the world. Like, and this sound, that sounds like a tricornie and it's not, but that's honestly Brian Armstrong. Like he's like, what is better for like the mission? And like everything, when you ever have a kind question and it comes back to Brian, it's like, what's better for the mission? He really is like that. And it really, you know, I think hopefully that comes across publicly, but authentically is. Like he really is a true believer. And I think a lot of people there are. And he'll do things. I've seen him do things many times that are sort of not obviously in the interest of business because it's like because it's

better for the mission. He's a true believer. So I think that's how he thinks. And I think that also, look, I think that's, I think it's very powerful because it's probably, in the end, it's probably a better way to look at business too, right? Because I think that one that comes through. I think people see that. Like, you know, I just think people get that the authenticity.

And that, and that helps him and people, and it fires up the employees and they feel mission driven and, you know, there's a bunch of benefits. But it also like things like base. It can look kind of, is that, is that the right thing to do? And is that going to disrupt our business? And like they're, you know, like they have their, they have now. I think they still have two apps, right? They have the kind of mainstream app and then the wallet app.

And that's theoretically, the wallet app is disrupting the other one. Isn't that a bad idea? But they just, you know, they kind of do it. And because it's consistent with the mission. And my guess is that we'll be smart business long term. Yeah. Yeah, that's what I was saying. It feels like they're recognizing that they're in the business of eventually disrupting

their earliest iteration. We've always seen this with, you know, like, this is just, this goes beyond crypto at the firm. Like, this is why kind of our core value is investing in founders and founder-led companies. And I just always believe this too. If you just look at public companies, the ones that are run by founders, you know, Steve Jobs, obviously, like he saw, you know, he had the iPod. The iPod. Yeah, the iPod was wildly popular, hit device, you know, circa 2005. and he said phones will eventually disrupt it, and I'm going to do that. Instead, I'll do it to

myself, right? I mean, Akia Murido at Sony was famous for this, like constantly sort of saying ignoring focus groups and coming out with new products that disrupted its existing line. The CD disrupted the Sony Walkman, the tape recorder Sony Walkman, you know, et cetera. And so, you know, I think this is really what is special about founder-run companies is that they, they still have that kind of founder mindset and are willing to kind of disrupt themselves and their mission focused. And I think Brian very much embodies that. So on a similar note, I did want to ask about some trends in fundraising. You know, I saw that A16E released a regulatory blog post talking about several different

things that it was hoping for in terms of crypto regulation. But one of the points was around fundraising. And I'm sure you're aware that there is a trend toward bringing back. some version of ICOs through platforms like Echo and Legion. And I wondered what you thought of these platforms and what they meant for the role of VCs like A16C. Yeah, not to be a broken record, but to me it's all policy because, like, look, the current regulations, and like I spoke to Echo a little bit,

I don't know exactly, but my understanding is they're using kind of the existing, you know, the sort of angelist-like regulatory frameworks where there's just all sorts of, of complicated restrictions and friction. And, you know, so to me, and then ICOs, like, it depends what you mean by ICA. People use that word, but, like, just creating a token that has, you know, that's centralized and selling it to the public, which is what a lot of people did in 2017 with the so-called

ICOs. Like, a lot of that stuff is just recipe for fraud and scams and also will not be legal under any proposed framework. So, I mean, the real question is, how do you design a policy that protects against frauds and scams, but allows for a broader sources of capital formation, more market participants, more crowdfunding, less venture capital. Fit 21, which is the bill that got through the house, I believe it had a $75 million crowdfunding cap. So it sort of in the early stages. So the way it kind of Fit 21 works is a token project follows two stages. And the first stage,

when it's centralized, there's more restrictions. And then over time, it becomes sort of, you know, falls into a commodity framework, more like Bitcoin and Ethereum. And the more restricted phase, there's sort of exemptions. And one of them was you can raise up to $75 million from crowdfunding through crowdfunding. And that, you know, that's a lot, that's a big, big improvement, a lot more money than you can kind of currently. The current, there's some current crowdfunding rules that go back to like 2011. They're very cumbersome and restrictive and effectively no one uses them.

