Chris Dixon, the philosopher king of crypto, makes a fresh case for blockchain. Is he too late?

By the tip of 2022, that imaginative and prescient was belied by an trade dominated by a on line casino mentality and outlined by legal 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 informed 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 possibility.’” 

He had labored in tech for many years, from an entrepreneur constructing early AI firms to an angel investor to a accomplice on the enterprise big Andreessen Horowitz (a16z). He had by no means skilled as extensive a rift within the public notion of his tasks and his personal understanding. “I might 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 doubtless turn into a mixture of bible and self-help e book for individuals who nonetheless share the view that blockchain know-how will usher within the subsequent age of the web. The e book, which might be launched Jan. 30, is a lucid protection of an trade that has typically turn into a parody to the surface world.

Although simply 52, Dixon serves as a type of elder statesman for crypto. He argues that blockchain could 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 pinnacle 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 traders’ cash. His e book 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 when it comes to networks—not solely how folks join, however how completely different applied sciences work together to construct the infrastructure we all know as the net. 

Most of what we consider the web at present is owned and managed by huge firms. Every part from WhatsApp to Gmail to the cloud computing providers powering them is run by a handful of corporations that not solely dictate how the platforms function however siphon practically the entire income, felling whole industries from newspapers to journey businesses.

It wasn’t all the time that manner. The early builders of the web imagined extra open networks that may be ruled democratically, with choices left within the fingers of the folks—or a minimum of anybody who cared sufficient to be concerned. 

This imaginative and prescient nonetheless lives within the constructing blocks of the fashionable web, by protocols like SMTP, which standardizes e-mail communication, and HTTP, which helps computer systems speak to one another. One other, DNS, permits us to go to webpages with human-readable names, like Fortune.com, slightly than a sequence of numbers. 

These protocols are usually free or very low-cost to make use of, and both open supply or managed by nonprofits tasked with upkeep slightly than profit-seeking. Their existence is the explanation that e-mail isn’t managed by Google, URLs by Amazon, or internet browsing by Microsoft. 

“I all the time detested Microsoft,” Dixon informed me. It might appear an odd assertion from one of the vital highly effective males in tech, and particularly one who works at a enterprise agency that helped construct the web as we all know it at present by plowing billions of {dollars} into firms like Fb and Twitter. 

Regardless of his affluence and excessive profile, Dixon has a laid-back have an effect on. He recommended 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 school professor than a enterprise titan, talking in paragraph-length solutions that may rise in tenor as he turned labored up over an thought. The educational persona was punctured after we stepped outdoors to his ready black SUV and driver. 

Dixon stated 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 write down in regards to the centralization of the web. Particularly, he turned transfixed by an analogy created by the coder Eric Raymond referred to as the “Cathedral and the Bazaar.” Within the cathedral mannequin, software program is tightly restricted to an inside circle of builders, usually employed by a company, who can construct elaborate and delightful buildings which are closed to outdoors contributors. The bazaar, in distinction, is open supply—hectic and with out clear order, however alive by 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 assist RSS, one other open-source protocol that enables customers to observe numerous web sites and blogs. Nonetheless, Dixon understood that they functioned extra like cathedrals, writing on the time of his concern they’d minimize 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 numerous cash to justify their valuation.” He was proper, after all.

In the meantime, earlier that yr, the pseudonymous determine generally known as Satoshi Nakamoto printed his white paper introducing Bitcoin to the world. Dixon was not a right away 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 might be dispersed and ruled by its contributors 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 cause I wished to go be part of a VC agency was if I might stage up and actually attempt to determine the brand new computing motion,” he informed me. 

It wasn’t instantly clear that blockchain could be the long run. Considered one of Dixon’s first bets was on the nascent crypto change 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 manner that may enable software program builders so as to add new options and develop on blockchain’s use instances. The Bitcoin crew by no means did. As a substitute, a brand new blockchain referred to 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 e book. The primary period of the web, facilitated by early protocols and improvements like the net browser, allowed us to devour—learn—data. 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 choices to reaping the proceeds—personal.

A decentralized social media platform, for instance, would enable customers to vote on content material moderation and hold 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 might truly monetize their very own content material, and a token system might distribute earnings and serve a double function as a governance mechanism. 

It’s a pleasant world to think about, however one which has not come to go greater than 15 years after Bitcoin’s emergence. That’s not for an absence of attempting. There have been loads of crypto tasks aimed toward customers, 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 to the mainstream. 

