a16z Partner: What do you think of the argument that "Crypto is dead"?

Video source: EO

Compiled by: Cikey, Sanzhi

Translator's note: The original video "Is Web 3.0 Dead?" was released in early September and was presented by Chris Dixon, a partner of a16z and a leading figure in Crypto. Since joining a16z in 2013, Dixon has not only helped shape the company's strategy, but also founded and led a16z crypto in 2018, which focuses on Web3 and blockchain technology. Today, he manages an investment fund of over $7 billion to promote the rapid development of the next generation of the Internet. So what does he think of "Is Web 3.0 Dead?"

Crypto does face some challenges at present, especially in the FTX incident in the United States and the Terra Luna incident in South Korea.

Although a lot of bad things have happened in the past few years, I don't think Crypto is dead.

In fact, every innovative technology will experience ups and downs. It is wrong to directly infer that "some technology use cases are inappropriate" as "the technology itself is not good", because technology itself is not good or bad.

Hello everyone, I am Chris Dixon, a16z partner, and founder and head of the Crypto Foundation.

For the past 25 years, I have been closely connected with the Internet industry. I started as a software engineer and later transformed into an entrepreneur. My first company focused on cybersecurity and was eventually acquired by McAfee; my second company focused on AI and was later acquired by eBay. "

I have also been involved in angel investing since 2006, investing in some well-known Internet startups, including Pinterest, Stripe, and Kickstarter.

In 2013, I joined Andreessen Horowitz to lead our investment in Coinbase. Five years ago, we acquired the VR company Oculus. Since then, I have been responsible for business development and strategic planning for our Crypto Fund.

In the early days of the Internet in the 1990s, most online services were one-way, what we call "read-only". Websites at that time were more like electronic magazines or digital brochures, where users mainly went to get information, and the concept of social media was almost non-existent.

In the year 2000, with the rise of Web 2.0, I also joined it. This movement emphasizes "reading and writing" skills, and has spawned many related conferences and blogs. The core idea is that the Internet should not only be a platform for passive reception of information, but also an interactive platform where users can not only consume content but also create content. The rise of social media platforms such as Facebook and Twitter is the embodiment of this concept, making the Internet a truly participatory medium.

In the 2000s, network-based services became the dominant force on the Internet. Facebook, Uber, WhatsApp, etc. are all platforms that connect people to each other. They have a strong "network effect" - the more users there are, the more valuable the service is. As these services expand, their influence also increases.

However, we are facing a risk that the Internet may end up being dominated by a few large technology companies such as Google, Amazon, Apple, Facebook, etc. I believe this is not a good thing for innovation in emerging businesses and society as a whole.

The Internet was originally intended to build a decentralized network that returns power and wealth to ordinary users instead of being concentrated in the hands of a few large companies.

In the traditional media industry, especially television and radio in the United States, resources and revenue are highly concentrated and controlled by a few large channels. In the 90s, when I and many of my peers started to get involved in the Internet, we were extremely excited about the potential of the Internet - it promised to redistribute wealth and power and return them to the edge of the network, that is, ordinary users.

In the 90s, the Internet did achieve this to some extent, but in the 2000s, this decentralization trend began to fade.

Fast forward to today, the top five technology companies account for 50% of the market value of the Nasdaq 100 Index, and more than 95% of Internet traffic and revenue are concentrated in the hands of these companies. All trends indicate that this concentration will continue to intensify.

At the same time, the development of AI is impressive, but if it is not restricted, it will further accelerate this concentration. Because AI technology requires companies with a lot of money, data and powerful computing power, which are exactly what large companies have.

In my book, I propose a solution: a new generation of Internet services based on blockchain.

In simple terms, such services are designed to eliminate intermediaries, such as "gatekeepers" and "toll booths". Take Facebook, Uber, Amazon, YouTube, Twitter as examples. These platforms have money flowing, whether it is advertising fees or transaction fees, they all charge a certain percentage of commission, which is called "commission rate" in the Internet industry.

The "commission rate" of Internet services is very high, usually between 50% and 100%, and most of the flowing funds go into the pockets of these service providers.

In addition, these companies also control the entire network, decide who can access the network, who will be blocked, and decide how the algorithm works. They often change the rules, for example, the type of link or content you post may affect whether you are recommended or demoted, and these algorithms are highly opaque and completely controlled by these companies, while the users and content creators who rely on these networks have no say in this.

