207 - Read. Write. Own. | Chris Dixon

✨ DEBRIEF | Ryan & David unpacking the episode: https://www.bankless.com/read-write-own-debrief ------ Chris Dixon of a16z returns to the podcast today to discuss the new book he authored to explain his mental model for understand crypto: Read. Write. Own. Chris is one of the most articulate people we know at explaining crypto - particularly from the lens of crypto as an evolution of the internet. ------ Listen On Your Favorite Podcast Player: https://bankless.cc/Podcast ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2 ⁠ 🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo https://bankless.com/Celo 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ------ Resources: Chris Dixon https://x.com/cdixon?s=20 Read Write Own https://www.amazon.com/Read-Write-Own-Building-Internet/dp/0593731387 Mental Models for Web3 https://youtu.be/jezH_7qEk50?si=4pk8NRWF69HMRFuR a16z Episode https://youtu.be/RXHITeaGB8Q?si=NoiqjNiHzmZxFIae ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Can we build new systems, new social networks, new games, new financial systems, new, you know, just across the board, every kind of internet service you can imagine? Can we build new ones that are able to compete with these, what I call corporate networks, the Facebooks, Twitters, et cetera, but have the societal benefits that we saw in the early internet?

• 0:23Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Chon Adams. I'm here with David Hoffman. We're here to help you become more bankless. Guys, notable venture capitalist Chris Dixon on the podcast today. He wrote down his mental model for understanding crypto in a new book called Read, Write, Own. It'll be out today or tomorrow. It's absolutely fantastic overview to understand crypto. There's really two lenses to explain crypto to people. I think there's first, the money lens. This is, we've covered that in episodes that we've done with Lynn Alden and others. And there's also the lens of the internet. And this is the episode you're about to listen

• 1:06Ryan Sean Adams?

  to with Chris, because both models are correct. And I think Chris uses the lens of the internet to explain crypto in a way that is unique and incredibly helpful as this third technology generation of the internet. A few takeaways for you. Number one, we go through the three eras of the internet. Number two, we talk about why blockchains are like computers. In fact, they are computers. Number three, how crypto will revolutionize this whole internet thing. Number four, why tokens are valuable. And number five, why crypto is now on the cusp of its iPhone moment. We had this episode with Chris Dixon, recorded on an old Bankless podcast episode in 2021, where he came on and gave us the Read, Write, Own thesis. And I

• 1:49Ryan Sean Adams?

  think it was one of the most effective podcasts we ever recorded to pill people and get them into crypto and understand the power of crypto back in the top of the frothiness of the 2021 bull market. And content like this, I think, is really valuable to have when crypto gets really chaotic and hectic and, you know, tokens are flying everywhere, because it reminds us about the base principles about why we're here. And Chris decided that that mental model worked so well that he needed to put it into a book, coming in the tail end of 2022 and into 2023.

• 2:23David Hoffman?

  I think the whole world needed to be reminded about the power of crypto and how all of these emergent phases of the internet are necessary for a better version of the technologies that they all inspire. And so I think the significance of this episode is just a good reminder for crypto natives who probably listened to that episode in Bankless history, but also, you know, maybe should listen to it again, you know, two plus years later into the future, as Chris has been able to refine his thoughts and articulate them better.

• 2:54Ryan Sean Adams?

  Yeah, I think 2022, a lot of us asked, why are we still here? And this is basically Chris's answer for this. He looked into his soul and looked at what was going on in the world and he reestablished why he was here. And it's all chronicled in this episode. You're absolutely going to love it. We will be right back with the episode with Chris Dixon. But before we do, we want to thank the sponsors that made this episode possible, including Kraken, which is our number one recommended entry port into crypto. Go create an account.

• 3:22David Hoffman?

  Kraken knows crypto. Kraken's been in the crypto game for over a decade. And as one of the largest and most trusted exchanges in the industry, Kraken is on the journey with all of us to see what crypto can be. Human history is a story of progress. It's part of us, hardwired. We're designed to seek change everywhere, to improve, to strive. And if anything can be improved, why not finance? Crypto is a financial system designed with the modern world in mind. Instant, permissionless, and 24/7. It's not perfect, and nothing ever will be perfect. But crypto is a world-changing technology at a time when the world needs it the most. That's the Kraken mission, to accelerate the global adoption of cryptocurrency, so that you and the rest of the world can achieve financial freedom and inclusion.

• 4:04David Hoffman?

  Head on over to kraken.com/bankless to see what crypto can be. Not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to US and US territory customers by Payward Ventures. PVI, doing business as Kraken. Mantle, formerly known as BitDow, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 onboarding,

• 4:49David Hoffman?

  like Game7 for Web3 gaming and Bybit for TVL and liquidity and on-ramps. So if you want to build on the Mantle Network, Mantle is offering a grants program that provides milestone-based funding to promising projects that help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle.

• 5:12Ryan Sean Adams?

  Bankless Nation, we are joined by Chris Dixon. He is a general partner at A16Z, where he leads all crypto investments. He's also one of the most articulate people we know at explaining crypto. That's why he's on the episode today, particularly from the lens of crypto as a revolution, not just of money systems, but a revolution of compute, a revolution of the internet. And he's written all of this down in an extremely accessible book that I just picked up and read. It's called Read, Write, Own. So we're going to explore the theme of that book in today's episode. Welcome back to Bankless. How are you doing, Chris?

• 5:46Speaker 00

  I'm great, Ryan. Thanks for having me.

• 5:48Ryan Sean Adams?

  All right, so last time we talked, and I know you've been on Bankless a couple of times. So last time we talked, it was pre the absolute chaos of 2022. So it was like, it was like May 2022. We had the Terra Luna thing. We were like, what was that? But we didn't yet have FTX. We didn't yet have all of the, you know, the crypto funds going down. So I just want your take as we go into this episode. Like, how did you weather that storm? How was 2022 for you? How did it compare to other downturns?

• 6:14Speaker 00

  It's a good question. I mean, that was, look, that was a very bad time. There were a bunch of bad actors, as we now know, who did, you know, some very bad things, including criminal things. And, and I think, you know, beyond the, obviously, the direct harm that they caused to the consumers and, and all the other kind of victims of those.

• 6:35Speaker 00

  Of those crimes, there was also just the collateral damage on the whole crypto blockchain movement that we all work on, which is frankly frustrating. I've been working on this for a long time. I believe in it very deeply. And I feel like there's a set of people who've come along who kind of co-opt this movement that I think has, it's a very important movement, and I think it's an idealistic movement. And I think those folks co-opted and kind of contorted and give us all a bad name. And that also then leads to this regulatory backlash. So frankly, it was very frustrating. I kind of, honestly, like, I forgot when was that,

• 7:19Speaker 00

  like, early 2022? Or is that right? Or am I getting the timeline right? Like, when was the FTX thing? Yeah. There was that whole series of events. Late 2022. And I reflected on it. And I said, you know, why am I doing this? Like, I've sold two companies. I've worked in venture capital. Like, I could, you know, like a lot of VCs pivot AI when times like this, you know. I obviously didn't. But like, I could do other things. And, you know, including, like, I like writing. I have a lot of interests. Like, it's just, I don't have to be kind of going around and working on this. And so I reflected on that. And, you know, and what kept coming back to me was this idea that kind of the gap between what I saw, the potential I saw for this movement, I think you guys see

• 8:04Speaker 00

  this, I think others that we work with, like in our portfolio, see this, the gap that I saw and sort of the public image was just so incredibly wide. And, you know, and I guess in my negative moments, I kind of saw that as frustrating. But then I tried to flip it around and be optimistic and say, you know what, that's actually an incredible opportunity. How often in your career, in one's career, do you get the opportunity to close that gap? Right? And so I said, you know, instead of sitting here and kind of feeling sorry for myself, or whatever, I'm going to write a book. And so that was, you know, middle of 2022, I set out to do that. You know, I also did it because I wanted to test myself. Because I think, you know, I think it's Richard Feynman who has that great quote, if you can't explain it to a, you know, a 10-year-old, you don't really

• 8:47Speaker 00

  understand it. I'm butchering the quote. But like, I do believe that, like, you know. It's common in this space to kind of, I think, use crutch words like decentralization. I mean, that's a real word, but people often use it as a way to kind of skip over explaining the details, right? Or we say things like, hey, the casino bootstraps the utility, but like, well, how does that actually work, right? Like, what are the details? And like, explain it to... So what I said to myself is, what would be an interesting challenge to sort of imagine, let's say, a friend of mine set up, imagine a smart high school student, you know, who doesn't have any background in technology, but they're, you know, open-minded and smart. And can you explain from kind of first principles, why this is an important movement, you know,

• 9:32Speaker 00

  how it works, how it will evolve, why it should matter, you know? Why shouldn't it be banned? Why do I... Why is this societally beneficial, right? And so for me, it was, I think, a multiple kind of motivations. Like, one was to challenge myself, like, can I really prove this to myself? You know, writing things, you know, Jeff Bezos, I think, talks about this, that the reason they don't allow PowerPoints and you're forced to write things kind of discursively in memo form is that it forces you to really think and fill in the gaps, right? And so for me, partly, it was frankly, just like a personal exercise, like, can I do this and fill in all the gaps? But it was also, I kind of flipped it around, and like, this is an incredible opportunity

• 10:14Speaker 00

  because, you know, I have the opportunity to write a book that helps kind of take something that's, that I think of as probably, I think there's two really important tech movements happening right now, AI and blockchain, crypto. And AI, I think, is very well-understood. It's a, you know, I talk about this in the book, I think there's what I call inside-out and outside-in technologies, which we can talk about later, but, but essentially, it's a technology coming from the establishment, and it's, and it's well-understood. Like, everyone gets the idea that if you have like, a super smart robot, like, you know, it could be useful, whereas, you know, blockchains and crypto are not understood. And so I sort of flipped it around my mind, I said, that would be, you know, this is a really interesting opportunity to do that.

• 10:58Speaker 00

  So I, you know, like, I have my day job, although, you know, in downturns, that does slow down somewhat. And I have a great team to help me. So I spent, so it was like, I guess, summer of 2022, I set out to do it. And I was, of course, like everyone, embarking on a project incredibly naive about how much work it would take. It's like, oh, whip it out in two months. You know, fast forward, basically 15 months later, I was finishing the thing up, went through many, many drafts. I basically was on a schedule of, I would get up, I mean, and I'm not complaining, I actually really had a great time and loved this, but I got up probably at six or seven every day, you know, for a year and worked three or four hours every morning on it. And,

• 11:42Speaker 00

  you know, really, at one point, you know, took some time off and one point like rented an isolated house and like did a lot of work on it. A lot of work. And I, you know, a lot of it is, is sort of the Mark Twain quote, if you had, if I had, I think it was Mark Twain, if I had time, I would have written a shorter letter. Like, I really, really, really tried to compress concepts in a simple way. I cut out, you know, the book is 230 pages, main text. I cut out at least that much also, like 230 pages. As you know, I think, you know, Ryan, I don't go very deep into technology kind of details. That's, that's on purpose because I'm really trying to appeal to the general reader. I could, you know, if, if there's a demand for it, I could write a sequel where I kind of go into the kind of

• 12:24Speaker 00

  more of the tech and stuff. But if people are interested or, you know, but, but, you know, it's, it's really meant to be kind of this general reader kind of thing. So, so look, that, that was for me a great kind of both project. I think it was, I learned a lot, but it was also kind of a coping mechanism. It was a fun time.

