A Crypto Optimist and a Crypto Skeptic Walk Into a Podcast Studio

I’ve been wanting to explore the world crypto and blockchain technologies could build on the show for a while. In certain ways, I’m an optimist: I think these technologies matter, and many of them will work. In other ways, I’m a skeptic: I’m unconvinced that their wide adoption will lead to the glittering, decentralized digital world that many crypto proponents imagine. So this is a crypto conversation that goes way beyond Bitcoin. It’s about what will happen when we build the foundation for truly digital economies, with digital money, digital goods, and digital ownership. It’s about technologies that could unlock a renaissance of creativity or an orgy of commercialization. Or both. And it’s about whether we are mistaking problems of power for problems of technology, and what might happen if we fix the technologies without changing the power structures. As everyone in this debate agrees, we made a lot of mistakes with the internet we have. How do we avoid them on the internet we’re building? My guest today is Katie Haun. Haun is a general partner at the venture firm A16Z, also known as Andreesen-Horowitz. She’s a former Supreme Court clerk and federal prosecutor who has focused on cybercrime and prosecuted corrupt agents involved in Silk Road, the first big darknet market. So she saw the dark side of crypto first, and now, at A16Z, she’s a leader of one of the biggest crypto venture funds there is. So this is a conversation about the world crypto might create, conducted with as little technical jargon as we could manage. Enjoy! I also want to note that this will be the last episode I host until January. I’m going on paternity leave for the next few months, and we’re going to have an absolutely all-star lineup of guest hosts while I’m gone. That lineup will include Jamelle Bouie, Ross Douthat, Tressie McMillan Cottom, Nicole Hemmer, Heather McGhee, David Brooks, Julia Galef, and the one, the only, Rogé Karma. I’m excited to be a listener and trust me, you should be too. One last bit of housekeeping: The Times’s Opinion section is looking for an editorial assistant to work with Michelle Goldberg and me on fact-checking our columns and doing some editorial research and clerical work. This is a great, entry-level role at The Times. It needs a year of journalism experience, and on my end, I’m particularly looking for candidates with a demonstrable obsession with policy analysis and social science research. You can find more information at http://nytco.com/careers. Mentioned: “NFTs and a Thousand True Fans” by Chris Dixon Book recommendations: The Company by John Micklethwait and Adrian Wooldridge My Life in Full by Indra Nooyi Palace Walk by Naguib Mahfouz You can find transcripts (posted midday) and more episodes of "The Ezra Klein Show" at nytimes.com/ezra-klein-podcast, and you can find Ezra on Twitter @ezraklein. Book recommendations from all our guests are listed at https://www.nytimes.com/article/ezra-klein-show-book-recs. Thoughts? Guest suggestions? Email us at [email protected]. “The Ezra Klein Show” is produced by Annie Galvin, Jeff Geld and Rogé Karma; fact-checking by Michelle Harris; original music by Isaac Jones; mixing by Jeff Geld, audience strategy by Shannon Busta. Special thanks to Kristin Lin.

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

• 0:06Ezra Klein?

  I'm Ezra Klein and this is the Ezra Klein Show.

• 0:20Ezra Klein?

  So before we begin today, I've got some housekeeping. First up, the Times Opinion section is looking for an editorial assistant to work with me and Michelle Goldberg. This job is going to be fact checking our columns, doing some editorial research, doing some clerical work. It's a great entry level role at the Times. It needs a year of journalism experience and on my end, I'm going to be particularly looking for candidates with a deep demonstrable obsession with policy analysis and social science research, exactly what you'd expect. But I'll put the link to the job listing in the show notes, or you can find it by going to nytimes.com/careers. And second, this is going to be my last episode until January. I'm going to miss y'all for a

• 1:01Ezra Klein?

  little bit. We're about to have our second child and I'm going to go on paternity leave for the next few months. We're going to have an absolutely all-star lineup of guest hosts, including Jemel Bowie and Ross Douthat and Tracy McMillan- Cotum and Nicole Hemmer and Heather McGee and David Brooks and Julie Galif and the one, the only, the Roger Karma. So I am excited to be a listener in these next few months and trust me because I know some of what's coming. You should be too. But okay, today's episode. I need to spend a bit longer on the introduction here because I've maybe tried to do a bit too much in this conversation and it's going to require some background for it to make sense. I've spent the last year wrestling with the question of what

• 1:43Ezra Klein?

  crypto is and what it'll mean. And most people, when they hear crypto, they think of currencies. Bitcoin is the most famous, but you may also have heard of Ether and Dogecoin and there are countless more. But currencies are where crypto technology begins, not where it ends. This is hard stuff to talk about because even the language is unfamiliar. Blockchains, for instance, are crucial. They're these ledgers that many different computers hold and update simultaneously and they can be used for a lot more than currency. But this creates a problem. We're in this period with crypto where we're still talking about what it is rather than what it can do. It's like if every time we talked about what the internet does, we had to define TCP/IP protocols.

• 2:28Ezra Klein?

  Nobody would know what anybody was talking about. And so I want to have a conversation here about what crypto can do, what the world will look like if it works. And so I'm going to try to stay away from technical terms, not entirely successfully, but try and paint a broader picture, both here in this intro and in the conversation. So backing up, one way to think about the internet, the internet that we have and that we know and that we sometimes even love, is it's a technology for copying and sharing information between people. It's a global copy machine. But in making information so easy to copy, it makes it hard for creators of that information to profit off of it.

• 3:10Ezra Klein?

  That's why piracy and identity theft are such problems. Think of something like Napster in the early 2000s. Suddenly, we could all copy each other's music for free, but the people who created that music made no money off of the proliferation of their songs. And so all these huge corporate middlemen arise, who in various ways created business models around buying, selling, and verifying information. iTunes, Spotify for music, Facebook for identity, Google for search advertising, and so on. And that's the story of a lot of the dominant business models on the internet today. The internet as we know it wasn't built to establish the ownership of information.

• 3:54Ezra Klein?