These centralized service providers actually control the fate of users. This is why I value the potential of blockchain technology, which can bring a new attribute to the Internet - ownership.

Blockchain is a revolutionary invention that can achieve many functions. I think of it as a new type of Internet computer. They are based in the cloud and can perform many tasks, but the most critical one is that they can give true ownership of digital assets.

Take Bitcoin as an example. One of the most interesting features is that the owner of the private key is the real owner of the Bitcoin. This kind of ownership does not exist on Twitter or Facebook.

For example, I have accumulated followers on Twitter for many years, but if the owner of Twitter decides to close my account tomorrow, my account will be gone tomorrow. From this perspective, I am not the real owner of this account. This situation has happened many times on the Internet. Whether it is virtual items in games, content on social media, or your account on PayPal, in the existing mainstream Internet model, users have almost no real ownership.

Bitcoin introduces a new concept-users can own digital assets. Since the birth of Bitcoin, technicians have expanded this concept of ownership to a wider range of areas, such as NFT. The core idea of NFT is that you can own a piece of art, a game prop, or even an NFT that represents a social media username. In this new blockchain-based model, users can truly own these assets, and these assets cannot be easily taken away.

Imagine if I have my own username and follower list on social media and I am not satisfied with a service, I can move to another platform with my username and followers. In this new blockchain model, I can own my username, follower list, data, and even a set of data that I provide to the AI algorithm. In the existing mainstream Internet model, only the service provider or the company behind it can own this data and resources.

Early Internet protocols, such as email, also have similar characteristics. For example, the resurgence of newsletters is an example. Many journalists choose to leave traditional media and start their own newsletters through platforms such as Substack. This is because when you have your own newsletter, you actually own your subscriber list and you have their email addresses. The commission rate of platforms such as Substack is only about 10%, which also attracts many people to use it.

If these platforms change the rules, you can choose to leave and switch to other services. Blockchain-based services are also based on the same concept of ownership.

Right now, we are at a critical juncture where Web 2.0 companies like Facebook have billions of users, while the number of users of blockchain services, including Crypto, is only a few hundred million. Although the number of users of emerging blockchain games and social media is about tens of millions, it is still a small proportion relative to the entire Internet user population. Therefore, we are still at a relatively early stage in this development, and I think it has to do with several factors.

First, it is infrastructure. For example, if you play a blockchain-based game now, the experience is still different from that of a non-blockchain game. At present, the underlying infrastructure of these services is still in its early stages, and it will take some time to reduce costs and improve the user experience. But I am full of expectations for the breakthroughs that may appear in the next few years.

In addition, I wrote in my book that there are two cultures in blockchain: one is the speculative "casino culture", and the other is the "computer culture" that focuses more on technological development.

Casino culture is more focused on short-term buying and selling of tokens, while computer culture is committed to building a new generation of Internet services that return digital ownership to users, reduce intermediary fees, and are controlled by users. The latter is what we are more willing to promote and invest in, but unfortunately, casino culture seems to be dominant at present, which is not conducive to the healthy development of the industry. I hope that there will be wise policies and regulatory measures to curb speculation while promoting the positive development of technology. Unfortunately, some policy decisions made by the United States in recent years have actually contributed to this unhealthy trend.

For example, the number of meme coins created last month exceeded 500,000, a record high. At the same time, regulatory policies have imposed restrictions on productive computer cultural behaviors, which is contrary to the sensible regulatory policies we hope to see. I hope this situation will change, and there have been some positive signs recently.

Although the crypto space has encountered some challenges, such as the FTX incident in the United States and the Terra Luna incident in South Korea, this does not mean that the entire space has failed.

History tells us that every interesting technology will have ups and downs. AI and neural networks have been around for nearly 80 years since 1943. The concept of AI also has a long history. Alan Turing published his famous paper in 1950, describing what is now called the Turing test. Although chess systems like Deep Blue have become world-class 20 years ago, other applications such as natural language processing have been relatively slow to develop. However, over the past decade, machine learning algorithms have gradually approached and surpassed human performance in the ImageNet competition, and language systems have also gradually improved. Although the process of development has been slow, a major breakthrough did occur two years ago. If you have been paying attention, you might think that AI is a new field, but it is actually a long-standing field with many ups and downs. I think many technologies have this trajectory, including blockchain and Crypto.

