In October 2022, simply weeks earlier than the collapse of FTX, Chris Dixon sat down to put in writing a ebook about crypto. The enterprise capitalist and everlasting optimist needed to share a recent imaginative and prescient for the expertise he had come to like. Having based startups in an earlier period of the web, earlier than the likes of Google and Fb devoured up each greenback, Dixon believed the decentralized promise of blockchain may reinvigorate the early constructing blocks of an open web.
By the top of 2022, that imaginative and prescient was belied by an trade dominated by a on line casino mentality and outlined by prison hucksters like Sam Bankman-Fried. The failure of FTX felt like a turning level the place, for a lot of onlookers, crypto turned synonymous with fraud.
“I used to be like, ‘Fuck, that is miserable,’ after which I felt sorry for myself,’” Dixon advised me over breakfast final week. “After which I used to be like, “I can have a look at this as a miserable second, or I can have a look at it as a chance.’”
He had labored in tech for many years, from an entrepreneur constructing early AI corporations to an angel investor to a associate on the enterprise big Andreessen Horowitz (a16z). He had by no means skilled as huge a rift within the public notion of his initiatives and his personal understanding. “I may doubtlessly attempt to shut that hole,” he thought to himself.
The result’s Learn Write Personal, a manifesto on the virtues of crypto that can possible grow to be a mix of bible and self-help ebook for individuals who nonetheless share the view that blockchain expertise will usher within the subsequent age of the web. The ebook, which shall be launched Jan. 30, is a lucid protection of an trade that has typically grow to be a parody to the skin world.
Although simply 52, Dixon serves as a type of elder statesman for crypto. He argues that blockchain will be greater than “quantity go up” playing and a plaything for self-described degens—it may be an apolitical software program that saves the web from its company overlords.
As the top of a16z’s crypto agency, Dixon isn’t just an armchair theorist. He has actual pores and skin within the sport, to the tune of $7.6 billion of his buyers’ cash. His ebook isn’t just a treatise on the way forward for the net. It’s a name to arms for the survival of the trade.
Courtesy of a16z
The cathedral and the bazaar
Dixon thinks of the web by way of networks—not solely how individuals join, however how totally different applied sciences work together to construct the infrastructure we all know as the net.
Most of what we consider the web right this moment is owned and managed by large corporations. All the pieces from WhatsApp to Gmail to the cloud computing companies powering them is run by a handful of companies that not solely dictate how the platforms function however siphon practically the entire income, felling complete industries from newspapers to journey companies.
It wasn’t at all times that approach. The early builders of the web imagined extra open networks that will be ruled democratically, with selections left within the fingers of the individuals—or at the least anybody who cared sufficient to be concerned.
This imaginative and prescient nonetheless lives within the constructing blocks of the fashionable web, by means of protocols like SMTP, which standardizes electronic mail communication, and HTTP, which helps computer systems discuss to one another. One other, DNS, permits us to go to webpages with human-readable names, like Fortune.com, moderately than a collection of numbers.
These protocols are typically free or very low cost to make use of, and both open supply or managed by nonprofits tasked with upkeep moderately than profit-seeking. Their existence is the explanation that electronic mail isn’t managed by Google, URLs by Amazon, or net browsing by Microsoft.
“I at all times detested Microsoft,” Dixon advised me. It could appear an odd assertion from one of the highly effective males in tech, and particularly one who works at a enterprise agency that helped construct the web as we all know it right this moment by plowing billions of {dollars} into corporations like Fb and Twitter.
Regardless of his affluence and excessive profile, Dixon has a laid-back have an effect on. He steered we meet at a diner—his favourite spot in Tribeca had closed, so I discovered one close to the Fortune workplace. Consuming a plate of eggs, sausage, and potatoes, he appeared extra like a university professor than a enterprise titan, talking in paragraph-length solutions that will rise in tenor as he turned labored up over an thought. The tutorial persona was punctured once we stepped exterior to his ready black SUV and driver.
Dixon mentioned his profession has been pushed by a love of open-source software program, just like the working system Unix. It’s what drew him to blockchain. He’s a prolific blogger, and round 2009, started to put in writing concerning the centralization of the web. Particularly, he turned transfixed by an analogy created by the coder Eric Raymond known as the “Cathedral and the Bazaar.” Within the cathedral mannequin, software program is tightly restricted to an internal circle of builders, typically employed by a company, who can construct elaborate and exquisite buildings which might be closed to exterior contributors. The bazaar, in distinction, is open supply—hectic and with out clear order, however alive by means of collaboration.
On the time, platforms like Twitter and Fb nonetheless tried to type themselves as bazaars. They invited builders to construct apps on their platforms, and Twitter pledged to help RSS, one other open-source protocol that permits customers to observe various web sites and blogs. Nonetheless, Dixon understood that they functioned extra like cathedrals, writing on the time of his concern they might lower off entry. “The issue is Twitter isn’t actually open,” he blogged in October 2009. “In some unspecified time in the future, Twitter might want to make plenty of cash to justify their valuation.” He was proper, after all.