  It wasn't built to make a piece of information scarce. And so now we pay a lot of money to companies that are able to do that through various mechanisms. This is where the set of technologies that get called crypto come in. If you put them all together, they create digital goods, truly digital goods, whose existence, uniqueness, ownership, and transaction history can be verified. So if it works, it's creating an internet with an ownership layer, an internet where you can buy and sell information much more easily. That's one reason the currencies were so important, why Bitcoin itself was such a revolution. Whether or not you think it's a good form of money, and to be honest, I don't think it's a good form of money.

• 4:36Ezra Klein?

  If you can trade digital money without anyone copying the money you say you have, if we can actually verify who has a piece of money, well, then, of course, you could trade digital art, or music, or really the ownership deeds to anything. It unlocks all kinds of new digital economies because it unlocks ownership. And it does so at a time when young people are spending more and more time in digital worlds like Minecraft, and companies like Facebook are promising to build the metaverse and an even more all-encompassing digital world, where you can have everything from business conferences to dates, where you can hang your digital art and wear your digital fashion. So rather than talking about cryptocurrency and non-fungible tokens and blockchains,

• 5:19Ezra Klein?

  I think it's simplest to talk about what all this is trying to create. Truly digital money, truly digital goods, truly digital transaction ledgers, truly digital ways to own things of value and buy and sell them with other people. We are creating the building blocks of truly digital economies. So up till now, I sound like a big crypto optimist, and maybe on the underlying technologies I am. But the crypto believers will tell you that all this is going to radically decentralize the internet, that it's going to topple the big corporate behemoths like Facebook and Google and Spotify, and create the democratized, person-to-person internet we were once promised.

• 6:01Ezra Klein?

  And for a lot of reasons, I am very skeptical of that vision. And again, my form of crypto skepticism isn't that the technology won't work. It's that it will work, but that we're wrong about what success will mean. We have seen over and over again on the internet how utopian dreams enable dystopian realities. Facebook promised to connect the world, and they did. But what has made Facebook dangerous in certain ways is not that their technology failed, but that it succeeded, and that gave them so much power. All technologies have their dark sides, particularly when yoked to our modern, supercharged form of capitalism. And crypto is definitely yoked to our modern form of capitalism.

• 6:44Ezra Klein?

  There is tons of money already sloshing around in it. And that money is coming, in many cases, from the same people and firms who funded all of today's internet behemoths. So as you'll hear in this episode, I am particularly skeptical that crypto is going to mean the end of the middlemen companies. In this, I think its backers may have mistaken a problem of market power for a problem of technology. But even beyond that, I wonder about a world in which our utopian dreams went from a de-commercialized internet to a more fully commercialized one, where buying and selling and owning and trading is more natively integrated and thus that much more central to living online. In his newsletter,

• 7:27Ezra Klein?

  The Convivial Society, Michael Sakasas, the technology critic I had on the show a few months back, makes a point that, quote, "It was easier to limit commerce when geography and inconvenience did a good bit of the work for you. There is now no time during which it is not possible to engage in commercial activity." I think that's worth meditating on. I wonder about the metaverse my children will grow up in, where that will be even truer. I wonder if making it even easier to turn everything on the internet into a transaction will unlock a renaissance of creativity or an orgy of commercialization? And probably it's going to do both. But this is an area I've wanted to explore a bit on the podcast. And so I asked one of the people helping to build it, or at least finance

• 8:12Ezra Klein?

  its construction, onto the show to talk about all this. Katie Haun is a general partner at the venture firm A160, also known as Andreessen Horowitz. She has a really fascinating background. She's a former Supreme Court clerk and a federal prosecutor who focused on cybercrime and prosecuted corrupt agents involved in Silk Road, which was the first big darknet market. It's worth looking up her background on this. It's just a totally fascinating story. So she saw the dark side of crypto first, and now at A160, she's a leader of one of the biggest crypto venture funds on the planet. And in my own reporting, I found her to be particularly clear and thoughtful on what crypto could become. And so I wanted to talk to her about both the good and the bad of the world she and so many others are now trying to build. As always, my email, [email protected].

• 9:14Ezra Klein?

  Katie Haun, welcome to the show.

• 9:15Speaker 01

  Thanks for having me, Ezra.

• 9:17Ezra Klein?

  So here's a proposal. How much would we lose in the conversation if when we're talking about cryptocurrencies, we just say digital money? When we're talking about blockchains, we say a digital ownership ledger. And when we're talking about non-fungible tokens, which are going to be important in this conversation, we just say digitally owned goods.

• 9:35Speaker 01

  Yeah, I mean, I would say digitally scarce goods for that last part, for sure, because I think digital scarcity is an important differentiator between just digital goods. We have digital goods now without blockchains.

• 9:46Ezra Klein?

  But the reason I say it all like that is because something that actually helped me understand the space came from a conversation we had, which is just an argument you made that you are creating a digitally native ownership and transaction structure. And so there's going to be digitally native money in it. There's going to be digitally native goods. There's going to be digitally native ways of saying who owns what. You are creating an internet of ownership and transactions. And the question is, what is an internet of verifiable ownership transactions? And I guess identity, like, what does that change?

• 10:20Speaker 01

  Well, the biggest unlock, and I think stepping back, is that what we have seen up until now, and certainly we've had the internet and we have computing platforms already, but what we've seen is you need a central point of authority or a central platform, a gatekeeper, if you will. And we've seen that because, of course, like, if you're on the other side of the world and I don't know you and we promise to send each other money, how are we going to do that without an intermediary that we both trust, right? So historically, that would be some kind of form of financial institution or bank or other payment system. What now all of a sudden blockchains allow for is the removal of an intermediary or a kind of trusted party. And so that has really profound implications where you're talking also about digital ownership.

• 11:03Ezra Klein?

  Give me a couple more sentences on that because.

• 11:07Ezra Klein?

  I struggle with this idea that blockchains do allow for trustless operation. So could you give me the case for why that's true? What people mean when they're talking about smart contracts? And what are the technologies that people say do that? And then, then I want to poke at it a little bit.