• 12:43Ryan Sean Adams?

  Look, we, we needed that coming out of 2024, or 2022, rather. And then like even the last year to kind of downturn and, and, you know, governments turning against us. I mean, David and I certainly felt that it was kind of a time for reflection, like, what are we doing here? And like, do we want to stay here? And are we going to take this back and clean up after the party? So like from our, my part, Chris, and I know David feels the same way. We're glad you doubled down, man. And what you've written here is an extremely accessible kind of explanation of crypto. And it's not Apologism, you know, so much, although there are elements of that, like you get into some defenses here. But it's just like, hey, let's talk about why this is important. And the existential question is, is crypto good for humanity or not? And that's what I think this book tries to answer.

• 13:28Ryan Sean Adams?

  So, so Chris, why don't we just dive right in? Because I want to make this an episode where like people can send their friends to and their family to. When they're like, what are you doing in crypto? Like in that industry of scams? I mean, we've got a lot of that in 2023.

• 13:42Speaker 00

  And by the way, if I could add, Ron, I mean, that's really what I want the book to be is I do think there's value for folks like you. I mean, you guys are deep in the space. You know, a lot, you know, you know, a lot more than this in the book. I do hope that there are mental models and ways of explaining that are appealing to folks like you. And by the way, I wrote the book very deliberately in sort of three to four page kind of blog post like chunks. So like, for example, you guys might skip the blockchain section, but might find some of the other sections on, you know, there's a part on regulation, a part on different applications. So it's meant to be skippable, just, just so you know, but, but really the core audience, what I really am hoping is it becomes the book that you give to your, exactly what you're describing, what you give to your friends and family to explain it. Right. I go, I've been going to DC a lot, like I literally every meeting, they're like, what book should I read?

• 14:27Speaker 00

  And I don't have a great answer. I mean, there's great books. I don't want to dismiss that.

• 14:29Ryan Sean Adams?

  There's great books. There's, I just want to say there's great books about crypto from like monetary economics.

• 14:34Speaker 00

  Yes, there's a lot.

• 14:35Ryan Sean Adams?

  And all that is created like.

• 14:37Speaker 00

  They're very like Austrian economics, Bitcoin.

• 14:40Ryan Sean Adams?

  That's not what DC wants to read.

• 14:42Speaker 00

  Well, and look, and it's just, and it's honestly not, I come at it from a different perspective.

• 14:44Ryan Sean Adams?

  I know you do.

• 14:45Speaker 00

  I come at it more from the internet perspective. There's that and looking, there's a lot of, I don't, I'm not like, there's great books on like, you know, there's the, what is it called? The infinite machine on Ethereum, there's great, there's a great book on Coinbase, but there isn't, to my mind, there wasn't sort of an up to date, comprehensive book. That's like, why is this important societally? And, and specific, and be specific and no hand waving, no, you know, like, let me go through the details and explain it to you. And honestly, just sort of walk you through my journey, right? Like I was a web one and then a web two person and, and it was going pretty well, you know, like Andreessen Horowitz, we've done well, like. Um, you know, why did I switch to this? Like it's because I believe what I wrote in this book. And so I wanted to share that with other people. So anyway, sorry to interrupt you.

• 15:26Ryan Sean Adams?

  Well, no, look, that's the preamble. Okay. So let's, let's get right to the goods here. And so like you start with kind of this introduction and I'm wondering, Chris, if you could kind of tell us a story, tell us a story of maybe the early internet as we explore these verbs, read, write web. And, and what I like about this is your framing of this, it's in the beginning, there was the internet and the internet was good. Right? There's this sense of a paradise lost that we had something special in the early days and it got sidetracked. So maybe you could start us off there. Tell us the story of the early internet. Like, what was different?

• 16:00Speaker 00

  Well, I mean, so, and I go through this some, you know, in a pretty rapid, but I think, you know, hopefully helpful way in the book. But, but, you know, the internet had this, its origins in government and academia. And for a variety of reasons, it, it began as this open decentralized platform. Right? So anyone could go and for example, put up a website and you could create art or make a game or start a business. And the key feature was you own that website and you had a direct, direct relationship with your audience. Right? So if people came to your website, you could have a free, make it free and just a cool thing, or you could put ads up, or you could, you know, sell stuff. And by the way, Jeff Bezos decided to sell stuff. Larry Page decided to put up ads. Like, this is why all this stuff happened.

• 16:45Speaker 00

  Right? Like the nineties were like happened and this sort of golden age of innovation on the internet, nineties and early 2000s, because these entrepreneurs knew you could put something up and if you built it, you owned it. Like you didn't pay 30% to Apple. You didn't pay 100% to Facebook. Like if you fast forward to the platforms today, like it's very, very different now. Like back then you, you had true ownership. You owned it, you controlled it. Like, yeah, you could lose your website if you broke the law or did other kind of really bad things, but otherwise like you had this little plot of land. Right? You owned something. And it was this sort of this collective bottoms up. I kind of liken it in the book to a city of like this sort of organically growing city, you know, I'm in New York right now. Like I love New York and I love how it's so organic and it's bottom up. And people have little plots of land and there's parks and there's public space

• 17:30Speaker 00

  and private space and they interact together. And that's what the early internet was like. And look, that's why I got into it personally. Like I, I, you know, I was also reflecting on this as I was writing the book. Like I don't know if I would have been in business, honestly. I'm not necessarily a business person. I was in academia, I was in a PhD program. I got into the internet because I got into business into tech, honestly, because of the internet and these ideals. Like, I was like, this is amazing, right, that you could sort of unite all of humanity in this global, global information network in this way that sort of this owned by everybody. There was no company behind it. There was no one controlling it. By the way, that wasn't a fait accompli for those who didn't really dig into the history. There were companies that were trying to own it, like Microsoft and Disney and others. But thank God for the kind of open source folks and the open protocol people

• 18:14Speaker 00

  who won out on that. Anyways, fast forward today, and I, you know, the, the internet has essentially, if you look at all this, by all the stats, has gotten consolidated around roughly five companies. So, you know, this is Apple, Amazon, Facebook, Google, et cetera. They, they, you know, it's the top, I think it's 95% of searches are, you know, the top two, the top 1% of search engines, top 1% of social networks, and 95% of the traffic. The 50% of NASDAQ's market cap is those top five companies, up from 25% a decade ago. Across the board, you look at all the stats, traffic, money, you know, the top five social networks made $150 billion last year in revenue. You know, that was 95% of the revenue made in social networking. You know, so it's just across the board.

• 18:59Speaker 00

  We, we are very close to a situation where the internet went from this, this open permissionless, democratically owned system to something that looks more like old style broadcast TV, where you have ABC, CBS, and NBC, which I, I think is a very disappointing outcome. And in fact, I would go so far as to say, I, I consider like a lot of the work I've done on the internet, honestly, a kind of a failure if that's where we end up. Like, this is not, like, this is a very disappointing outcome. And I, and I don't, you know, and it, look, and if I thought it was, you know, and so then what do you do about it? You know, you could imagine doing regulatory things about it. And in theory, that's great. I don't see any actual plausible movement towards that.

• 19:41Speaker 00

  You know, simple stuff like the Apple App Store, which is clearly, you know, a huge issue for startups and clearly, I think, an abuse of monopoly power.

• 19:50Ryan Sean Adams?

  Are you following, by the way, that Epic versus Apple battle right now?

• 19:53Speaker 00

  Yeah, Epic basically lost the thing. Now, Apple's doing this very cynical workaround.

• 19:57Ryan Sean Adams?

  And it's because, so for folks who don't know, it's because Epic just wanted to deploy Fortnite, like a payment system inside Fortnite. And Apple's like, nah, you can't. It has to go through our Apple payment system. And we get 30% commission on those transactions.

• 20:11Speaker 00

  Like, I don't think, like, Mark, Mark, my partner, Mark Andreessen, says he doesn't think he could launch, you know, Netscape today, right? You couldn't imagine if you launch an app that said you can open any other app in the world, including all sorts of crazy stuff, like, that just would clearly be outside of the bounds. So, like, we've dramatically narrowed the kind of Overton window of innovation because of Apple's policies. Anyways, that's a separate topic. But, like, look, theoretically, they're regular, this problem I'm describing of like, sort of this, this, this strong consolidation of the internet, theoretically, there are regulatory solutions to it. People have proposals like data portability and other things. I haven't seen any serious efforts towards those things. And as we see it with the Apple response yesterday, these companies are very clever and able to work around these kinds of regulatory things. I'm not optimistic about that approach. The other approach is

• 20:53Speaker 00

  new technologies, right? And I, and I think that the only credible and by far the most important one is our blockchains and the networks built on top. And so, you know, that, that to me is sort of the broad motivation here is can we, can we build new systems, new social networks, new games, new financial systems, new, you know, just across the board, every kind of internet service you can imagine, can we build new ones that are able to compete with these, what I call corporate networks, the Facebooks, Twitters, et cetera, but have the societal benefits that, that we had, that, that we saw in the early internet. And that's what I see as the promise of blockchains.

• 21:32Ryan Sean Adams?

  Okay, the framing of this is interesting and I think we want to get into it. So you mentioned protocol networks and then you mentioned corporate networks. And I think you also mentioned blockchain networks there. And that is kind of like a mental model you use throughout the book and roughly corresponds to the three verbs of the title of the book, Read, Write, Own, to like outline these three eras. I'm wondering if we could take these kind of one by one in a bit more detail, right? So the first is, we just did an overview of the history of the internet and where it's gotten off course. It's like this centralized, now it's permission, it's gate capped, like what are we doing here? This is not the internet of the 90s. I'm wondering if you could kind of take us now that we've looked at this in broad strokes,

• 22:15Ryan Sean Adams?

  take us through kind of like the history of protocol networks as they were. And like, again, what was so great about them and like what were they missing? Maybe RSS is a good example of this and how did corporate networks kind of creep in here? But also give us the framework here, protocol, corporate and blockchain.

• 22:34Speaker 00

  Yeah, let me just say on terminology, like it'll sound a little funny to some people because like in the blockchain world, we refer to networks as protocols. That would obviously in the context of my book be confusing. So I, you know, and I mentioned this in the book, but I, but I, so I sort of call them, just to be super clear, protocol networks, I'm referring to things like the web and email, HTTP and SMTP, kind of the original Web1 protocols.

• 22:59Ryan Sean Adams?

  Like the 90s internet.

• 23:00Speaker 00

  Yeah, the 90s internet. Corporate networks are referring to basically the 2000s internet, which is, you know, sort of pioneered by eBay, but then obviously Facebook and Twitter and all these other services where a company runs the network and has full control. They have full control of the economics and full control of access and every other kind of relevant thing. And then blockchain networks are essentially, you know, things that we're all familiar with here. I use it as an umbrella phrase, so Ethereum I would call a blockchain network. Uniswap, I would call a blockchain network, someone building a game on top of Ethereum. So I kind of like, I just, I didn't want to get into all the nuances in the book. So I kind of, you know, use an umbrella term to not have to separate L1 and L2 and all these other kinds of things, just so the crypto people know, like, I realize it's

• 23:44Speaker 00

  slightly eccentric language. I played around with it a lot and I found like this was the one, this was the kind of terminology I thought would be the clearest to the general public.

• 23:52Ryan Sean Adams?

  No, I like it. I think it works. And those three eras roughly correspond to read, write and own as well, right?