So essentially what Fit 21, one of the provisions in it was to essentially fix crowdfunding and make it more accessible. And I'm very supportive of that. I think it'll be good for the world. And I hope that we see something like that in one of these kind of new frameworks. So I haven't looked at the details of those projects, but fundamentally they have, it's just very restrictive of what you can do right now without fixing some of these rules. Now, look, on the flip side, we have seen in crypto, I want to just emphasize this to the kind of more libertarian crowd listening. like you need to have these rules. There's very smart reasons for having a lot of these rules. And we've seen it in crypto.

Like look at every wave we've had, you know, with ICOs, NFTs, like by the end of it, you just have all of these scammers and other kinds of people entering it. And you need to have rules around these things. So this is the real question I'd encourage people to engage in is like, how do we come up with the right policy framework that balances these two things, right? we have a ton of proposals on our website and we hope that some of them will become rules and laws. But that's the real question here. And then once you have that, there's a million interesting products you can build.

And I'm sure the ones you mentioned like Echo and these will, you know, we'll be at the forefront of that. Yeah. Well, as you mentioned earlier, you said that you expect that this year will be quite a different year in terms of what we'll see from crypto innovation. So what types of new trends do you think we'll be seeing in 2025? Well, what I really think we need and what I'm hoping for is a lot more kind of app layer innovation. So this means products that are used by, you know, everyday consumers or institutions that go beyond kind of the, you know, the crypto native crowd. So, you know, I'll just give you some examples of some things I'm excited about. Blackbird is a project we're investors in that lets restaurants use tokens is kind of,

creating loyalty rewards and stable coins for payments. And it's started by Ben Leventhal who created Rezi and before that eater and a very successful entrepreneur. And it's doing, you know, got a lot of restaurants in there. Restaurants have a, I think it's like a 3% profit margin. Like it's a very tough business. And if you can do things to improve that margin and to, you know, to help them, the very low profit margin, they have very little knowledge, a relationship with their, with their customers. People can love restaurant and go there a lot in the restaurant. I mean, maybe the employee knows you, but the restaurant has no relationship with you. And there's, so there's all sorts of ways in which Blackbird can sort of

improve the user experience, but also help the restaurant economics is one interesting one. Story protocol is when I'm personally involved with, which is a project that, that's launching this year that allows, you know, in a world of AI, how do you, you know, if I'm creating a new generative art project and I'm, you know, using as inputs, a bunch of other people's creative work, today people either just use it or they have to go and do some kind of cumbersome licensing kind of thing. What story lets you do is an artist can take their artwork and register it on the story blockchain. And along with that, you can register a copyright, like a legal copyright. They built a kind of a global copyright legal standard.

And it's a, you know, it can say whatever you want. It can say, for example, hey, you can, I created this superhero and you can use a superhero on your video game or comic. book or movie or whatever it might be and you can make derivative works, but you've got to pay me, let's call it 10% of the revenue. All right. And so you get sort of, the idea is you get kind of the creative works can become kind of like Lego bricks, composability, where you have all sorts of different interesting kind of, you know, independent or small creators, creating things and those things get mixed and reused and

recombined. And it's set up in a way that those people are ensured that they get paid. I think just generally a theme for me, I'm personally interested in. It is in a world of AI. Like you look at what's happening with AI. Like you look at the SORA and Google VO and these other products, you can type a few words and create a movie. Like it's not three years from now, probably a, you know, small group of people, if not one person, potentially zero people in AI can create a movie, right? Like something that looks like a movie.