• 11:25Speaker 01

  Sure, well, I'll give you one example is on a blockchain. Let's just take a financial use case. And again, I want to make sure that listeners here know that blockchains and crypto, I mean, much more than just financial use cases. But I think most people can understand the analogy that we're going to talk about here. Let's take email. You're on the other side of the world. I send an email using a protocol, using an internet protocol, right? And I send an email and you get it on the other side of the world. And we don't need to know each other. Let's say a photo, same thing. Now a JPG photo. I want to send you a photograph. I can do it instantly, cheaply, freely. I can send it to you, again, using these kind of internet protocols.

• 12:10Speaker 01

  Now let's take value. What the internet did for information, being able to send you that email or that photo, it can now do for value. So for example, let's take Bitcoin. I can send you, without knowing you, Bitcoin on the other side of the world, and you can verify that you got it. Now, a lot of critics will say, well, the block size and it takes long and it's expensive. You know, they'll criticize other things about it. However, the fact remains that I do not need an intermediary to transfer you, a stranger on the other side of the world, Bitcoin.

• 12:49Ezra Klein?

  And so to just draw this out one more piece, I think the first thing people say, wait, I do this already. I use Venmo.

• 12:54Speaker 01

  Yeah.

• 12:55Ezra Klein?

  I use PayPal. Wells Fargo has some function that I forgot in the name of. They're always trying to get me to try. And what you're saying is that because of this architecture, you don't need Venmo, you don't need PayPal, you don't need Wells Fargo.

• 13:09Speaker 01

  That's exactly right. That's exactly right, Ezra. So for example, and people do tell me this all the time, well, we already have Venmo. We have, you know, Apple Pay. And sure, I use Venmo and Apple Pay myself. So I definitely acknowledge that. However, here's the big difference. I need that centralized intermediary, that gatekeeper to accomplish that. And so what I'm really sending when I send you Venmo, by the way, Venmo is not supported all over the world. So it just will come back to that in a minute, because one thing about Bitcoin is I can send that Bitcoin to you, that value transfer, no matter where in the world you might be, without any centralized gatekeeper. And I think that's really powerful. And look, with Venmo or with Apple Pay or anything, it's really just a digital IOU. I think the thing people need to understand about, for example,

• 13:52Speaker 01

  the Bitcoin application here, is that it's the bits and bytes that are actually the bearer instruments. It's as if I showed up and handed you a suitcase full of cash.

• 14:05Ezra Klein?

  So we've been talking here a bit about the ways in which you're able to verify transactions. But you mentioned earlier, when we were talking about digitally owned goods, the ability to create scarcity. And that's pretty major here. You were saying a minute ago that what we can do with email and videos, you can send information all around the world, but we couldn't do it well with value. But the danger and a problem with the internet is that it's very hard to make that information scarce. The internet becomes a copying machine. Everything is getting copied all over. So talk a bit about scarcity here. How does that come in?

• 14:39Speaker 01

  Well, Bitcoin, of course, solved when you get out scarcity solved what is known as the double spend problem, right? And when you talk about what you just did with digital goods, everything before digital scarcity, everything digital was meant to be copied. Like you said, the internet was like one giant copying machine. I could send you a photo and you could send it around 1,000 more times. There was nothing scarce about that. Same thing with an email. You could forward it right along. It's the same analogy I just talked about with respect to Bitcoin and why it's different from, for example, using Apple Pay or using Venmo or using PayPal. And the difference is that intermediary. So for example, we have digital goods now, right? Long before you ever heard of NFTs, which are non-fungible tokens, or digitally scarce

• 15:24Speaker 01

  goods, as I like to call them, to avoid the NFT jargon. Long before that, you had digital ownership.

• 15:31Ezra Klein?

  I used to buy MP3s on the internet.

• 15:33Speaker 01

  Right.

• 15:33Ezra Klein?

  Like, that was a big deal for a minute, right?

• 15:35Speaker 01

  Right.

• 15:35Ezra Klein?

  iTunes came along and I could buy these digital songs.

• 15:38Speaker 01

  You could buy these digital songs, but there's a really important caveat. You don't actually own that digital song. And we've seen this. We've seen this. We call it platform risk. Let's say Apple Music changes their platform. You can't play it on another platform. Now, if you really owned the digital good, this, you know, new example that you just provided being music, if you owned it, you could take it and use it on any platform. And let me give you an example. Like, let's say you owned, back in the old days, before quote unquote "digital ownership", let's say you owned a record or a cassette tape. And you owned that? You could take it and do whatever you wanted. You didn't need to have a particular brand of boombox to use to play that cassette tape. You actually owned that cassette tape. And when you were done with that cassette tape or that record, you could take it.

• 16:23Speaker 01

  Didn't they used to have stores where you could take them and sell them?

• 16:26Ezra Klein?

  Sure.

• 16:26Speaker 01

  Right? Or you could give it to your colleague here, who's helping us record this session. You could give it to him. You could lend them out to friends. You could do things with physical goods. Now all of a sudden, people think, "Oh, I own this music digitally", but they don't own it because they're very locked into the rules of a particular platform. And they can, first of all, lose access. The platform could go under. They could create new rules. So, actually, you don't, Ezra, own it. Music, I think, is one of the areas that we will see a lot of digitally scarce ownership in. So, it's good you picked that example. But it's not just for the consumer, you. It's also for the content creator. And this is particularly true with music. Who makes most of the revenue? When you buy a song? Platforms, right?

• 17:10Ezra Klein?

  Yeah, Spotify's doing pretty well.

• 17:12Speaker 01

  Right, and record labels. Who actually does not capture value?

• 17:18Ezra Klein?

  Yeah, what's the pay for a stream on Spotify? It's something like 0.4% of a penny?

• 17:23Speaker 01

  It's also not very transparent for the artist, right? So, there are a lot of things that could be improved upon vis-à-vis the content creator. In this case, a musician. Particularly famous musicians already, they might have more power. For example, to command more money or greater transparency. But think about artists who are just getting discovered. And even musicians, I was actually, I won't say who, but I was talking yesterday to a famous musician about NFTs. And it's a household name. It's a, one of the hugest, greatest musicians that you've heard of.

• 17:53Ezra Klein?

  Oh, no?