• 23:57Speaker 00

  They do, they do. Yes, that's right. So, so basically the kind of story, right, is so that the internet started and, you know, parts of it were started in the seventies through DARPA and, but really kind of, I think most people would call like 1981, beginning of the internet. That was the day that IP, the internet protocol was formally launched. And then you had the rise, you had a bunch of different email systems and eventually people proposed SMTP as a way to kind of unify them all. You had Tim Berners-Lee create the World Wide Web Protocol, HTTP in 1989. But then you really had this kind of explosion in 93, which was Mosaic and Netscape, which was the first kind of consumer accessible client software.

• 24:38Speaker 00

  The, those early protocols, I, I would sort of think of them as almost like languages, like the English language, in that they're, they're just specifications of how to speak to each other. They're not actually like live running code, right? So like what HTTP says is, hey, if you send me data in the following format, I'll accept it and I can send you data back in that way. And what that means is if you think about the English language is, is it's effectively a consensus system, right? Like if I can start speaking English differently and maybe I can nudge the English language a certain way if I'm influential, you know, if you're an influential celebrity or something, you can make up new words and they'll get popular. But in general, if I go too far, right, you won't understand me and I'll cease to interoperate, right?

• 25:21Speaker 00

  You and I will no longer interoperate through the English language, right? So that's kind of what these, these things were. And then they had a very important component called DNS. Which, you know, is still around today. And DNS is the system, the naming system of the Internet. Where, you know, I own c-dixon.org, that's my website. But very important, a very, very important thing they did in DNS is they said the user, the owner, the user controls this mapping between c-dixon.org and the physical computer. Right? So, so there's a, in my DNS records, I can control that c-dixon.org points to, I think, I use Netlify today. But let's just say Netlify decides they're gonna start doing stuff that we see the big social networks doing, like charging me lots more money, or changing the rules. I can just switch, because I control that mapping. Right?

• 26:06Speaker 00

  I own that domain. Right? That was the key thing in the first era of the web, was that names, which are your entry point, they're your digital avatar, right? You control, and when I leave, and if I leave, if I, if I switch that name and leave Netlify, all of my networks stay in place. You can still email me, you can still find me an SEO. It's all, it's, it, it all happens behind the scenes. Right? So, think of it today as like, if I had C-Dixon on Twitter, and I can say, you know what? I don't like Elon Musk. I'm gonna switch my c-dixon dot Twitter to some other service. I'm, you know, I'm being a little metaphorical here, because it's, it's sort of hard to imagine how it would work exactly. But, and, and I can keep all my followers. Right? Like, I can leave Twitter today, and I can download my tweets, but I can't keep my following, and that's the thing that matters.

• 26:51Speaker 00

  Right? And so, that was the key thing with Web 1. You could exit, you could switch. And that, what that did, that was a very, it's very interesting, right? Because it's a very small architectural decision, but it had these really profound downstream consequences. Like, I, I would argue, but I'll, I'll get into it in a second. But, but, but essentially, kind of one of the themes of the book, is that these small architectural decisions in how these Internet services are built, can actually have these very profound downstream consequences. And I try to kind of walk through and explain that. So, that was a key feature of that first era. The other key feature of that first era, is it's what, the, the sort of 90's Internet, it was, is what I call skeuomorphic. Right? And that's a word that kind of Apple pioneered, and people have kind of, I guess, ported it over to other use cases.

• 27:36Speaker 00

  But, by skeuomorphic, I mean that a lot of early technologies, you know, when they're really radically new, people don't fully know how to embrace them, fully. And so, what they do is they kind of use, they kind of port over ideas from other, from other forms of media. So, you know, the, the, when the first films came along... If you go watch the early films, it was essentially people would do a play and they would put a camera in front of it, right? Because they hadn't yet established the grammar of filmmaking, that you could have a close-up and an establishing shot and like all these other kinds of things, right?

• 28:10Ryan Sean Adams?

  Do you remember Yahoo in the like 1990s? It looked like a Yellow Pages directory?

• 28:15Speaker 00

  Yeah, no, exactly. They would literally model them after Yellow Pages. Essentially, the web of the 90s was a bunch of brochures, like shopping brochures, you know, kind of flyers it looked like if you go back and look at the, like it was magazines, like it was essentially, and you could do some kind of inputting of stuff, but essentially it was a one-way medium. Essentially, you were going to a search engine and looking up, you know, Abraham Lincoln's birthday, or how to buy this, you know, this widget from some website or something like this, right? And that's why we call, a lot of people call it the read era, because it's sort of analogy to, you know, file systems and things of where it's like one way, you

• 28:57Speaker 00

  can read only, you can consume information only. Then, and so that kind of went along, and, you know, and then we had the internet crash, and then we had this sort of, kind of bubbling resurgence. That's when I got into this. I was early 2000s, and I was sort of really excited by essentially the native, what I'd call the native ideas of the internet, which was, hey, this is a brand-new medium. You can do more than just put up brochures and magazines and other kinds of skeuomorphic things. Like, what if, you know, what if we really leaned into the idea that it can be a two-way medium? That anyone can not only be a consumer of information, but also a publisher, right? When I say "we," by the way, that wasn't me, that was the movement. Like, I was a small part of the movement.

• 29:41Speaker 00

  It was literally, by the way, called the read-write movement. I mean, there were two names for it, Web2 and Read-Write. In fact, in the book, I cite a very prominent blog at the time. It was probably, the bank list of the 2000s was Read-Write Web.com. So, I mean, so that would be like, if we were sitting here then, it'd be like Read-Write would just be a thing. Everyone talked about it that way, right? Because that was the whole idea, was like, now we can make it a two-way medium, right? And there was all this cool stuff happening. There was blogging and mashups, they call, there's all these kind of neat things. And then, you know, and then, of course, you had YouTube and Facebook and Twitter and a bunch of, you know, kind of... Serious entrepreneurs come in and they kind of cobbled together a lot of the ideas made by the hackers and they made a more mainstream products and boom and then the iPhone

• 30:26Speaker 00

  came along in 2007 and the next thing you know boom like the whole world's you know using their phone seven hours a day which is the latest ad. You know, one interesting thing that happened there is, you know, so one interesting question, right, is how how come social networking, kind of the read, write web became controlled by these companies and led to the consolidation of the internet instead of being built in sort of the same open protocol architecture of the first year of the web. And we have a very interesting case study, which is there was a very serious attempt to make those systems open and it was RSS. And so RSS is essentially an open protocol that that allows you to basically mimic the, you know, you can build something like a TikTok or a Twitter or Facebook, kind of

• 31:11Speaker 00

  social networking.

• 31:12Ryan Sean Adams?

  Of interest, by the way, to podcast listeners, if you're consuming this on Apple Podcasts, you are consuming an RSS feed.

• 31:19Speaker 00

  And RSS is still around, but you know, and it's used by millions of people, but it's not, you know, it's not what it could have been. Like, it's not, like, in my mind, what it could have been is it could have been, we were all using RSS all day, we're using short video RSS instead of TikTok, we're using, you know, micro messaging RSS instead of Twitter, like, in my, so I'm not trying to, I'm a big fan of RSS for those, you know, like, I'm not trying to sort of diss RSS.

• 31:44Ryan Sean Adams?

  Like, podcasting is the only, like, use case that still remains.

• 31:47Speaker 00

  Podcasting and then like, you know, people like me and like other hardcore tech, open tech people, but yeah, it's not, it's relatively niche compared to these big social networks. It didn't have to be. And in fact, I'd say, I have the stats, you know, in there, it's like, you know, 2007, 8, it was a, it was a neck and neck horse race between RSS and. You know, for example, Twitter was sort of the most similar in functionality. And in fact, Twitter, I think of it as there was a real bait and switch that happened, which is all of these, these closed corporate networks marketed themselves as being kind of nodes in the RSS network. They all fully interoperated, both in and outbound. And they said, hey, just, you know, when you, when you write a blog post, instead of just

• 32:29Speaker 00

  putting it in your RSS feed, also post it on Twitter and it'll all interoperate, right? And in fact, if you go, I quote myself just one time in the blog, in the book, my old blog, I used to blog about this stuff. I have actually went back and look, I have dozens of blog posts arguing with people. And I'm like, guys, we shouldn't believe this. They're gonna do bait and switch. I literally, and I cited one, and if you remember that part, Ryan, but there's one part, I, I don't normally cite myself in the book, but this one part, it was relevant. And so, and you know, and I mean, and I didn't, it wasn't because I thought they were Machiavellian. I just understood how venture capital and, and business models work, right? I mean, I think they're all good. By the way, I should say, across the board, I think, I know a lot of people that work with these web two companies, I generally like them and think they're good people.

• 33:13Speaker 00

  I'm critiquing the system here. All right. And the reason I didn't have some crystal ball to see that this would happen, it was the fact that, look, at some point, like Twitter isn't making money in 2008, they're gonna have to make money. They have, you know, they raised money from a bunch of VCs, like, you know, there's going to be a business model at some point, and that business model is probably not consistent with having all the data go in and out for free. All right. And anyway, so, and look, and that was a very consequential outcome. So had RSS won, so the, the combined revenue of the social networks last year was two, was $150 billion. These are the big five. Had RSS won, and so basically think of these as sort of all this money is flowing through these networks.

• 33:56Speaker 00

  There's something called a take rate of a network, and that's sort of, that's what is the net, what percentage of the money flowing through the network does the network operator take? Like, what's the kind of, the, the toll fees, if you will, right? And so, for example, with credit cards, it's two and a half percent, rough, two to three percent. Right. So that's if you buy something, two to three percent is kind of going to the a set of different people who are operating the network. You know, I think eBay is eight percent. A bunch of kind of physical good things are in that ballpark of 10%. Apple App Store is 30%. Social networks are, outside of YouTube, are 100%. So they take all the money. It's almost unprecedented in the, in the rest of the economy. So all of the, so you go, you know, I go to any social network today.

• 34:40Speaker 00

  I'm going because of these content creators. The, the network is making money through advertising. They are sharing, sometimes they have these little creator pool things. I did the math in the book on it. It's like sub 1% of the revenue. It's really just almost a marketing thing. It's so de minimis. But essentially, I, you know, so I go, I wake up in the morning, I go to TikTok. I view these creators. These creators are working on this stuff. TikTok shows me ads, all of that money. Facebook shows me ads, Instagram shows me ads, Twitter shows me ads. All of that money goes to the network operator, right? Had, had RSS won, had an open protocol won, there, there would be no network operator. That money would go to the edges of the network, right? So we're talking about $150 billion swing in value

• 35:25Speaker 00

  due to which architecture of network won that use case of that era of the internet. These, these have very big economic consequences, right? It, it's, it, this is, you know, this is a, these are seri-, and that's just one category. I mean, I'm not even talking about, I know you guys like to focus on finance and things. That you could, you can go through each category of sort of internet services. And there's a lot, a lot, a lot of money at stake. And a lot of it depends on how you build, architect these networks, right? And so, you know, I reflected a lot on, this is actually why I got into blockchains. Cause that was 2013 is when I, you know, started making my first investments. Coinbase and others. And, you know, that was right around when RSS was really kind of falling off. And I was like, why did this happen?