In the meantime, earlier that 12 months, the pseudonymous determine generally known as Satoshi Nakamoto printed his white paper introducing Bitcoin to the world. Dixon was not a direct convert. Bitcoin’s purported use case is monetary, with Nakamoto envisioning the unique cryptocurrency as a brand new type of cash, whereas Dixon cared extra about broader infrastructure protocols. Nonetheless, he noticed the worth of blockchain—a brand new sort of community whose possession may very well be dispersed and ruled by its members and run by software program.
After a number of years writing small checks as an angel investor the place his affect was restricted, Dixon joined a16z and the VC huge leagues in 2012. “The one purpose I needed to go be a part of a VC agency was if I may stage up and actually attempt to determine the brand new computing motion,” he advised me.
It wasn’t instantly clear that blockchain could be the longer term. Certainly one of Dixon’s first bets was on the nascent crypto alternate Coinbasein 2013, however he additionally made investments within the VR firm Oculus, later acquired by Meta, and the drone startup Airware, which folded in 2018.
He anticipated Bitcoin to evolve in a approach that will permit software program builders so as to add new options and broaden on blockchain’s use instances. The Bitcoin staff by no means did. As an alternative, a brand new blockchain known as Ethereum launched in 2015, with the promise of permitting coders to create any style of decentralized apps. A16z launched its first crypto-dedicated fund, headed up by Dixon, three years later.
‘Sugar excessive’
Dixon’s pitch for blockchain is easy—it’s summed up elegantly within the title of his ebook. The primary period of the web, facilitated by early protocols and improvements like the net browser, allowed us to devour—learn—info. The second, pushed by company networks like Fb and Apple, allowed us to create—write—our personal content material. The third, pushed by blockchain, will put us in cost, from making selections to reaping the proceeds—personal.
A decentralized social media platform, for instance, would permit customers to vote on content material moderation and maintain its code open-source to permit for a vibrant ecosystem of third-party apps. With out the entire advert income going to the platform, customers may truly monetize their very own content material, and a token system may distribute earnings and serve a double objective as a governance mechanism.
It’s a pleasant world to think about, however one which has not come to move greater than 15 years after Bitcoin’s emergence. That’s not for a scarcity of making an attempt. There have been loads of crypto initiatives aimed toward shoppers, and billions of {dollars} of capital plowed into making them catch on. And but, crypto has nonetheless not had its “ChatGPT” second—the so-called “killer app” that helps it break by means of to the mainstream.
A typical chorus in crypto is that we’re within the early innings—that it took many years for on a regular basis individuals to come back to the web. The primary paper on synthetic neural networks got here in 1943, greater than 75 years earlier than the launch of ChatGPT. Dixon acknowledged that he’s typically too early on tendencies. He constructed his first AI firm in 2009 and ended up promoting it to eBay due to the subpar expertise.
Dixon is a believer in “characteristic parity,” the concept crypto apps will solely catch on after they’re nearly as good as their non-blockchain rivals. With sluggish processing instances, typically exorbitant charges, and perpetual safety issues, that day appears far off. “What number of killer apps are you able to make when it prices $10 for a transaction,” he mentioned. Nonetheless, Dixon mentioned there’s an “optimistic state of affairs” the place blockchain computing energy is ample within the subsequent 12 months. I requested if we may very well be over a decade away, as he was along with his first AI gamble. “I hope not,” he mentioned, laughing.
Within the meantime, the one facet of crypto that has caught on is theory—from the latest fervor over the Bitcoin ETF to digital asset casinos like FTX.
“Individuals can’t assist themselves however discuss costs on a regular basis,” Mary-Catherine Lader, COO of the a16z portfolio firm Uniswap Labs, advised me. “There’s a human draw to cash.”
Dixon describes the crypto hypothesis frenzy as a “sugar excessive.” It not solely creates a foul picture for the house, crowding out customers, however frustrates his portfolio corporations which might be making an attempt to construct unsexy infrastructure. “There’s different guys down the road saying, ‘Hey, flip Bonk,’” he advised me, referring to a newly hyped memecoin on the Solana blockchain. “And that will get the eye.”
In response, Dixon has taken on an uncommon position for a enterprise capitalist, spending time in D.C. to foyer for brand spanking new legal guidelines to manipulate crypto. Like many within the trade, he believes that the Securities and Trade Fee is stifling innovation by going after tokens like Solana that provide utility and homegrown corporations like Coinbase, whereas permitting so-called shitcoins and offshore exchanges to flourish.
A16z crypto has employed former regulators and political staffers, and Dixon himself is a prolific donor, with public knowledge from OpenSecrets exhibiting that he’s contributed to greater than a dozen crypto-friendly members of Congress. “That is gritty, tedious work, assembly with lawmakers,” Ron Conway, the enterprise legend and Dixon’s longtime buddy, advised me. “Most enterprise companies draw back from this exercise.”
Ben Horowitz, a cofounder of a16z, advised me that the agency determined to enter lobbying after seeing huge tech companies like Meta flex their affect in D.C. “These very highly effective corporations with monopoly merchandise are very lively in Washington,” he advised me. “If no person represents little tech, we’re going to get regulatory seize and an enormous slowdown in innovation.”