• 17:54Speaker 01

  I'm not, I'm not going to out the, the identity here. But I will tell you that that musician who's definitely made it, again, household name for a long time, who's very fascinated by what NFTs offer and why? Because this individual said for decades, most of their revenue, of course, did not go to them. It went to the labels and it's not going to Spotify. But it's not only that, that this musician is interested in. He's interested in what can my fans, maybe the fans who were the earliest fans? What is this kind of new digitally scarce good? If we can translate it for a moment to music here. What will it allow fans?

• 18:36Speaker 01

  What if they could own a piece of my future royalties? What if they, those who were my earliest adopters, got to own a piece of my song? Now all of a sudden, you're cutting out the middleman. And this is what I want to come back to over and over again. And you'll hear me come back to over and over again, when I talk about crypto and blockchains. And no matter the use cases, financial use cases, whether the applications are gaming, whether they're media, whether we can talk about decentralized finance, you know? And the list goes on and on. We haven't even gotten to decentralized autonomous organizations yet and kind of company structures. What they all have in common is they all remove the centralized middleman, single points of failure.

• 19:20Ezra Klein?

  So this is probably a good point for me to start getting into my skepticism of this vision. So compared to some of my friends, I'm more convinced that having an internet where you can verify ownership and transact and have scarce goods is a really big deal. I believe there's something big that's going to be built here. The vision that you often hear, and I'll frame it this way, often hear that it's going to be web 3.0. Web 1.0 was this anarchic early internet. There were webpages, you built them in HTML, you hand coded them, you were sending emails, we had little blogs. And then web 2.0 emerges, all these big middlemen who basically take over the internet, your Googles, your Facebooks, your Spotify's, your Netflix's, et cetera, et cetera.

• 20:01Ezra Klein?

  And that web 3.0 built on this more decentralized, trustless, middleman-less platforms will not need all that. And Sometimes I hear this and it sounds to me like people have mistaken a power problem for a technological problem. So let's stay on music for a minute. Years ago, Radiohead released in rainbows digitally first and you could pay them, as I remember it, whatever you wanted and you could download in rainbows. And they made a bunch of money and different people did this at different times. There were comedians who did this. They directly streamed their shows. But the thing was first iTunes and then later Spotify and Apple Music and the set of players there. They rolled up the market by being the aggregators. They had everything,

• 20:46Ezra Klein?

  but they didn't have literally everything at the beginning. They just had enough. Same was true with Netflix early on, way less than it has now, but it had enough.

• 20:53Speaker 01

  Had a critical mass.

• 20:53Ezra Klein?

  Had a critical mass. As the audience was there, you all have invested in many of these companies. A160 has made or people around it have made money from this stuff. And that gave them extraordinary power over the artists. An artist could get me to buy their music directly, but they need me, they need to get to me on Spotify. Because if they're not there, they might just lose the audience. So I don't understand what about the crypto technology here changes the desire of the audience to be somewhere everything is, somewhere that things are easy. They get aggregated, not just for trust, but for ease of use, simplicity. And then that platform develops escalating power over every other player in the marketplace. Whether or not their technology is really better, whether or not you could replicate what they do peer to peer.

• 21:36Ezra Klein?

  We've just seen it again and again. So what, what does crypto do to solve the Spotify problem? Let's call it.

• 21:42Speaker 01

  Well, I think, you know, it's important not to judge the current state of innovation in crypto with the end state of innovation. And people such as yourself will often tell me, well, wait a second. It doesn't do that yet. And look, I'll be the first to acknowledge that the applications we're talking about, still very early days with Web three. And I think, by the way, we should go back and unpack what is Web two? Because I think that many people don't even know what we're talking about when we talk about Web two and Web three.

• 22:06Ezra Klein?

  So I think. I'm terrified. Nobody knows what we're talking about at all at this point. I'm not even sure. I know what I'm talking about.

• 22:12Speaker 01

  But I think like it's important not to judge the current state of innovation by the end state of innovation. And so right now, what you have with decentralized technologies is some janky consumer experiences. And we've seen time and time again that people say they prefer less power aggregated. People say they value their privacy. But when push comes to shove, people go to where it costs less and where it's convenient. And I think convenience is paramount. And why I say it's important not to judge the current state of innovation with the end state of innovation is we're so early, we don't have the convenience yet. The UX or like the kind of layer that the consumers use in crypto is not yet fully ready for prime time in some cases. In some cases it is, by the way. But I think that's a really important point. So what

• 22:56Speaker 01

  you see right now is you see this kind of struggle between centralized platforms and decentralized platforms. And people will tell me, well, the centralized platforms are winning. You know, they have all of the customers, they have all of the power. And that might be true right now. But I think the other thing that's really important not to lose sight of Ezra is you have these socioeconomic tailwinds right now and a real ethos among younger generations that they don't like centralized power. They don't like the notion that a handful of tech giants have all of the power and have all of the say over decisions like platforming, deplatforming. Right now, have decentralized platforms won over centralized platforms? Of course not. This technology, I mean, a year ago, sitting here, we wouldn't have even been

• 23:41Speaker 01

  having a conversation about non-fungible tokens or digital scarcity.

• 23:45Ezra Klein?

  But this is actually what I'm getting at with it, which is that my suspicion, my concern, or I guess maybe even my prediction, is that as that layer gets built, that will be the new generation of middlemen, because they will build the layer that allows people, to an extent, to benefit off of this new, better internet of ownership and transactions and whatever. You all are big investors in OpenSea.

• 24:08Speaker 01

  Yeah.

• 24:09Ezra Klein?

  Which is, maybe you can explain it, but it's to do a quick and dirty version, it is a big market for digitally owned goods. It is a big market for non-fungible tokens. And I don't know what their structure is now. And how they and how they make their money, but something like OpenSea that becomes the eBay or the Zillow for for how you go and buy non-fungible tokens would have a lot of power in that marketplace if they were the main player in it. What I found the first rounds of the internet was that I was told the technologies were decentralizers.

• 24:41Speaker 01

  Yeah.

• 24:41Ezra Klein?

  And they were to an extent.

• 24:42Speaker 01

  Right.

• 24:43Ezra Klein?