Like in that, you know, illustrations are already done, right? It's already AI can already do as good of a job. text soon, you know, writing, you know, romance novels. Maybe you're not, not going to be Hemingway, but you can certainly write like pretty good novels probably pretty soon using AI. And so in that world, what is the business model for creative people? Like that's a part, that's something I'm very interested in is like, because we don't want, you know, we need, we need to have business models. We need to have economic models. We need to have ways for creative people to engage in the internet, not just have the internet be a passive experience, have people creating stuff. And it should be,

these should be tools that serve people and that help. people accelerate and enhance and, you know, improve their creative abilities. But you need, in any of those kinds of scenarios, you need economic models because if people can't get paid, they can't, they can't do this. They can't spend their time on this. And so I think that's a very interesting question. In that world, how do we create kind of pro creator of economic models? So story is one of my favorites in that, along that theme. What, I mean, we mentioned stable coins in finance. That's obvious. I think that, that I'm really hoping we'll get the policy improvements we need there to unlock that. I think, like, I think that that could,

I think there's going to be a lot of, you know, a lot of institutions, for example, who I believe who are eager to kind of get involved in that once we have the clarity. There's a bunch of interesting games that we're involved with, like Eve Online, which is a popular non-crypto game that's doing a crypto version. And, you know, a bunch of these will be rolling out a bunch of, you know, beta and other kinds of releases this year. You've seen like the social networks like Farcaster and Lens and all these other things I think are interesting. What else? I don't know. We have probably, I'm just, these aren't exact numbers, but I would say 30 to 40, probably app layer companies

that have basically been blocked from building and launching what they want to build. And the ones that have launched, I think they really, what you see is half of what they wanted to build and not the full thing. And so what I think that what I'm actually working on, like on a day-to-day basis, like literally having phone calls and talking about it with these folks, is like how do we now in this new policy environment, build the products we want to build and run the real experiment, right? And get stuff out there.

So that's, to me, the theme. That's what I'll spend my time on this year. I mean, obviously, there's a lot more work to do on the policy side. That sort of two things are that. And then now that we have that, let's get the app layer stuff really working because the infrastructure is good. I mean, look, there's always going to be improvements. And I'm not just missing.

I think the work people are doing is very important. But it's, but it's gotten just so much better. And it's pretty good now. What we need is the app layer. And that, I just think that, those two things, fixing, policy and getting popular apps, that will solve, I just believe that will solve everything. It will solve the questions you had around, you know, value of tokens. It will solve questions around, you know, all these different blockchains and tradeoffs and

sort of these debates people are having, explaining these technologies to people, like, all those kinds of things will be solved with great applications. Yeah, I agree with you about the infrastructure because the Trump and Melania meme coin launches. like if there was ever a test of a system, that was it. And, you know, obviously there are improvements, but it basically worked. So I think that was. Yeah. I think it was some tweet.

I think it was phantoms that it was like, I forgot what it was like seven million transactors. It was like in some, was it a minute or I don't know what it was. It was the numbers were astoundingly high. And there were some hiccups, but generally it worked. Yeah. So it's very, very different now. I mean, people forget this, right? But like, I think it was three, like when the NFT stuff happened, you know,

was sort of happening in 2021, I mean, I remember trying to do simple NFT transfers that were like 50 bucks, you know, because that was pre that was really pre-L2. I mean, that was kind of a state of the art three years ago. Like, you know, you now even, I mean, I had this conversations with the folks at optimism, like even a year or a half ago before 4844, I mean, I think the average, just like a simple thing was $2 or something. And now it's, I don't know what it is, two cents. So dramatically better. Yeah.

All right. Well, Chris, this has been such a fabulous conversation. Where can people learn more about you and A16Crypto? A6DCrypto.com, and we have a ton of content. We open, we shut open source everything. And so we have podcasts, but a lot of written content, hundreds of tech and policy articles. So, you know, hopefully it's a useful resource. Perfect.

Well, thank you so much for coming on unchanged. Great. Thank you, Laura. Thanks so much for joining us today. To learn more about Chris and everything else we discussed, check up the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Matt Peltred, Wanda Aranovich, Megan Gavis, Pamma Jimtar, and Margaret Correa. Thanks for listening.