The enterprise elephant within the room
The irony that a16z has grow to be a champion of a decentralized net shouldn’t be misplaced on Dixon. With its investments in corporations like Airbnb, Fb, and Twitter, the enterprise agency helped shepherd within the corporate-owned web period that Dixon is now pleading that we transfer on from.
“I believed it will be far more fragmented, and I used to be flawed about that,” Dixon mentioned. “We neither knew nor needed to be making a system that will additionally then result in the demise of enterprise capital, since you’d have 4 corporations controlling the web.”
In Horowitz’s estimation, a16z has largely moved on from Web2 bets, even exterior its crypto fund, besides the photo-sharing app BeReal (He didn’t point out that the agency additionally contributed $400 million to assist Elon Musk purchase Twitter in 2022.) “That’s the great factor about being a enterprise capitalist,” Horowitz mentioned. “You may place many investments.”
Whereas VCs can unfold their bets round, within the case of crypto, the participation of an enormous enterprise agency nonetheless stokes concern that it may undermine blockchain’s mission of decentralization. Like different crypto VCs, a16z typically receives tokens in lieu of conventional fairness for its investments, which means it may have an outsized affect within the governance of initiatives.
The priority has sparked controversy, reminiscent of when a16z backed an unpopular proposal for Uniswap to make use of LayerZero, one other portfolio firm, as underlying infrastructure, moderately than a competitor named Wormhole. Whereas a16z tried to deflect criticism by arguing it had distributed tokens to pupil golf equipment and nonprofits, outraged purists on Crypto Twitter accused the agency of “proudly owning” Uniswap’s ostensibly open protocol.
Lader, who works for Uniswap Labs, which is technically separate from the Uniswap protocol, mentioned she doesn’t talk about governance with Dixon. Nonetheless, she argued that decentralization isn’t a assure of equal distribution of possession, however as a substitute an indicator of “truthful, open entry.”
One other problem plaguing crypto VCs is the tendency to dump tokens for short-term features. In conventional enterprise capital, companies maintain on to investments for years till they exit, both by means of an IPO or acquisition. With crypto, tokens can vest in as little as a 12 months.
“In case you’re a crypto VC, your obligation is to money out as quickly as potential,” mentioned Omid Malekan, an adjunct professor at Columbia Enterprise College. “That design may be very dangerous for the long-term viability of most crypto initiatives.”
Dixon acknowledged that many crypto VC companies function extra as hedge funds, however mentioned that he pushes for longer lock-up durations—he even helped introduce a provision to this impact in proposed crypto laws. “Quick-term incentives are a really harmful factor,” he advised me. Based on an a16z spokesperson, the crypto funds nonetheless maintain 94% of all of the tokens it has bought in non-public market transactions.
The extra existential query for Dixon is whether or not crypto initiatives want venture-scale investments and the expectations that include them. He’s betting that the recipients of a16z funds won’t solely function the muse for the following era of the web however reap billions of {dollars}.
After I requested Horowitz, he in contrast the gamble to DNS, the protocol that interprets domains. They aren’t investing immediately within the utility, however the tokens—form of like if a enterprise agency had purchased a slew of URLs within the early days of the net. “I don’t truly suppose there’s a rigidity there,” he mentioned.
Malekan, the tutorial, argued that latest tendencies have demonstrated in any other case, particularly as VCs spend money on the knotted tangle of foundations, labs, tokens, and protocols that always undergird crypto initiatives. Those which have succeeded, reminiscent of Bitcoin and Ethereum, required little funding. “In crypto, you’ll be able to nearly argue there’s a really sturdy damaging correlation between success and the sum of money that you just increase,” he advised me. “It’s not simply succeeding as a undertaking—it’s a must to act like a billion-dollar firm.”
Whereas Dixon says that tokens are a solution to drive participation by means of wholesome hypothesis, like residence possession, they might simply as simply recreate the dangerous, profit-driven incentives that constructed our present web. One client crypto undertaking that broke by means of to the mainstream, the a16z-backed Axie Infinity, spurred a warped, alternate economic system the place employees within the World South plowed their financial savings into the sport and performed it as a second job. The sport’s temporary success could have been an experiment gone awry, however it was nonetheless a glimpse into what a venture-backed, blockchain-dominated future may entail.
For now, it’s a theoretical query, with Bankman-Fried barely in our rearview mirrors and the crypto sector looking for a foothold. Dixon is notoriously media-shy, skirting the standard convention circuit and rotation between CNBC and Bloomberg TV that’s frequent amongst his friends. With Learn Write Personal, he’s rising from the shadows, able to take the mantle of management and carve a path ahead for each his trade and the nonbelievers. The luggage of a16z could not make him the perfect messenger, however he’s at the least a compelling one.
“If we will make it work, it simply looks like a really highly effective and massive alternative, as a result of it’s very contrarian,” Dixon mentioned. “And by the best way, that’s the way you become profitable.”