• 36:10Speaker 00

  And then I, you know, and then I saw blockchains and I said, you know, what, it started to occur to me. It took me a while to fully understand it. That this could be kind of the best of both worlds. Meaning it could have the societal benefits of protocol networks, right? Where the money flows to the edges, the control flows to the edges. But could have sort of the competitive advantages that you need. To compete against these modern networks. And specifically after reflect, because look, I mean, the reality is RSS lost. And there are, there have been 50 other attempts to create new programs, at least 50 credible. I go through, I list a bunch of them in the book. Many, many, many attempts to create new protocol networks. The reality is only two have really succeeded at scale. The web and email, and both of those were started in the, in the, in the eighties.

• 36:54Speaker 00

  And I would argue were started before they had serious corporate competition. And so since we've had serious corporate competition, no protocol network has been able to succeed. And I think there's very clear reasons why. And I, and I actually go through this, one case study I have in the book is RSS versus YouTube. So, you know, there was a thing called media RSS, and it was meant to be an open system for, for sharing video like YouTube. But YouTube offered a very, very compelling alternative value proposition, which is they, they would subsidize the hosting. So in 2005, when YouTube launched, they actually started off as an online dating site, they quickly pivoted. Their pitch to people, you know, at the time, people were, to the extent they were showing video, they were showing it on their blogs.

• 37:35Speaker 00

  And their pitch to people like me as a blogger was, hey, video is a pain in the ass, and you got to pay a lot of money to host it. You can just click a couple of buttons, and we'll pay for the hosting, we'll subsidize it, and you can just embed this code. And by the way, we'll also co-host it on youtube.com. We don't get a lot of traffic, but why not? Right? So you're like, this is awesome, right? And then, do I want to do that, or do I want to do media RSS? Where it's this thing, I gotta, you know, configure it, I gotta buy a domain, and then I gotta pay my own hosting costs, right? So like, by the way, and this happened with Twitter and Facebook, why did all these social networks raise many, many, many billions of dollars before they, before they went public? A lot of it is subsidization. They subsidize hosting costs, they subsidize all sorts, but this is the major strategy of web two.

• 38:18Speaker 00

  Subsidize, subsidize, subsidize, it costs many, many billions of dollars. That's just one example of why I think things like RSS had no chance. They were like this ragtag group of developers with no money to subsidize. So you look at blockchains and you're like, wait, you can design systems with low take rates. You can design systems where the value and control goes to the edges. And you have things like tokens that let you that let you do things like subsidize, right? That let you actually compete in a level playing field. So to me, and this is sort of the core argument of the book, is that blockchains are, you know, it's can be the best of both worlds. They can have the societal benefits of the early internet and protocol networks. But the competitive advantages and advanced functionality and ability to fund and subsidize and other things the corporate networks do, right?

• 39:02Speaker 00

  And so it's really kind of this beautiful mixture of these two things. And like I saw that and just sort of said, this is, I mean, to me, this is sort of, you know, in my tech career, one of sort of five amazing, beautiful ideas I've seen. And and just was like, this, this is clearly the the right answer.

• 39:20Ryan Sean Adams?

  But by the way, what are the other four so we can see them?

• 39:22Speaker 00

  I just sort of made up the five. The thing I described for sure, the the internet itself, I would say, yeah, I would say the, you know, the internet itself, look, I'm, I'm very much from this, like, I grew up on Unix. You know, I mean, not Windows, like, I'm very much from the open software side of the world in in many different ways, both kind of philosophically and just technically, that's what I knew. And, you know, architecturally, like, small pieces loosely join, like, the Unix, Unix philosophy was always kind of the way I thought about the world. I would say open source software for sure, like Linux, Unix, just, you know, well, Unix is a standard, but, you know, that whole kind of universe, the internet, the open protocols of the early internet, blockchains.

• 40:07Speaker 00

  I think, look, machine learning, I, you know, I started, I was too early, I started a machine learning company in 2008. I remember I went to this DARPA conference, it was like this academic DARPA conference where they were, they were showing these, these systems that could like, you know, play 20 questions and do other things in like the mid 2000s and this idea that a machine could learn, I mean, we're now seeing the results with ChatGPT. I mean, I do think it's an amazing, it's an amazing thing that you can use processors that were designed to to play. You know, shooting games and you can repurpose them to make intelligent machines. And that's certainly one of the great ideas. So I don't know, you know, I mean, probably.

• 40:42Ryan Sean Adams?

  Maybe add mobile to the list, maybe?

• 40:44Speaker 00

  Yeah, I mean, like the, you know, the, I mean, for me, you know, the first time I got my hands on an Apple two or something was a, you know, the clouds parted and, you know, the angels sang and it was a wonderful.

• 40:57Speaker 00

  That's more of a personal, a personal story. But, um, but yeah, like certainly, it's certainly, I think it's certainly up there. And, and look, and then going back to our earlier conversation, I think it's really wildly misunderstood. And, and look, and it's not just, I'm not trying to blame the audience or the readers. I think a lot of it, the why it's misunderstood is, is the fault of the industry. And I think specifically the set of people in the industry that are just, and you see this on crypto Twitter and just generally that are just endlessly focused on prices and kind of, you know, speculation and making money. And I, and I think, I actually have come to think the biggest risk to the space.

• 41:39Speaker 00

  I think of it as we're saying, we're, we, the people that care about the movement are sandwiched between, on the one hand, I think a regulatory regime that is basically just misguided. And on the other hand, a set of people who are just interested in speculating. And I think are crowding out and frustrating a lot of the good people. I think the crazy thing about the, the regulation is I think that the regulation they're doing actually promotes the speculation and hurts the real use cases. I could talk about that. I mean, so for example, Dogecoin is highly legal. But if you do Dogecoin and then try to actually give it utility, that's when you trip up securities laws.

• 42:21Speaker 00

  It's this insane kind of approach to it, but I'm.

• 42:25Speaker 00

  Anyway, so, look, I mean, and I think, so just to be clear, I think the onus is on us, and I think, you know, and the industry to fix this and explain it. I don't think the average person who's busy with their job should have gone and investigated blockchains and everything. I do think, I do hope that having everything contained in a nice little 230-page package of a book might make it a little easier to have an on-ramp.

• 42:50David Hoffman?

  As we progress in the whole like Web 1, Web 2, Web 3 conversation, and also the read, write, own conversation, it very much gives a, an aesthetic of like evolution. Like, we're layering on new abilities onto the internet, and as a result, the internet expresses itself uniquely based off of the skills, the abilities that we have during the particular phase of the internet. And so like, you know, own doesn't imply not having read and write, right? It's like a new skill on top.

• 43:20Speaker 00

  Oh, yeah, no, for sure. No, it's, no, no, definitely it's additive. Yeah, yeah, it's definitely additive.

• 43:23David Hoffman?

  Right. But also, at the same time, we, the blockchain world is not, we're not trying to take all of the properties and the characteristics of corporate networks into our future internet. Like, we are actually intentionally trying to leave some of the properties behind. So while it is like an evolution, a progression of the skill tree of the internet, we are also not totally taking everything with us. Do you have a mental model for us for as we develop more abilities, as the internet grows in sophistication, each one of these abilities is layered on the others, but we're also leaving some properties behind? How, how should we think about like, understanding this arc?

• 44:00Speaker 00

  Yeah, that's a really interesting question. Like, I would say, like, there's some clearly great things about the, you know, about the Facebooks, Googles, et cetera, right? Which is, they brought mostly free, generally free services to 5 billion people. And, you know, they're very high-performing, they have great user experiences, as I said, they're mostly free.

• 44:24Speaker 00

  You know, they just, they have very high quality software design, you know, the lot of those things are important and, you know, should be maintained. I think it's very important. I think one of the things we're kind of missing in Web three is feature, feature and functionality parity with Web two. I think we need to get to that. You know, we can talk about that at some point if you want, but, and that means, you know, transaction costs and user experience and finality time and just all those kinds of things. So they've done a lot of good stuff there. I think that the, you know, to me, the big problems with that, with the Web two model is one, that there's these five actors in the middle, take all the money and don't share it with the people that actually create the content and do the work. You know, just to give you another data point, you know, Spotify, there are, I think by their own

• 45:08Speaker 00

  stats, 14,000 out of 8 million musicians make $50,000 a year or more, which is the average, roughly the average American salary. So, you know, it's like 99 plus percent don't make enough to live on. And this is, is this a problem because people don't like music? No. Is it a problem people don't like to pay for music? No. It's a problem because you have these giant intermediaries in the middle, Spotify, the labels, everyone else taking all the money. Right? And so I think this architecture of all the money and control. I think, look, I also think, like, I'm not, I'm not getting, I don't get much into politics and I'm not highly political myself, but this idea that, you know, a bunch of product managers in, in, you know, in, in San Francisco should decide, make decisions about who has

• 45:50Speaker 00

  access to these critical global infrastructure. To me, it's like, imagine if AT&T decided who got to make phone calls. Like, it just sounds like a really bad fucking idea. Like, shouldn't that be something that's done by the government or by some kind of like democratically controlled system? You know, so just the control and like, and there's all sorts of other, like, there's a thing going on in TikTok now. I have a friend who's a TikTok creator.

• 46:14Speaker 00

  You know, what TikTok has decided is a few people got too big. They got like a hundred million followers. And so they're deliberately dialing down their reach and then dialing up. Right, because any, any business doesn't want to get too dependent on a few quote unquote suppliers. And so they, they are, they're constantly playing games where they're turning dials. Someone builds a business and they turn the dials and they take away that business. So they make them pay more to kind of promote themselves to get back up. You know, a lot of the social networks, I think the next wave we're about to see now is basically you can't link out to social, from social networks. We're already seeing this somewhat on Twitter and Facebook. They're trying to keep you there like completely solid in those networks. So if you link out just a web link, like if I, if I tweet something right now and I say, hey, and you know, click here to learn more, that, that tweet will get demoted. And that happens on most social networks now.

• 46:58Speaker 00

  And I think that will accelerate and you'll basically end up with these five silos that don't link out as an example. And so anyways, all, to me, all of these things should be, these are very important decisions about how our online lives are structured and controlled. And they should not be controlled by five companies. They should be controlled by communities, the way the first year of the web was. So that part, we definitely got to get rid of, I think. But we don't need to, what we shouldn't lose is the wonderful user experiences. You know, ideally, you know, very low cost or free or, you know, freemium or whatever the model might be for, for these things. Keep the internet accessible, like, like more people have internet access now than access to running water. I think that's due, that's a testament to the, you know, the, the amazing success of these free services. A lot of it, by the way, is due to open source software.

• 47:42Speaker 00

  The fact that all software is essentially free today. You can get an Android phone for $10 because all the software is free. It's Linux. We don't want to lose that. Like, it's very important to keep, you know, the internet accessible and, and, but, but I, but I think all of these, essentially the way the money and the power is, is allocated is just, is just horribly wrong. And it's going, look, it's going to get more and more acute and people are going to figure it out. And by the way, AI is going to accelerate this. I'm a big fan of AI. I'm very excited about it, but it's a centralizing technology, right? It, it rewards companies with big stockpiles of data, capital and compute. And will, you know, it will further entrench this and further accelerate it. And so, and I don't see any other counterbalancing force on the horizon but blockchains. I, this, I challenge people to come up with something.

• 48:26David Hoffman?

  That's exactly how I see Web 3 as the next step from Web 2. And maybe it's, I'll throw this to you, is maybe Web 2 was also a reaction to Web 1 in the same way that Web 3 is a reaction to Web 2, whereas Web 1 was clunky and for nerds and for people who could deal with the UX limitations that the internet had. And then we made Web 2 in order to deal with those problems, giving us a new set of problems. And now, Web 3, you kind of, maybe the problems of Web 3 are trying to solve the economic problems of Web 2, or the value capture problems of Web 2. Is it fair to say that each web phase of the web is a reaction to the previous one?