  But in part because it was complicated to be decentralized, all these other players came up and they rolled up their markets by being simpler, not by doing something that couldn't be done, but just by being simpler, by getting the critical mass. And then instead of hand coding your blog, you're on Blogger and then later you're on iPad and WordPress is now running everything on the internet.

• 25:01Speaker 01

  Right.

• 25:02Ezra Klein?

  And so on and on.

• 25:02Speaker 01

  So it's just new giants. I think what your point is is new giants will emerge.

• 25:06Ezra Klein?

  New giants will emerge. I don't. And so I want to hear what in the technology stops that from happening? Why should I believe this will remain decentralized?

• 25:12Speaker 01

  Well, a number of things. So let me, let me, first of all, you've packed a lot of questions all into one. First, you asked about OpenSea and the model. And first of all, let's be clear, not everything in crypto is decentralized in terms of businesses. Sorry, in terms of business models, not everything in crypto is a decentralized business model. Okay, so we're investors in, for example, Coinbase. You know, I'm on the board of Coinbase. Coinbase is a centralized platform. People use it to acquire tokens sometimes that might be very decentralized, right? But it is Coinbase itself is a great example of a centralized platform, a centralized exchange. But getting back to OpenSea, the question you touched on earlier, like Coinbase, OpenSea is a centralized business. It is not a business where they have tokens or the community owns OpenSea.

• 25:57Speaker 01

  They have a board, they have investors, they have employees. It is a centralized business like many other businesses. The difference, though, between some of the tech giants that you're talking about and OpenSea is, I think, very important. Number one, you asked, how does OpenSea make money? It makes money by taking a modest take rate on every sale, whether primary or secondary. But here's the really powerful difference between an OpenSea and some of the tech giants you're talking about. Who takes the vast majority of the money that is being generated? The content creators. So for example, and I think this is underappreciated with NFTs, we're talking about digitally scarce goods. Let's take art as an example. Let's take digital art. Most people think of NFTs as just digital artwork.

• 26:41Speaker 01

  It's actually much more than that, but let's just take art as an example. Let's say you buy a piece of digitally scarce art on OpenSea. The creator of that art could have coded that NFT, that token, so that they have a future royalty stream in all future sales. If you stop and think about it, Ezra, that's a really powerful thing. It's a really important new economic paradigm. Because now, all of a sudden, the take rate, who's benefiting from that? The content creator. And then also, in the case of future resales, in the case that the art appreciates, the digitally scarce art appreciates, the original owner, the original purchasers.

• 27:22Speaker 01

  So actually, it is true that OpenSea as a centralized business does make a profit. But I would argue that their profits are far less than, for example, what is YouTube's take rate? Double-digit percents. Very huge rent-seeking platform there, right?

• 27:38Ezra Klein?

  I'm not going to speak up for YouTube here. But it seems to me, the analogy to an OpenSea is in eBay. And eBay doesn't take 50% of a sale. I don't remember what they take now. It's been a while since I ran an auction. But, I mean, that just strikes me, if we're saying that in the thing that is like eBay, like this is where you go to auction off goods. They have a business model like eBay. And they're getting a ton of investment and are becoming like a super important marketplace. That, to me, is the kind of thing that makes me suspicious that, I'm not saying this won't bring all kinds of cool new things. I mean, I want to talk about what you were just saying, where you can program in future revenue streams. Like, all kinds of cool things could emerge on this crypto layer. But there's a difference between them being decentralized cool things and more centralized.

• 28:21Ezra Klein?

  And it kind of sounds like OpenSea is just going to be the eBay of the new, I mean, if it succeeds, is the eBay of the NFT market.

• 28:27Speaker 01

  So I think, two things. I think it's possible that centralized business models and decentralized business models can coexist. We were talking about crypto. Obviously, the ethos of crypto is decentralization, but there will still emerge, you know, there are a class of consumers, and we think it's a very big class of consumers out there, who might want to use a marketplace like OpenSea. You know, what do you get in exchange for that take rate that they take, right? They are performing services. They're making it easier for consumers, for example, to browse and discover. They enter into partnerships, site reliability. Now, that's not to say that there will not emerge decentralized marketplaces also for NFTs.

• 29:07Speaker 01

  And I believe that there will be a world where we have more centralized platforms like OpenSea to discover and purchase NFTs, and also decentralized platforms for it.

• 29:17Ezra Klein?

  Let's talk a bit about just NFTs themselves and what they create because whether it ends up centralized or decentralized, something cool is you're able to sell a new kind of thing. So what makes NFTs different? What can an artist do now in terms of creating and profiting from digital art that they couldn't have done 10 years ago?

• 29:36Speaker 01

  If you look to kind of what blockchain technologies can do, they bring down barriers because they let content creators interact with their fans and early adopters from day one. And that's really powerful. Take a case of an undiscovered musician. Like, let's not take a famous musician. Let's take an undiscovered musician who's just getting started. Some early fans think, wow, this is really cool. I'm going to buy a piece of their first song, right? I'm going to own a piece of their first song as like an NFT. Or maybe they're going to hold a share of future royalty streams. I think that's just something that's really interesting. But getting back to what new behaviors are possible with NFTs. One of the things that we've seen is this concept of a group of individuals getting together.

• 30:20Speaker 01

  So it's kind of a social aspect, too, and purchasing an NFT together. Other new behaviors that can emerge. It's almost like we saw this with the Bored Ape Yacht Club, which, you know, Steph Curry famously kind of bought a Bored Ape and now is an actual membership in an online community or club. And I think there's a social aspect to that, too. So in addition, you know, you can think of things around ticketing, maybe people who were at a certain event got tickets that were NFTs that are essentially like a collector's item of an "I was there." We've seen already with NFTs, things like NBA Top Shots taking off this year. That captures a moment of, you know, a sports game. But you can imagine this extending to all kinds of other things. For example, movies being made.

• 31:05Ezra Klein?

  When you buy a Top Shot, right, a, which is functionally, you're buying kind of a video of like LeBron James making a dunk, or you buy a picture on the internet, what are you buying? Like, what do I own at the end of that?