A standard chorus in crypto is that we’re within the early innings—that it took many years for on a regular basis folks 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 traits. He constructed his first AI firm in 2009 and ended up promoting it to eBay due to the subpar know-how. 

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 stated. Nonetheless, Dixon stated there’s an “optimistic situation” the place blockchain computing energy is adequate within the subsequent 12 months. I requested if we might be over a decade away, as he was along with his first AI gamble. “I hope not,” he stated, laughing. 

Within the meantime, the one side of crypto that has caught on is concept—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, informed 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 firms which are attempting to construct unsexy infrastructure. “There’s different guys down the road saying, ‘Hey, flip Bonk,’” he informed 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 Change Fee is stifling innovation by going after tokens like Solana that provide utility and homegrown firms 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 displaying 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 good friend, informed me. “Most enterprise corporations draw back from this exercise.”

Ben Horowitz, a cofounder of a16z, informed me that the agency determined to enter lobbying after seeing huge tech corporations like Meta flex their affect in D.C. “These very highly effective firms with monopoly merchandise are very energetic in Washington,” he informed me. “If no one represents little tech, we’re going to get regulatory seize and a giant slowdown in innovation.” 

The enterprise elephant within the room

The irony that a16z has turn into a champion of a decentralized internet isn’t misplaced on Dixon. With its investments in firms 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 assumed it could be far more fragmented, and I used to be flawed about that,” Dixon stated. “We neither knew nor wished to be making a system that may additionally then result in the demise of enterprise capital, since you’d have 4 firms controlling the web.”

In Horowitz’s estimation, a16z has largely moved on from Web2 bets, even outdoors 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 stated. “You’ll be able to 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 might 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 might have an outsized affect within the governance of tasks.

The priority has sparked controversy, equivalent to when a16z backed an unpopular proposal for Uniswap to make use of LayerZero, one other portfolio firm, as underlying infrastructure, slightly 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, stated she doesn’t talk about governance with Dixon. Nonetheless, she argued that decentralization isn’t a assure of equal distribution of possession, however as an alternative an indicator of “truthful, open entry.”

One other difficulty plaguing crypto VCs is the tendency to dump tokens for short-term features. In conventional enterprise capital, corporations maintain on to investments for years till they exit, both by an IPO or acquisition. With crypto, tokens can vest in as little as a yr.

“Should you’re a crypto VC, your obligation is to money out as quickly as attainable,” stated Omid Malekan, an adjunct professor at Columbia Enterprise College. “That design may be very unhealthy for the long-term viability of most crypto tasks.” 

Dixon acknowledged that many crypto VC corporations function extra as hedge funds, however stated that he pushes for longer lock-up intervals—he even helped introduce a provision to this impact in proposed crypto laws. “Brief-term incentives are a really harmful factor,” he informed 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 tasks want venture-scale investments and the expectations that include them. He’s betting that the recipients of a16z funds is not going to solely function the muse for the subsequent era of the web however reap billions of {dollars}. 

Once I requested Horowitz, he in contrast the gamble to DNS, the protocol that interprets domains. They aren’t investing instantly within the utility, however the tokens—type 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 pressure there,” he stated. 

Malekan, the tutorial, argued that latest traits have demonstrated in any other case, particularly as VCs put money into the knotted tangle of foundations, labs, tokens, and protocols that always undergird crypto tasks. Those which have succeeded, equivalent to Bitcoin and Ethereum, required little funding. “In crypto, you possibly can virtually argue there’s a really sturdy detrimental correlation between success and the sum of money that you just increase,” he informed me. “It’s not simply succeeding as a challenge—you must act like a billion-dollar firm.”

Whereas Dixon says that tokens are a approach to drive participation by wholesome hypothesis, like house possession, they may simply as simply recreate the dangerous, profit-driven incentives that constructed our present web. One shopper crypto challenge that broke by to the mainstream, the a16z-backed Axie Infinity, spurred a warped, alternate financial 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 transient success might have been an experiment gone awry, however it was nonetheless a glimpse into what a venture-backed, blockchain-dominated future might entail.

For now, it’s a theoretical query, with Bankman-Fried barely in our rearview mirrors and the crypto sector trying to find a foothold. Dixon is notoriously media-shy, skirting the standard convention circuit and rotation between CNBC and Bloomberg TV that’s widespread 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 might not make him the best messenger, however he’s a minimum of a compelling one.

“If we will make it work, it simply looks as if a really highly effective and massive alternative, as a result of it’s very contrarian,” Dixon stated. “And by the way in which, that’s the way you earn a living.”