• 49:05Speaker 00

  Yeah, I think that's a great way to look at it. I mean, with Web 2, you know, like the kind of move fast and break things, like it was very hard to move fast with protocols, right? Protocols, you require consensus, you have committees, you couldn't do subsidization. So just like the example I gave with video, so like, you know, 2005 was an important year because that was the year that broadband penetration in the US started to surpass narrowband penetration, and so people could use video. And it was, the protocol versions of, the open internet versions of it were clunky, and they were expensive. And so it seemed like a great, like I was for it at the time. I was like, well, of course, why don't we have a company do it? And they can subsidize it, and they'll get paid later because they'll be a big network and they'll be able to run ads or something. And it seemed like the right trade. We just hadn't seen how the movie fully played out, right?

• 49:49Speaker 00

  We didn't see how, as they got bigger, they would consolidate more, they would extract more, they would close down more, right? And so I go through this in the book, there's a section I call the attract-extract cycle, which I think every network or I argue, I think, pretty strongly, and evidence suggests it's true, that all networks kind of go through this life cycle where they start off kind of attracting users and what I call complements, which are, you know, creators and developers and others. And then over time, once they get to a certain kind of level of market share, their incentives switch, and they start to sort of squeeze more and more out of those participants.

• 50:27Speaker 00

  And so, you know, I think in the mid 2000s, it seemed like a good idea to make these, to have companies step in, they could move much faster, they could subsidize, they could rapidly iterate on the products. But then I think, once we saw the issues, you know, in the early 2010s, I think people should have, people in the tech community... You know, should have reacted to that and sort of said, hey, this isn't the right thing. I, you know, my view is a lot of people in the tech community just, you know, were benefiting from it. As a my, you know, Mark Andreessen likes to say, we used to be the pirates, now we're the navy. Like, they became the navy and they, you know, they, it was, it was a good system for them. And, you know, but to me, it was like, is that

• 51:12Speaker 00

  worth the trade? We lost all of the kind of original ideals of the internet. It wasn't worth it to me.

• 51:17David Hoffman?

  Cello is the mobile-first, EVM-compatible, carbon-negative blockchain built for the real world. And now, something big is happening. Introducing the Cello Layer 2. It's a game-changing proposal that's going to bring Cello's rapidly-growing ecosystem home to Ethereum. Vitalik has shared its excitement for the Cello Layer 2 on the Cello forum, so has Ben Jones from Optimism. But why? The Cello Layer 2 will bring huge advantages, like a decentralized sequencer, off-chain data availability, and one-block finality. What does all that mean? Rock-solid security, a trustless bridge to Ethereum, and more real-world use cases for Ethereum without compromise. And real-world adoption is happening. Active addresses on Cello have grown over 500% in the last six months. With the Cello Layer 2, gas fees will stay low, and you can even pay for gas using ERC20 tokens. But, Cello is a community-governed

• 52:02David Hoffman?

  protocol. This means that Cello needs you to weigh in and make your voice heard. Join the conversation in the Cello forum. Follow @celloorg on Twitter and visit cello.org to shape the future of Ethereum. Are you planning to launch a token? Is your token already live? And are you granting your employees and contractors vesting token awards? And are you trying to figure out how to take care of taxable events for your team? Toku makes implementing a global token incentive award simple. With Toku, you will get unmatched legal and tax support to grant and administer your global team's tokens. Toku will help you navigate across the lifecycle of your token, from easy-to-use pre-launch token grant award templates to managing post-cliff taxable events with payroll. For legal, finance, and HR teams, it's a huge, complex task

• 52:45David Hoffman?

  to have to comply with labor laws, payroll and tax obligations, tax reporting, and crypto regulations in every country that you employ someone. It's difficult, time-consuming, manual, and costly, and it's drawing more attention from global regulators and governments. Toku makes it simple for leading companies in the space: Protocol Labs, Hedera, Gitcoin, and many more. So if you want some help navigating the complex world of token compliance, go to toku.com/banklist or click the link in the description below.

• 53:10Ryan Sean Adams?

  Okay, so I think we've established like where we are presently, right? So, you know, we talked about kind of the 90s internet, which was the Reed era. And the great thing that did for us is it democratized information. And then we moved into the 2000s, we had kind of a fork in the road. We could continue doing our publishing verb on like protocol networks. But instead, the corporate networks took charge, right? And so we democratized publishing, but at what cost? In the Reed White era, the cost was monopoly. The cost was rent extraction. And so now you're painting a picture of own, which is the last verb in Reed White own, right? Which is maybe the 2020s internet, this blockchain internet and these blockchain networks.

• 53:53Ryan Sean Adams?

  And your model for blockchains and networks and tokens, all of these things is different, I think, than some other people's, right? Some people talk about kind of a general ledger and all of these things. I think you would, you would agree to that. But your main model, it seems to me, Chris, is this is a new type of computer. And I'm wondering if, yeah, tell us about that. Why, why the computer lends on it like?

• 54:13Speaker 00

  Well, so to me, like a ledger, so, okay, so, you know, what is a computer? A computer is, you know, going back to Alan Turing's famous paper that kind of that defined it. It's, it's something that, that can both store information, but also act on that information, right? So I kind of, the analogy I like to use is both nouns and verbs, right? So the nouns are, you know, you store, the nouns are the things, things in the world, the things you store. Your, your Bitcoin balance, your Ethereum balance, your state. And the verbs are the code that let you operate on that, right? That's what a computer, you know, so you look at your, you know, your iPhone, you have the main, the two main things, right? The processor, which is the thing that, that processes the verbs. And then the, you know, the hard drive, which is the storage, right?

• 54:59Speaker 00

  So to me, I just think ledger undersells it, right? So I'm not saying blockchains aren't a ledger, but it's just, to me at least, it suggests the hard drive, not the hard drive plus the processor.

• 55:11Speaker 00

  And so, you know, I think a stronger formulation is to say, no, it's, it's both, right? It's both and you can, and just in the same way. And that, and that's important because there's a, there's a very important feedback loop that computers have. Because computers, I call it the platform app feedback loop, the platform application feedback loop. And I believe that this feedback loop is, is, you know, that people talk about things like Moore's law, which is that you can pack more semiconductors on chips, or really. There's a broader kind of economic phenomenon at work in the history of computing, which has made computing evolve so quickly. And so if you take a look at your iPhone as an example, my iPhone today that I have is

• 55:52Speaker 00

  much better than the iPhone I had in 2007, but also the apps have gotten much better, right? And those two things have mutually reinforced each other, right? So the first iPhone came out, and then somebody created like a fun game that got popular, and that sold more iPhones, and that gave Apple more money to make the phone better, and the camera got better, and then someone created Instagram, and then Instagram took advantage of the camera. And so you had this back and forth kind of flywheel, right? And that's what happens with, you don't have, to my knowledge, you don't have that with ledgers. You have that with computers, computers, because computers are, anyone can come along, anyone, any of the eight billion people on Earth, or let's say the 100 million subset who like to program computers, can come along and write an application for the Ethereum blockchain. And one of those applications might become popular, and if it becomes popular, that

• 56:37Speaker 00

  puts more money back into the Ethereum world. That makes the, you know, indirectly lets Ethereum get better. That in turn makes, gives people the ability to write more apps. And so you get these flywheel feedback loops with computers that I don't think you get with ledgers. I just think ledgers undersells it. I'm not saying it's not a ledger. Sure, you can store, you can store balances like a ledger on an Ethereum blockchain, or a Bitcoin blockchain, or, you know, almost any blockchain. But, you know, the fact that you can write arbitrary code and write arbitrary apps, to me, makes it, you know, makes a much more accurate term as a, you know, as a computer. Now, by the way, people think computer, they think of a physical computer. And we've had virtual computers for decades. I mean, so VMware is this huge company that built, you know, that was built on virtual computers.

• 57:22Speaker 00

  A computer is, a computer is defined both historically and, you know, whether it's Alan Turing, or just the usage of the word before that, through its functional properties, not its physical properties, right? So like, of course, Ethereum is not a computer in the sense that you go pick it up, and it's a physical device, but it's a computer in function, right? It's a, it's a set of computers networked together that come together and, you know, every block do a straight state transition and change the state according to computer code, which is exactly what a computer does, right? So, so the, the interface that the end user or the developer interacts with. Is a computing interface, even if it's sort of at a layer of abstraction above the actual physical.

• 58:02Ryan Sean Adams?

  The other thing I find with this analogy where maybe tech people get thrown off is that they look at this and they're like, that's your computer, you know, 15 transactions per second. What are you even talking about?

• 58:12Speaker 00

  Look, if you're Google, if you're, if you're an employee at Google, you, you, you see the world through the lens of, let's optimize performance. How can we pack more, you know, uh, some, you know, more performance into the CPU or the GPU, the storage, the networking, right? Blockchains are, are designed to, um, in, in many ways to, to limit the power of those companies. And specifically, what, what can you, one of the things you can do with a blockchain, I mean, what I describe a blockchain as is a computer that can make commitments. So you can say, I can write code in the blockchain that says, I, you know, internet service, am never going to go take your data and do bad stuff with it. Okay. People at Google like the fact that they have a 35-page privacy policy, which nobody reads,

• 58:57Speaker 00

  which they can change at will and do whatever the hell they want with your data. That's the state of the internet today. The state of the internet today, like the assurances that you have from internet companies, it's, it's the most absurd system in the world, is you get these pop-ups that have literally 50-page legal agreements, which I bet you nobody in the world has actually read, nor could read, nor could understand, um, that you click, I agree to, and, and then you hand over all of the power for these companies to do whatever they want. So somebody who's sitting in that position, like someone at Google or Meta, and they say like, this is how we interact with users, this is how we make promises to users, these 50-page legal agreements that we unilaterally control and no one understands, why would they want a computer that undermines that power, right?

• 59:38Speaker 00

  So like, look, it's a trade-off. Yes, blockchains have worse performance. Like there's, you, you pay for the consensus. Right? Like the, the, the, these properties that we like, that you, that this group here speaking likes about blockchains, that they can make strong commitments, that they can have, that they can guarantee digital ownership, that you can create, you know, tokens and other kinds of things like that, it does come at a cost. And that cost is is performance generally. But if you believe that there's value in having Internet services that can make strong commitments to users and can't just sort of arbitrarily control how all the money flows, the data flows and everything else, that that may be a trade off worth making.

• 1:00:17Ryan Sean Adams?

  Right, so so these computers that can make commitments, they're they're different than other computers, like they aren't great at a lot of things, maybe they're not as good as kind of at the read and write verb, but they're really damn good at the own verb. Because ownership is basically a commitment and that's their their superpower is this last ownership piece. I'm wondering if you could talk a little bit about tokens here, Chris. So you you start this chapter on tokens, which are basically an expression of ownership on a blockchain computer. And you talk about this difference between single player and multiplayer technologies, right? The idea that tokens are maybe a social technology in the way that money is a social technology? Say more about that.