• 31:18Speaker 01

  You own, I mean, and people will often ask this because they'll say, well, I can take a copy of that. I can take a picture of that or copy that. Well, that's true. But you could also go take a copy or make a copy or a photo of the Mona Lisa in the Louvre. Doesn't mean you own it. So fundamentally, it's about you know that you actually own one unique digitally scarce item, in this case, the moment from the game, in the case of Top Shots, which you just, which you just referenced.

• 31:45Ezra Klein?

  But literally, what do you own? Because one of the concerns I've heard is, and Neil Dash, who co-created one of the first NFTs, he says that when someone buys an NFT, they're not buying the actual digital artwork, they're buying a link to it. And he goes on to make this argument, and some others have too, that you're often linking to an artwork that sits on the server of a startup that could disappear. The blockchain itself can't hold the thing you own, right? The blockchain is not built to hold the video. So is what you own like a deed? What, again, what do you own?

• 32:17Speaker 01

  Right. Well, I think this is a really interesting case, because you just said it can't support this idea of there's not a blockchain that can support permanent ownership.

• 32:26Ezra Klein?

  Well, a lot of them currently don't, right?

• 32:27Speaker 01

  Yeah. Well, I would, yes, but then there are some that do. So I think this is really important to understand. For example, and we're investors in one of these protocols, so I'll go ahead and disclose that here, but Arweave, which started out as a blockchain for permanence, which has really now, and for permanent information. You know, it was interesting, Senator Pat Toomey actually talked a lot about Arweave at a recent hearing where he said that they had preserved important information that, for example, certain nation-states had tried to remove, but it's still present on the Arweave blockchain. So this idea of blockchains that have special purposes, like permanence, in the case of Arweave, I think is out there. And in fact, Arweave actually has really leaned in, because what do people want when they purchase an NFT? They do want permanence.

• 33:10Speaker 01

  And Arweave is one such blockchain that offers this. And there are others, by the way. So you do own a representation of something that sits on the blockchain. And I get this question a lot. It's like, well, if I bought digital art, what can I do with it? What can I do with it? And I think that's a great question. I mean, yes, can you display it and know that you actually are the owner? Yes, there are companies where you can go display it, much like you could display other types of digital art. I guess the difference here is you know that you own this.

• 33:38Ezra Klein?

  So mine is saying this, and you should correct me because this is a part of this that I find technically a little bit opaque. But that there's been a fight I have tried to follow over these folks who are saying, "Look, you're basically getting a certificate and a link hosted by a group who may or may not be stable in the future." And that people are not able to evaluate like the underlying technological and business proficiency of where they're buying these things from. And so I think what I'm asking is, do you actually own the code? Like, do you hold the thing and you can then do whatever you want with it? And like, what do you hold it in? How do people take these things and utilize their ownership of them?

• 34:18Speaker 01

  Yeah, so Ezra, like you could, just like you have, for example, but let's say if you have Bitcoin and you might hold it in a centralized exchange, for example, right? But you can also export it to a hardware wallet if you want. If you want to forego kind of convenience, for example, and you want to own that yourself, then you can export that to a hardware wallet. And my understanding with NFTs is you own a token and you can do with that token whatever you could do with something in the physical world. You own it, you can export it, you could give it away to someone, you could sell it to someone, you could lend it to someone. And one other interesting thing is we're seeing that you can start to pledge as collateral these things for for various types of other instruments or assets.

• 34:59Ezra Klein?

  So that gets nicely back to the example you gave with the musicians because we've been talking about goods, but a big part of what is getting a lot of investment and what is exciting in the space are contracts. This makes it very easy to set up a contract, which is self-executing that people can trust. And as such, it allows all these players who would not have been able to like basically make themselves into derivatives before, to make themselves into derivatives without needing to trust that like they are a powerful financial instrument.

• 35:32Speaker 01

  Yeah, and I think what you're talking about when you're talking about derivatives are actually decentralized finance or DeFi, which to me is a very different thing than talking about NFTs.

• 35:43Ezra Klein?

  But wouldn't turning a song into something that you get a piece of, isn't that turning a song into a financial instrument?

• 35:48Speaker 01

  No, we don't think so. We think it's a kind of artistic representation. We're talking about like media or content. When we talk about like media or content in this way, digitally scarce, we're talking about this in more of the NFT world, not in terms of a financial instrument.

• 36:03Ezra Klein?

  But I think, and this is actually very interesting to me. So the band that came to mind when you were saying this, Dispatch, who I loved in college and still have a real soft spot for, they were a big early Napster hit. Their song, The General, got big on Napster. But of course, you can't profit off of Napster. So if people began showing up at their shows and they made money. So then I was thinking, as you were giving this example about Dispatch, so what could people have done? They could buy a Dispatch concert ticket, or they could like buy merch maybe online, which is a little harder then, but you could do it now. But what you're saying is Dispatch could allow, at a moment of like intense fan interest, you can somehow buy 5% of the proceeds from The General, or 1% or 4% or whatever it is. But that is a financial instrument.

• 36:46Speaker 01

  Well, actually, it's not. Maybe what I, what I should have said is actually not the financial proceeds, but you can buy a piece of the song. And of course, you might buy a piece of the song for different reasons. Different fans might buy it for different reasons. Someone who's financially motivated might think, wow, this band is going to be really big someday. And if I own a piece of this song, maybe I can sell it at a higher cost someday. That's very different than the fans such as yourself who loves the, what is it, Dispatch? You might have just bought a piece of the song because you love the band and you want to show patronage. And you know, my partner, Chris Dixon, has a great blog post on this, which I would recommend anyone who wants to dive deeper into this area, and it's very accessible. It's called 1,000 True Fans. And it's this notion that

• 37:27Speaker 01

  certain fans will just show up, they'll drive as far as possible to go see their favorite band. These are the true fans. And people that are purchasing, for example, a part of an artist's song, Their motivation might be very different from someone who comes along and purchases part of an artist's song because they think that that song will one day be a big hit.

• 37:47Ezra Klein?

  But I want to push on this for a second because my understanding this actually from you was that you can instrumentalize more in this internet of transactions than you could before. I mean, you gave the example of an artist creating an NFT that built into the structure of the NFT gives them a cut of all secondary sales. So if they sell the NFT for 600 bucks, but they blow up later and then that person sells it for 600,000.