Technology can be used for good or bad purposes. A hammer can be used to build a house or to destroy a house; fertilizer can be used to grow crops or to make explosives. AI can be used for fraud and scams or to enhance human creativity. Blockchain can also be used for improper purposes, but it can also be used to create a new wave of Internet services and return money and power to Internet users. The way to ensure that technology is used for good is to set rules for it. I think it is a mistake to confuse the application of a particular technology with the technology itself. In the book "Read Write Own", I strive to fully describe the productive uses of blockchain. It is a mistake to jump from "this technology has bad uses" to "therefore this technology itself is bad." Technology itself is neutral, the key lies in how people and governments guide the potential of this technology in a positive direction.

My book "Read Write Own" tells the story of the potential of blockchain and encryption technology. Over the years, I have had conversations with many people about the value and prospects of blockchain, and in these conversations, I found it difficult to explain clearly in a single meeting because the knowledge background involved is often shared by Internet entrepreneurs, but not commonly known to the wider group. Therefore, I think there are several important values in writing blogs, articles, and books.

First, I hope to be able to push entrepreneurs, share some ideas that might help them, promote their thinking, and hopefully attract more people to this technology, get them thinking in the right way, and thus create more interesting entrepreneurs to talk to us. This way, our conversations become deeper because they have read a lot of content, and I hope they will also read my work, so we can get into a higher-level conversation. This is very effective in saving time. We want to work with the smartest people, and these people always want to read interesting content. So this way helps to build relationships, share knowledge, and accelerate the development of this field.

The key feature of blockchain is that you can build new Internet services, and these services can be anything we use on the Internet today, including social networks, games, marketplaces, and AI services. A significant feature of these services is that there are no barriers and fee collectors, and the services are completely controlled by the users and the money flows to the users.

In my book, I explore these concepts and apply them to seven specific areas, trying to imagine what the future will look like once entrepreneurs build these services. For example, after searching on Google, you need to click through to websites that rely on advertising and paywalls for their revenue. In a world driven by AI, you will no longer need these intermediate steps. We are rapidly entering a new era in which the traditional profit model for many creators may disappear. Why pay illustrators when you can generate illustrations directly through AI services such as MidJourney? These AI services learn from user data but do not pay them for it, which is a frustrating result.

I am worried that the Internet may be dominated by a few giants, which will squeeze out many people who currently make money on the Internet. Therefore, I predict that in the next 3 to 5 years, we will face an Internet crisis and many existing business models will disappear.

Therefore, the concept of Story Protocol brings many exciting possibilities. It brings an innovative business model to the field of digital creation. This model can bring together everyone's creativity. For example, someone is good at weaving storylines, another is good at designing characters, and another is good at combining these elements. Someone may even fork these contents and create new versions, similar to the way open source software projects are. Whether the comics are hand-drawn or generated using AI technology, these creative methods are feasible as long as the creator sets the rules.

The essence of the Story Protocol is that it allows you to define the content and terms of the creation and record them on the blockchain. Blockchain technology performs well in ensuring that records cannot be tampered with. Each record is linked to a legal agreement and can be enforced through legal means when necessary. This model not only relies on trust in the blockchain, but also connects with the existing copyright law system.

There will be no restrictions on AI participation, you can use AI to create or use these "Lego blocks", and you can participate in any way as long as you follow the economic rules set in the blockchain. This system makes it possible to contribute and consume ideas at the scale of the Internet, ensuring that creative workers can get the rewards they deserve. This is especially important today when AI systems may disrupt or make many existing business models obsolete.

So, I hope this book can be an easy-to-understand guide for non-technical people, explaining in simple and straightforward language how the Internet works, the history of the Internet, the potential of blockchain, and why I am excited about all of this.

This book is also for policymakers, because I discovered early in my career that the best opportunities are often hidden when people think a technology has reached its end.

In fact, when I started my career, people told me that the Internet was dead. I founded my first company in 2003 and 2004. I found that the best opportunities in my career were when people said something was dead. My experience is that AI has its ups and downs, the Internet has its ups and downs, and Crypto has its ups and downs. If you want to wait until the situation improves before taking action, you will find yourself doing the same thing as a large group of people.

Whether it is AI, Internet or Crypto, they will experience ups and downs, but the key to success is to keep the faith and dare to invest in these fluctuations.

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