• 1:00:58Speaker 00

  Yeah, so so, you know, single player technologies are technologies where, you know, a simple way to think of it, if you're stuck on a desert island, you know, you you would you want to have a, you know, a flashlight, but would be pretty useful probably, or a lighter or something like this, right? Those are single player technologies. Would you want to have money on a desert island? Like, that would seem kind of silly, because if you're the only person there, like, how are you going to spend it? It's a social technology, right? It has value to the extent of the role it plays in social interactions. And so tokens are very much social technologies, right? If if I'm the only one, if I, you know, if I make a blockchain and I'm the only user of it and I'm the only one who has tokens and there's no other users, like, it's just utterly pointless, which, by the way, is why these sort of private blockchains, these

• 1:01:42Speaker 00

  corporate blockchains, never really made sense, because it was essentially, you know, taking a multiplayer technology and making it single player mode. And and so, yeah, so tokens are very much multiplayer technology.

• 1:01:54Speaker 00

  And specifically, the way I think of tokens is they are a way to, a kind of a way to simplify and encapsulate a very, a kind of complex idea in a very simple package. And encapsulation is a very important concept in software and the internet. And so, like, to me, the canonical example would be a website. So you think about the early vision of the internet, and if you're Tim Berners-Lee, you're saying, "Okay, I want to have everyone in the world be able to both, you know, put up, I want to have this giant ocean of information, and anyone can contribute to that ocean." Like, how the hell do you keep that organized? How is that not just total chaotic mess? But we'll have this simple thing called a website. And the website, you know, you can go, anyone can go and put up that website, and then

• 1:02:37Speaker 00

  we'll have this method by which you can connect the websites together through links. All right? We take that for granted today, but that was a very profound insight, profound simplifying insight, that made this very, very ambitious, you know, kind of overwhelmingly, could have been overwhelmingly complex idea into something understandable and tractable. And so, in the same way, you know, what we're kind of proposing today is imagine an internet where people can own objects in the way they do in the physical world. So I own, you know, this laptop I'm using, I own my house, you know, I may own a piece of clothing, I own, you know, whatever you might own, right? And today, on the internet, you don't, you may own your domain name, you basically don't own anything else.

• 1:03:20Speaker 00

  Everything else is owned by maybe your email address. Everything else is owned by these big corporate services. They can take away, you know, you have, "I'm C. Dixon at Twitter," they can take that away from me at any time, for any reason. They can take away my audience, they can, you know, the virtual goods and the games I have, they can take it away, or the game goes away, or whatever it might be. And so, to me, what tokens are, is this... Is a way, similar to the website, a way of encapsulating ownership. So a token is the atomic unit of ownership in this blockchain world. And therefore, it's a very general concept. And you can have tokens that are, you know, the kind of broad breakdown, of course, is fungible and non-fungible. Fungible, they're interchangeable for one another, like money or something.

• 1:04:04Speaker 00

  And non-fungible, they aren't, right? And I think the big mistake that a lot of like critics are making today is they're focusing, and they'll say NFTs are stupid or something. And what they really mean is the thing I saw in 2021, I didn't like. Which is a very different statement than, you know, than than an atomic, a way to encapsulate ownership on the internet is a bad idea, right? The thing about software is like, I liken software much more to something like writing a book. It's an extremely expressive medium. I think it, I think the phrase "software engineering" throws people off. They think of it like bridge building.

• 1:04:43Speaker 00

  Software is as expressive as, you know, C++ or, you know, Python is as expressive as the English language. And this is, you know, something that philosophers and mathematicians have talked about. You can, basically, they're, you know, Turing complete languages or, you know, you can, anything, really, anything you can imagine and think about, you can, you can design in software. And so, you know, when people invent these new primitives, like a website or a token, a very dangerous trap to fall in is to, is to confuse early embodiments of that with the actual possibilities of the technology, because software is so expressive. It's sort of like saying, you know, a new genre of books comes along and, you know, the first science fiction book comes out and you didn't like it and you're like, "Science fiction is stupid." And you're really just like shorting humanity.

• 1:05:28Ryan Sean Adams?

  Even more broadly, you might be saying like, "All books are stupid because you read one..."

• 1:05:32Speaker 00

  Yeah, no, exactly, exactly. I mean, like, the way I think of it is like, I mean, this is like, I think a core thing about the business I do and like venture capital is like, we're long humanity, right? If like, if you, if you... Have these open computing platforms and that 5 billion people can, you know, like when people say something like they'll never be a popular blockchain app. To me, that's like saying they'll never be a great novel about a whale. Like, it's just a bad, you're just betting against humanity. Like, there's a lot of really, really, really smart, creative people. And it's a really, really, really malleable, plastic medium, right? It's an art form. And someone is going to, and in this art form, when you introduce these new genres and primitive, in some ways, you can look at blockchains as like a new genre. It's like someone just invented mystery novels or science fiction or whatever.

• 1:06:16Speaker 00

  I'm using, obviously, analogies, but like, of course, there's gonna be a lot of, it's gonna cattle, it's gonna excite really creative people and they're gonna come up with some, some great stuff. I've seen this throughout my career where people are like, they're like, oh, this category will never work. And it's like, you're basically saying, no, there's some genius won't come along in this incredibly powerful medium and put the pieces together in an interesting way. Like, you're, you're, you're saying this entire idea maze, which you haven't explored, because nobody's explored it, because it's this really vast and interesting maze, has no treasure in it. Like, I'll take the other side of that bet every time. And so that's, you know, the same with tokens. Like, tokens is just this massive unlock of this new idea maze.

• 1:06:58Speaker 00

  We don't really know exactly where it's gonna go, but certainly don't confuse, like, granted, there was some dumb stuff done. I mean, look, there's dumb stuff done with tokens. By the way, I've been on the internet my whole career. There's been dumb shit on the internet my whole career. I mean, I mean, dumb stuff on the internet. Like, this idea that, like, there's dumb crypto stuff, therefore crypto is stupid. Like, welcome to the internet, my friend. Like, like, if, it's like, I don't even know where to begin to tell you all the dumb stuff I've seen, being on like boards and other things with, involved with internet companies. So, I mean, look, it's just, it's just the nature of putting 5 billion people together and, you know, in chaos and everything else as you get, but, but you gotta look through the, the, the kind of accidental trappings of how things arrive.

• 1:07:41Speaker 00

  I remember early social media, I, like, I've been on Twitter since, all these things since the very beginning. And I remember, you know, all these mocking news articles and things about these nerds in Silicon Valley, talking about what they had for lunch. Why do I know you had a burrito for lunch? And like, a lot of it was that kind of silly stuff or whatever. And just, we were fucking around and fighting over texts, whatever. I don't know what was going on. But it was, but it was, but it was mostly silly, but you had to look beyond that. Like, what it really was, was this is a new global protocol for micro-messaging, right? It just so happened that the early people were doing X, Y, and Z with it. It happened that the early NFTs did X, Y, and Z with them. And some were interesting and some were not interesting and some were stupid and, you know, et cetera. But you got to look through that and say, what is it fundamentally?

• 1:08:24Speaker 00

  And fundamentally, what it is, is a token is the atomic unit of ownership. And to me, in the same way that the website was for Web1, the posts, the social posts, was sort of this encapsulating way to make publishing something that was kind of able to be grocked by mainstream people and tokens sort of nicely package ownership. And now we're in this phase where developers and creative people are exploring that idea of maze. And to me, this is the really exciting time is we're going to have a number of years where those, where we're seeing like kind of all the different unlocks and creative ideas that people come up with when you have this really powerful new primitive.

• 1:09:04David Hoffman?

  Yeah, Chris, I remember being in 2021 when me and Ryan started Bankless and we were just so focused on DeFi, finance. We're going to reconstruct the financial system, which of course is still on the table. But really what happened in 2021 was NFTs came and took over and it was actually more artistic and creative and cultural expressions that really took Ethereum and crypto at large mainstream. And I think if you came into crypto at that time, or really any time in crypto, you'll come in and you'll notice that there are pockets of tribes everywhere. And tribes come in so many different flavors and different communities with, you know, that look different because they have different like profile pictures on. And something I learned is like, oh, like if crypto is going to go mainstream, it's

• 1:09:46David Hoffman?

  going to go mainstream because of some sort of social technology that it unlocks. And I think if you go back to every single phase of the web, both in Web2 and Web1, that was also true. Like the Web1 forum was an extremely popular place to be for niche interests. And what did Twitter and Facebook and messaging do? The whole like read and write is side of the internet was like, oh, more people can come and be social on the internet. And you can't really understand crypto without understanding the role that communities have when they play in this world, especially with tokens. Tokens is like a binder for communities to come together. How would you say this social arc of the internet is being expressed with this very

• 1:10:30David Hoffman?

  expressive technology that we have now in Web3?

• 1:10:34Speaker 00

  Yeah, and just so, you know, I know this, you guys, your audience might be a little more finance focused. I'm very excited about the financial aspects here of blockchains. And we have a number of investments around this, including, you know, a bunch of the big DeFi protocols. And I think with financial applications specifically, you have specific regulatory challenges that make it trickier.

• 1:11:00Speaker 00

  But like, I'm very excited. I have a section on the book on finance and payments. But, but yes, I think that to your point, David, that, you know, that, that probably tens of millions of people are get excited by finance. Whereas hundreds of millions or billions of people get excited by games, social networking, you know, media, culture. It's just a broader, it just has broader appeal. I have a lot of just personal friends who aren't in the business, who just, you know, are, they, they're into NFTs and, and other kinds of things like that in the way that they aren't into finance. I think we all probably find that if we go and hang out in broader circles.

• 1:11:43Speaker 00

  And so I do think that, that, that, you know, and like a lot of our investment, we try to kind of be, you know, somewhat agnostic in our investing, in our application investing and invest across these categories. But we have done a lot in media, social networking, you know, to things like Farcaster. And one idea I'm really excited about, I have a section on the book on is collaborative storytelling. So we have a few investments there. So that's the idea that you, a bunch of, you know, so you think about these communities that get really excited about Star Wars and Harry Potter, and you read the forums and they're, you know, diagnosing how the story should have gone. And I just saw one that was on YouTube. It was like a, it was like a remix of one of the recent Star Wars TV shows that a user did. And it was just clearly better than the actual show.

• 1:12:28Speaker 00

  And so like, imagine if you could, you know, so just that power of fans and the excitement level. Imagine if you had a token community where, where those users. Users could come together and create narrative worlds. They could create a new Harry Potter, a new Marvel, and they could get rewarded for their contribution to those, to that corpus through tokens. And then have an incentive to go, you know, sort of spread the word and evangelize that. Why do we have only sequels today and, you know, and kind of old IP rehashed in Hollywood? It's because it costs too much money to, to market a new narrative universe. What if you could take the power of, you know, think about the, think about how much marketing power you have embedded in things like Dogecoin?

• 1:13:12Speaker 00

  Like, I'm not like, I think Dogecoin is kind of silly and there's not really a point to it, but it's a really powerful community. Now, what if you took that powerful community and combined it with like a really cool new narrative universe as an example? And that actually, you know, had some kind of value beyond just the token? That's, that's just one example. I think there's a lot of interesting stuff happening with games. I'm personally involved with one, Proof of Play, Pirate Nation. It's really interesting. It's a fully on-chain game. It's a, you know, it's a bunch of Xinga folks and it's, it's sort of taking some of the ideas that were pioneered by the Lattice, you know, Dark Force kind of crew and, and

• 1:13:52Speaker 00

  I think kind of if, if, if like that, that style of on-chain gaming had a baby with, you know, Zynga games or something, like kind of combine the two, sort of a little more mainstream, but a lot of the cool ideas. And so you get the composability and it's really cool idea because you could have all the back, literally all the backend runs on-chain and then that means that other people can fork the clients and kind of build on it, you know, kind of build around it and extend it and it's sort of this infinitely extensible system. So, so, you know, so I do think, like, I, I tend to think that I, I kind of, I guess maybe it's an easy way out, but I kind of think all of the above, like all of these things are interesting and important. I think finance is clearly important.