• 38:11Speaker 01

  Wait, who they blow up later?

• 38:12Ezra Klein?

  The artist, right? So if I'm an artist, which I'm not, but let's say I get into poetry and I create an NFT out of my third poem and somebody buys it for $7 because it's terrible, but I become really, really famous and then it can be sold for 700,000. Something that you've kind of explained to me is that I could have programmed into that, that I got 10% of the secondary sale.

• 38:33Speaker 01

  Yeah. And by the way, that's the artist's choice who's creating it, right? So not all artists or content creators are programming these smart contracts to receive future participation and income streams, but many are. So it's possible is the point.

• 38:49Ezra Klein?

  Which just seems cool.

• 38:50Speaker 01

  Yeah, no, it's great. It's really about, and this is one of the parts of crypto that we think is really about economic participation. And, you know, when people think of music or art, they think of really famous artists or really famous musicians. But of course, this is possible also with folks who are content creators and who aren't discovered. You know, I have a couple NFTs and one I bought and actually at the time I bought it, I didn't know who the artist was, but we later corresponded after I bought it. And it turns out he's a young artist living in Spain. And now with NFTs, you know, whether or not he's ever going to become world famous is, you know, anyone's guess, but the point for him is he now can make enough income that he can do this full time. And so if we think about kind of The gig economy now. Think about where we are. We're here in San Francisco.

• 39:35Speaker 01

  You know, remember back a few years ago, we talked about the gig economy with Lyft or Uber drivers. Now we see DoorDash, Instacart. This is a new form of economic activity, but that lets people kind of pursue their true passions, I would argue, and make a financial living while doing it. I think that's really powerful. And definitely, it's still very early days, so you might have questions about. And there are still a lot of open questions about, you said, what if I blow up? I didn't mean you meant literally, but what happens? These are important legal questions. What happens if an artist has programmed into a smart contract, future economic interests? Let's say that NFT becomes, and that piece of digitally scarce art becomes really valuable, and then the

• 40:18Speaker 01

  artist dies. These are really yet to be known. What are the rules? Who gets that? Now, I would argue, putting on my old legal hat, it's probably the same as it is in the physical world. If you had someone who died, look to their will. If they died intestate, certain states have different rules for that. But I would argue it would likely be the same as goods in the physical world.

• 40:59Ezra Klein?

  We're talking about NFTs and the way people, to the extent they think about them, currently think about them. Their trading cards, their videos, their digital art. What could they be?

• 41:11Speaker 01

  Well, one thing I think is really interesting. And this is even though I'm not a gamer, but I think this is just such an interesting application, is decentralized land and people building on top of decentralized land. You know, Ezra, one of the crazy things that I learned recently, being in the space, is we have now a new profession, and it's a virtual real estate agent. This exists. And there are virtual real estate agents now who are actually doing this as a full-time job. And I think we can, we can laugh and we can say, oh, but you know, if you think about the metaverse.

• 41:46Speaker 01

  I think this is a generational moment. And the fact of the matter is that there are generations that are perfectly comfortable spending money and spending time in the digital world and actually even more so than in the physical world. And this is hard for, this was hard for me to kind of get at the outset of getting into this space is why would anyone spend more money? I'll give you another example, actually. And this is an example, I think, that kind of proves the point of the power of NFTs. Roblox, you know, the gaming platform. Roblox has purses, like ladies' handbags, ladies' or men's handbags, right now that will sell for more money than the actual physical good in the real world. And they're branded, by the way.

• 42:29Ezra Klein?

  So like Gucci has a Roblox purse kind of thing?

• 42:31Speaker 01

  Actually, did you know that? Because it's actually is Gucci.

• 42:34Ezra Klein?

  I did, yeah, we talked about this once.

• 42:35Speaker 01

  That's right, okay, yeah, yeah. Yeah, but there are other brands, right? It doesn't need to be Gucci. But it's interesting to me because you can only use that bag, that digital Gucci bag, because it's not digitally scarce, it's on Roblox, it's on a closed platform, it's not an NFT. You can only use that on Roblox. And full disclosure, Andreessen Horowitz is an investor in Roblox, not the crypto fund, but the venture fund is an investor in Roblox. And yet, you know, you can't use that digital purse anywhere else. Now, I think that NFTs are really powerful. If people will buy a digital purse for more than the physical purse, what will they do when they can use it across platforms and no longer just on Roblox, but on any gaming platform?

• 43:18Speaker 01

  When they can export it and lend it and do other things with it or sell it? I think that's really interesting. I mean, one of my partners recently made this analogy, and I think it's good, bear with me and see if you follow. It would be as if you went to a hotel in the real world and every time you went to a different brand of hotel, you had to bring a different suitcase full of different clothes because the, you know, Minariat chain only let you wear the clothes, the Minariat clothes, and the Hilton chain only let you wear the Hilton clothes. And, you know, you get the idea.

• 43:48Ezra Klein?

  Yeah, and I want to say for the audience, if all this sounds weird, it is weird. And I think it is worth always just entertaining the possibility that the future will be weird. So like what I'm trying to- Bridge here is the idea that like we are creating the beginnings of digital economies and digital goods at the same time, we are creating the digital worlds.

• 44:08Speaker 01

  Okay.

• 44:09Ezra Klein?

  One of the places where again, I wonder about the decentralizing is all these people like, oh, the metaverse as well be interoperable.

• 44:14Speaker 01

  Yeah.

• 44:14Ezra Klein?

  And I'm like, will they?

• 44:16Speaker 01

  Well, that's actually a key.

• 44:17Ezra Klein?

  Apple let you bring anything into its metaverse?

• 44:19Speaker 01

  Well, that's a key differentiator, I think, with crypto is this interoperability and this notion of interoperability.

• 44:26Ezra Klein?

  But you could create crypto that isn't.

• 44:28Speaker 01

  I mean, you could, I think one thing though, is that people who are in the crypto space, like what we always hear about is interoperability because there are multiple blockchains and you're talking about building bridges between chains. So I think interoperability is something that's really important.

• 44:43Ezra Klein?