• 1:14:35Speaker 00

  I think media is clearly important, games are clearly important. Like games, like to me, games are not the end all. Like, I wouldn't be doing this if I thought the only outcome were blockchain games. But it's a, there can be very important, historically, games who very important kind of on-ramp into new, into new ecosystems.

• 1:14:52Speaker 00

  Games were, you know, an important driver of early PCs and important driver of early mobile phones. And so I think these things kind of all work together, you know, you kind of game, the game might get you to 100 million wallets and then maybe some of those people will start to use payments once they have those wallets, right? Like, I wish there were less tribalism. Like, we're working on the same team. There's enough people that that are actually out to get us.

• 1:15:18Ryan Sean Adams?

  So true.

• 1:15:20Speaker 00

  Like, just, like, by the way, I hope you saw that in the book. I tried to be really kind of broad and ecumenical. I'm for those, if those, if any Bitcoiners are listening, I am pro Bitcoin, even though they seem to think we hate them and they are attacking me. Like, there are people out to get you. I'm not one of them. I'm on your team. I'm pro tech. I'm pro all the different tribes. I

• 1:15:40Ryan Sean Adams?

  Pro decentralization. I mean, I, hopefully that is the, the crypto meta, meta class, meta tribe is like pro decentralization and like

• 1:15:49Speaker 00

  Yeah, pro decentralization, pro new, you know, kind of rebuilding the internet, creating better systems, returning power to the edges of the network is another way to kind of say decentralization, right? And there's different ways to get there and, you know, there's different blockchains and there's different this and that, but I think we all have mostly over, you know, overlapping values.

• 1:16:09Ryan Sean Adams?

  All right. So, so let's talk about this. So I feel like we, we kind of established what blockchains are, what tokens are, and of course, outfalls these things called blockchain networks. And recall, we had these three eras of the internet and now this is kind of the own era. And we saw protocol networks, we saw corporate networks, and now we're in kind of the blockchain network phase. I'm wondering if we could, like, high level, one thing that we established earlier, the problem of these corporate networks is this rent extraction. Okay. And it was the Bezos quote, "Your take rate is my opportunity." How does crypto solve the rent extraction problem? I mean, you were talking about these

• 1:16:48Ryan Sean Adams?

  corporate take rates of Facebook takes 100%. YouTube, they, they take 45%. iOS, they take, like, Apple Store takes 30%. And they're in charge. Like, they, they own the monopoly. There's only like five of these companies doing all of this. Contrast that to blockchain networks. How can we kind of like squeeze the balloon a bit more towards users?

• 1:17:10Speaker 00

  Yeah, and so, you know, I have a chapter on take rates. So I specifically go deep into this, including kind of analysis of the take rates of all the existing Web 2 networks and then go into the Web 3 side and then talk about exactly your question, like, why, you know, what about the architecture of blockchain networks constrains the take rates? And there's a couple of answers. Like, one is that, you know, with blockchains, you have to commit to the take rates upfront. Right? So you create a network and you say, the network says, "The take rate, you know, I'll take X percent." And, you know, there's also, there's nuances here. It depends on how the network is governed. But, you know, in any decently designed blockchain network, it will be either community governed

• 1:17:55Speaker 00

  or fixed to the take rate, right? And community governed meaning you need a majority of the community to change it. So number one is you set it upfront and you're, you know, you have to stick with it, right? So you can't kind of bait and switch and change it. And that means also people can shop around. So if there's, you know, three different payment networks that are built on blockchains, and one charges 3% and one charges 1%, you know, the 1% one will win, right? So you have actual price competition. So, you know, that's an important thing. Number two, you have the ability to exit for users. So if somebody gets too extractive, right? So if you think about like Lens and Farcaster and this new wave of blockchain-based social networks, right? Your name, as I was just discussing it earlier, which is sort of your critical thing and your following list, you own it and you can exit.

• 1:18:38Speaker 00

  If a specific client or if, you know, or one of the pieces of software you're using decides to jack up the take rates, you can leave, right? So the ability to exit, the having a low switching, I mean, the high take rates of these corporate networks, they're all, it's all predicated on the fact that you're stuck, you're trapped. Once you build a, like, look, I, you know, I've built my audience on Twitter for well over a decade. You know, if I may or may not like some of the stuff they're doing, but I don't really have a choice. Like, I'm not going to build that audience again somewhere else. Like, it's going to take too long, right? And so you're stuck there. And so the ability for the user to switch and to take their audience with them is a very, very powerful force that forces these businesses to compete on prices.

• 1:19:21Speaker 00

  And the price, in the case of a network, when you compete on prices, you're competing on take rates. I go through and through a few other things. I kind of go through a list of them of sort of these things that constrain the take rates in blockchain networks. And also just empirically, I have a couple of charts that show empirically. This is also the case.

• 1:19:37Ryan Sean Adams?

  Yeah, I mean, some of those numbers from the charts, like OpenSea take rate is like 2.5%, right? That's where you buy NFTs. Uniswap is like 0.3%. I mean, it depends on the pool, but around 0.3%.

• 1:19:48Speaker 00

  Yeah, and you can have things like Blur come along that compete with OpenSea, and they're able to because the people, users can exit. Because all of the key, the key, you know, the usernames, the NFTs they hold, those are all held on a blockchain and they can switch.

• 1:20:03Ryan Sean Adams?

  Another unlock of the like own phase and the blockchain network phase, I think, is token incentives. So we talked about tokens and the benefits of ownership, but how about incentives themselves? I mean, the skeptics see like token price go up and they see speculation, they see casino. But I think you see some solutions around like the cold start problem. You see some solutions around a model for open source development and making users owners is like a good thing from your lens. Can you talk about that?

• 1:20:34Speaker 00

  Yeah, and so, you know, as I mentioned before, like with the example of YouTube, corporate networks, I mean, web services have been subsidizing for years. Like, I mean, this may be lost on people because they don't see the kind of how these, these, these companies work from the inside. Like, I've had the chance to see that in my job. I mean, why do, like, again, Facebook, Twitter, TikTok, they all raise billions, if not tens of billions of dollars of money. Where does that money go? Some of it goes to salespeople and this and that, but a lot of it goes to subsidization of hosting and everything else, right? And so subsidization is not new to web. You know, people accuse, oh, you shouldn't spend money to acquire users. Like, guys, Web2 has been doing it for 15 years.

• 1:21:15Speaker 00

  They just do it in this way of like, you don't actually offer the money, you offer them free hosting. And, you know, because they don't want to actually share the real thing with them, which is the actual ownership. But And so, yeah, and so, you know, I think one, there's a bunch of really interesting things that you can imagine, that you can do, one can do with tokens as a way to sort of subsidize. I think one really interesting one example that I walk through in the book is this idea of using it to overcome the so-called cold start problem of networks. So the cold start problem is essentially networks, once they're at scale, you have kind of the network effects working on your behalf. So think about a dating website or something.

• 1:21:57Speaker 00

  Once you have a lot of people, you know, who want to date on your website, it becomes almost on autopilot because that's just going to naturally attract more people. But when you first start off that dating site and there's two people on it, no one's going to come there, and that's the cold start problem, or the bootstrap problem, people call it, right? Sort of how do you get enough people on your dating site that it starts to be attractive to other people to come to your dating site, right? And so this cold start problem is not new. My partner Andrew Chen wrote a really good book on it. It sort of goes through it. It's an old problem of creating networks. And a lot of networks that I think have been really valuable in the world have not gotten to scale because they've kind of gotten trapped in that cold start phase, right?

• 1:22:38Speaker 00

  So I think, I think of it as like, like, like electric charging, you know, a community-owned electric charging systems around the world would be useful for the world, but like, how do you get there, right? Maybe Tesla will do it, and you know, Elon Musk is an N of one, and maybe we'll pull it off, but like, you know, how do you do it? Another interesting example that I talk about in the book is community-owned, you know, kind of grassroots telecom companies. So this is an idea, I've been thinking about this idea for 20 something years. I remember being, visiting MIT once, and there were these, there was this thing called RoofNet, which was, um, is it, was it RoofNet? Yeah, it was RoofNet, which was a bunch of students putting networking equipment on

• 1:23:20Speaker 00

  their, on their, on their roofs, and building these mesh networks where they could get on the internet, you know, sort of like, we would hop to one, to another, to another, to get on the internet, and they wouldn't have to go through like Verizon or something. And it was this cool idea, and like, what if that spread virally? And in fact, The people that were working on that eventually created this company Sam Sarah, sorry, Maraki, which got by Cisco and then Sam Sarah anyways. So it was a cool idea. There was a similar attempt in New York City called, I think it was called Mesh NYC. There was a European company called Phone that tried to do it with Wi-Fi hubs. There's been a bunch of attempts, like how can you create kind of a community owned, let's call it Verizon competitor, right? Which would have all these cool benefits, including the fact that you wouldn't have to, you know, pay all this money to these big kind of corporate gatekeepers.

• 1:24:05Speaker 00

  And so, you know, then you have this blockchain network called Helium that came along, which has basically done that using, you know, token incentives. And I would describe it as, you know, they're not there yet in terms of having succeeded as a global network. But I would say they've gotten half of the way there. So they've really used the token to successfully build the supply side of the network, the kind of the networking hubs. They now have, they're in the process now of trying to build up the demand side. But even getting halfway there, you know, in one of what I consider the most ambitious ideas, you know, kind of in the history of the internet, is an impressive achievement. And I think we're going to see more and more people think about ways to kind of take old networks.

• 1:24:45Speaker 00

  I think you could almost go through like old internet magazines and, and look at all of the kind of cool ideas people had that didn't end up working. And I bet you a lot of them with the right incentive systems might work now.

• 1:25:00Ryan Sean Adams?

  You know, one thing where I see traditional investors still get caught up though is on, on kind of the value accrual of these tokens. So like you have, like Warren Buffett called crypto rat poison, right? Michael Burry called it magic beans. But like from my perspective, I think tokens can be valued using totally traditional financial mechanisms.

• 1:25:19Speaker 00

  I have a section on this and it's very, like, I think it's, the only way to explain it is they simply just haven't done research. Cause like Ethereum is a productive asset, which has a PE ratio, as you know. And so it's just they, but like they literally don't.

• 1:25:33Ryan Sean Adams?

  Well, but did they say this directly? Did they say this?

• 1:25:35Speaker 00

  Like a lot of people, they heard about Bitcoin like six years ago. They read about it and they literally stopped doing research. I mean, I have to say, like, Because it's just, they're just so clearly wrong. And the mainstream media does this too. Like, they just are so clearly wrong, and they just keep saying it over and over. Yet, look, are there stupid tokens in the world? Yes. Does Bitcoin have cash flow? No. Like, but again, it's software. It's a creative, plastic medium. It's, you know, because you didn't like one mystery novel doesn't mean all mystery novels are bad. Okay, like, you have to actually go do work and look at what these things are. And many of these tokens are productive assets, Ethereum being the most obvious example.

• 1:26:17Speaker 00

  Like, it literally generates cash flow. People pay to use the network. And that cash flow indirectly goes to the token holders through the various mechanisms. And you can value it by traditional financial methods. You can, you can say, I think it's stupid. I don't like Ethereum. Okay, that's your feeling. But like, it's, it's, you know, the same way you can say, I don't like a company, or I don't like your, your house. I don't like your house. Fine. But I, my house charges rent and I, you know.

• 1:26:45Ryan Sean Adams?

  It's a capital asset, man. I'm sorry you have feelings about it.

• 1:26:48Speaker 00

  It's a productive asset. Like, it's just, it's just, look, it's just so wrong that, that criticism is just so wrong that I just have to assume they are, literally haven't done the work. And unfortunately, we live in a, you know, the sentiment against crypto is so negative today that you can get away with saying statements like that, that are just clearly, just frankly lazy and false. And so, anyway, so I have, you know, I try to disabuse that, that myth in the book.

• 1:27:12Ryan Sean Adams?

  I, I think people on that should just kind of do their own research about the different models for, for valuing various assets. Like, one piece of controversy that seems to have stuck a little bit that, that you also address here is, some people have heard your lens on crypto, and they're like, yeah, Dixon, crypto's a computer. Cool. That's not what we see. What we see is a casino. You know, the speculation thing, they can't get their head wrapped around that. They can't get their mind wrapped around that being good for the world. What, what's your, and I would say, in the industry, there's this polarity. I think you mentioned this earlier in the episode. There's a notable VC firm who talked about crypto as like, the casino on Mars. And, you know, that raised some eyebrows, yeah.

• 1:27:52Ryan Sean Adams?

  What do you think about this? Are we a computer? Are we actually just trying to make a casino here in crypto?

• 1:27:59Speaker 00

  Yeah, so like the way I would like, like I would give it the analogy to real estate, which is there are real estate speculators, obviously. There's people that trade real estate. There's real estate, you know, I don't know what financial products where you can speculate on real estate. But, but the reason we value ownership in real estate is not, the speculation is a side effect, right? The reason we, we want people to like, for example, we value things like homeownership is homeownership is important to people from a, you know, from a personal wealth point of view. It's important from a psychological point of view. It gives you satisfaction to raise your family in a home you own. It's important from an incentive point of view. You know, lots of studies show that people that own homes are more likely to

• 1:28:44Speaker 00

  improve their home, improve their community. There's a bunch of reasons why homeownership is valuable. As a byproduct of that, there is speculation around real estate. And the speculation does play a role, like it provides liquidity. It makes it easier if you want to sell your house to know what the price is and like get this estimate and all these things because, it's because there's active markets, right? So it plays a role, but it shouldn't be the, the main thing. It should be a side thing in my mind. And so I'm not anti people, you know, predicting Bitcoin, if they want to invest in Bitcoin, it's going up or down, or whatever they want to do. The same way with the stock market. I'm not, I don't lose, you know, I'm sure there's, obviously there's whole industries, people betting on stocks going up and down. But if that, that's not the point of stocks. The point of stocks is to get money to companies

• 1:29:28Speaker 00

  to go build products, right? So we, we just need to, I just think it's putting the cart before the horse, you know, to, to think that the casino is the main thing, right? To me, speculation is a side effect. And by the way, I think you need, and you know, historically, we have, and I believe with crypto, you need guardrails around that speculation. You don't want that. There's a lot of ways that can go wrong. And we've learned that through, you know, hundreds of years of history, and there should be guardrails around it. But, but the problem right now, from a policy point of view, is they're kind of throwing the baby out with the bathwater. And they're saying that because there was speculation, let's ban digital ownership. Which is what is effectively going on and that's just a really and especially as I said in a time when we now are very close to having five companies control the internet and digital

• 1:30:13Speaker 00

  ownership is really one of the only credible counter counterweights to that. That's just a really bad idea. So we really need to separate the two and look what I'm hoping in the book is to like I obviously we've seen the bad side of crypto. Everyone's seen it very visibly with things like FTX. I'm trying to give layout the positive vision. I'm sure there are other positive visions. This is my positive vision. This is a full, complete, comprehensive, positive vision of the future of the internet that involves, you know, sort of blockchains at the core. And now it's out there and people can critique it and I'm looking forward to good faith. I'm sure there'll be a lot of bad faith critiques. I'm looking forward to good faith critiques and plan to respond to them and hope to learn from them. But but that's that's kind of the point to me. And so I'm not, by the way, I don't know these other VCs who talk about the casino

• 1:30:58Speaker 00

  as a bootstrap thing. I think they probably I haven't spoken to them about it. I think they probably kind of agree with me that in the end they are looking for the utility. So I don't know. I think it might just be more of a difference in phrasing. Yeah, and just maybe a phrasing and other things. So I think we probably all a lot of us agree more than than it might first appear.

• 1:31:15Ryan Sean Adams?

  So Chris, this has been awesome. We've talked about the read era of the web, the right era. Now we're in this ownership era of the web and it seems like it's a chance to reinvent the internet and that's kind of what you're arguing. You say this in one of your concluding chapters. There are only two network architectures that preserve the democratic and egalitarian spirit of the early internet, protocol networks and blockchain networks. I think that was really well said and maybe we're coming full circle. The pendulum is swinging the other way towards more democratic and egalitarian internet architectures. And I think that is that's pretty bullish and I want to ask you as we close out a kind of a two part question, right?

• 1:31:57Ryan Sean Adams?

  So just from a what's next perspective, right? So we talked a lot about a lot of the crypto infrastructures being built. Now we have kind of cryptos hit its broadband moment so we can do cheap transactions per second. That's all great. We still haven't had our iPhone moment, I would say. We have a store of value, we have stable coins. Is the iPhone moment coming and like in general, what keeps you here? What keep what has kept you optimistic about this space?

• 1:32:20Speaker 00

  Yeah, I mean, look, I think these tech movements can just take a lot longer than people think. So, you know, like, as I mentioned earlier, I started an AI company in 2008. I thought it was sort of the time and I was early. First neural network paper was nineteen forty-three. You know, Alan Turing wrote a wrote a paper in nineteen fifty where I think he predicted, you know, AGI or something in a few decades. If you if you speak longtime AI people who read history books, there's all these talk of like different AI summers and winters. There was a big investment bull run in the eighties. And then boom, you know, twenty twenty twenty was a twenty twenty-three chat GPT. And that, you know, I think that was the iPhone moment. And if you look at that, you know, I mean, look, they were, this is no way to diminish

• 1:33:04Speaker 00

  all of the amazing research work, the transformers paper, the stuff that OpenAI did. But a lot of it, I think, is driven by, you know, fundamentally by GPUs, right? By Moore's law, like a lot of, you can go back in history, you can smartphones, like Steve Jobs is the greatest, I think, genius since Thomas Edison, by no means taking away from him. But like, if you if you track to the growth of processors and capacitive touchscreens and and modems and things like you would have seen that somewhere between two thousand seven and two thousand ten that like smartphones would go mainstream like the the the underlying tech gives you at least kind of error bars as to where something will probably happen.

• 1:33:48Speaker 00

  You know, it's like, I remember reading a deep learning book a few years ago and they had a chart and it was like, how many neurons? How many neurons in different like, it's the Ian Goodfellow deep learning book and has a chart. How many neurons in different types of animals, right? And you could literally track out each year, how many, how fast GPUs get and how many neurons you could have in your neural network. And it was like roughly around twenty twenty-three, twenty-four, whatever. It's like, you know, you started getting the GPUs that could get, you know, close to humans and whatever, some kind of, you know, smart, much smarter animals. So this is not to take away from any of the individual contributions, but there is this sort of, I think, there's this infrastructure. I'm somewhat of an infrastructure determinist maxi.

• 1:34:31Speaker 00

  Like, like, it really, it really does matter how performant and how, you know, in the case of blockchains, how expensive and usable and performant these things are. And I think we're, I think we're pretty close. I wouldn't say we're there yet. Like, it's still can be clunky. There's, you know, we need a lot of these four eight four four and these upgrades and DA layer, kind of like cheaper storage. You know, bridges, the wallet experience. So I don't know if we're quite there infrastructure wise, but I think we're a year or two away or close to it. Like, it's pretty, it's getting a lot closer. I hesitate because I, you know, I think it's easier in tech to predict what happens and harder to predict exactly when it happens. Like, at least I found that to

• 1:35:14Speaker 00

  be the case. And so, you know, that's one part of it. And then the other part is like, you know, people building on top of that, the application layer. And there I feel good. I mean, we have a lot of very good entrepreneurs in our portfolio, outside of our portfolio, also, who are building a lot of really compelling apps. You know, we've probably, I think we're gonna have fifty to a hundred kind of credible shots on goal of like compelling applications that are built, which is kind of what I think you typically see, you know, it's the rough number you see in these kinds of new venture movements to have a few breakouts. You know, it's like, I remember early mobile, I was involved then, I was, you know, investing in things and you had sort of, you know, Instagram and Foursquare and Angry Birds and like, you know, you got, and there were like ninety seven others that I can't remember

• 1:35:58Speaker 00

  the names of. But like, you need that kind of scale of experiments to get run to kind of have the, to kind of fully run through the idea maze. So I, you know, but like, I, it's very hard to predict the specifics of, but I agree, we have not had our chat GPT moment. I think we've had a lot of interesting stuff happen. I'm very bullish. And, but, but I think, you know, we haven't quite had had that breakout moment. And I think when we do, it'll be a great thing because it will, it will immediately help explain all this stuff to people. It'll help on the policy side. It will, by the way, all these people debating like, what should we call it? NFTs, Web three, like, none of that's gonna matter. I remember having these debates about AI and it was like, we used to call it machine learning and once you have a chat, you can call it whatever, you know.

• 1:36:43Speaker 00

  Well, people now are just calling chat GPT. Yeah, it doesn't matter. When the stuff works, it doesn't matter. In tech, in tech products are the marketing, not names, not like, the products market themselves, I believe in tech. And so, that, that is the North Star. And we literally have it as a KPI, like, inside of our fund, North Star, of like, getting the infrastructure and everything else into, you know, so that we have that kind of breakout iPhone chat GPT moment. And like, how, what can we do? Like, we have a research team and the goal, the North Star of the research team is like, driving the, the, you know, the, the.

• 1:37:16Speaker 00

  Making whatever contribution they can to getting the space closer to that moment. Right?

• 1:37:20Ryan Sean Adams?

  Well, well said, Chris. And I know as we're in the infrastructure phase, it's harder to explain to the world what it is we are doing over here in crypto. But this book does a fantastic job of that. And I hope it propagates far and wide. The book, Bankless listeners, called Read, Write, Own. We'll include a link to it in the show notes. And Chris, thank you so much for coming on. We should have you back.

• 1:37:41Speaker 00

  Thanks, guys.

• 1:37:42Ryan Sean Adams?

  Talk about the current state of crypto.

• 1:37:43Speaker 00

  Yeah, I'm happy to come back and just, you know, riff on what's going on. Thank you guys so much for having me.

• 1:37:48Ryan Sean Adams?

  Awesome. Bankless Nation, a few other action items for you. We've got some previous Chris Dixon episodes from the archive. You gotta check out Mental Models for Web 3, one of my all time favorites. We also had Dixon and his partner Mark Andreessen on a time or two. Gotta end with this. Risk and disclaimers. Of course, crypto is risky. So is this ownership era of the internet. You could lose what you put in, but we're headed west. This is on the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.