  Without getting super deep into metaverses, one of the, the things here that seems, I think we're starting to talk about digital worlds and a lot of these goods don't make sense until you start thinking about people living in increasingly digital worlds, which kids who are gamers already do. I think we can expect those digital worlds to become bigger and more common. Facebook is now talking all the time about metaverses and digital conference room worlds, which sounds like hell to me, but other people have their own views on this. And that it's when that begins to emerge, that this ability to have digital goods that are digitally transacted and digitally owned becomes really important. Like, am I understanding the vision right? Like, we're creating the foundations for like the VR future?

• 45:24Speaker 01

  You are, although I would push back a little on that. We need digital worlds in order for NFTs to succeed. Undoubtedly, the world that you just outlined, when it exists, and I do believe it will exist, just seeing what the future generations are doing already. And by the way, we see companies like Coca-Cola doing NFTs also in this fashion. So I think like, I think that this will happen, but I don't think the metaverse needs to be here in order for NFTs to already be important. And let me tell you why. I mean, I don't spend time in the metaverse. I still do spend a lot of time online. And actually, let me share a personal anecdote with you that maybe some can relate to. I thought to myself last year, well, even though NFTs arrived on the kind of.

• 46:09Speaker 01

  Mainstream call it this year, you know, we've been looking at the NFT space since 2018 because we were early investors in Dapper Labs, which was the team behind before Top Shots, before NBA Top Shots, CryptoKitties. Of course, CryptoKitties were one of the early kind of well-known NFTs.

• 46:25Ezra Klein?

  And they, these were NFTs of kitties. Yeah.

• 46:28Speaker 01

  You could breed them, you could do different things. And, and you know, look, again, like most things, and like my partner Chris Dixon always says, a lot of things on the internet started out as jokes or memes and turned into huge businesses. But that's when we started paying attention to NFTs. The problem back in 2018 was there wasn't scalable or performant blockchains yet, right? Remember, CryptoKitties famously broke Ethereum because it was, it was clogging the Ethereum network. Now, fast forward a few years, and there have been significant improvements in scalability and performance. And I would argue many more, much more to come there. Just, you know, we're already seeing that now. But even in a couple of years, dramatic improvements across various

• 47:08Speaker 01

  blockchains have been made already for scalability and performance. So I thought, you know, about a year ago, well, I understand that people will buy NFTs and I believe in that, but I won't buy them because like, why will I really care about buying a virtual piece of art? I would have much preferred to spend money on a new outfit in the real world, Ezra. And yet, I found myself earlier this year, and actually, I think this is important for a number of reasons because it talks about this new economy and the artist behind it. I thought, you know, gosh, we're spending a lot of time on Zoom. I want a new virtual background because all of my meetings are now on Zoom, it feels like. Some are getting back to in-person, but even those that could otherwise get back to in-person are staying

• 47:53Speaker 01

  online. A lot of board meetings, we're staying online, we're staying remote. And I want something that expresses my personality as a backdrop. I don't want people to see, you know, that I'm working out of my home, for example. And yet I don't want just a copy of something. I want to get some unique piece of digital art. I'm going to go buy a piece of digital art, an NFT, and I did. And I'll come to that in a moment, but for the first time recently, I found myself thinking about, normally I would think, what, what will I wear? And instead, I recently thought I have to just wear something simple, a black T-shirt, to showcase my digital background. True story, and that's me. And I'm not spending time in the metaverse.

• 48:34Speaker 01

  And the interesting story about that artist, um, her name is, she goes by Ajin. She's a female artist who does program her smart contracts and can trace them on chain and will know when I, if I ever sold mine and I have no plans to sell mine, or if I lent it out to a friend. And I think that's something that's really important. And it gets lost when we just talk about, oh, you know, crypto, it's, you know, there are so many headlines out there. It's just for, you know, guys and Lamborghinis. Like it's so much more than that. And the space has, it already was more than that then, but the space has changed so much. And I think it's a new economic model for people to earn a living, doing what they like.

• 49:16Speaker 01

  And so do I think that that will even grow with the advent of the metaverse? I do, but I think that already we spend more time online. Already there are generations, and now I'm part of it, who will spend actual money on digital goods. And I think those trends will continue. And certainly when the metaverse is fully here and people are living more in the metaverse, I think unquestionably it will grow then.

• 49:39Ezra Klein?

  Let me combine two things that just came up that I, I think are interesting. I was giving my skepticism earlier that we will see a lot of these corporate middlemen and players knocked down, but, but maybe they will be. And then you also have something that you just mentioned, which is these contracts that can survive and survive and survive, these rules, right? This is what makes it trustless.

• 49:59Speaker 01

  Yep.

• 50:00Ezra Klein?

  That sounds good on some level, right? Facebook, I'm in media. Facebook has changed the terms of the deal on me many, many times. I ran Vox for a long time and every six months it was like a whole new game. But one thing that I wonder if we're gonna miss is actually somebody who is in charge and can make decisions. And I'll connect this to something you just said about scalability and performance. Bitcoin is an energy disaster. It's just the way the mining works is an energy disaster. Now, if Bitcoin were a company, right? If Bitcoin were a startup and it was eight people and you go to their board meeting, they would probably say, oh, we gotta, we gotta work on this energy problem. We gotta change how the mining works or something. But there's nobody to do that now. It's very, very hard to change. You need all the miners and those reasons they don't want to do it.

• 50:43Ezra Klein?

  And so, nobody's gonna change it and it's just this rolling electricity disaster. And it makes me wonder if there are actually a bunch of downsides to these contracts being so hard to alter. You mentioned earlier that an artist could die and then, you know, where do the proceeds go?

• 50:57Speaker 01

  Right.

• 50:58Ezra Klein?

  That, I don't know, there are problems with companies that can change everything, but it's also sometimes good to have somebody to call.

• 51:04Speaker 01

  Right.

• 51:05Ezra Klein?

  How do you think about that?

• 51:05Speaker 01

  Right, sometimes a middleman can be important, I think, is what you're saying.

• 51:08Ezra Klein?

  Or there's a decision-making apparatus.

• 51:09Speaker 01

  Sure, sure. I first want to address a couple of things you just said about environmental disaster, because I hear this a lot. I hear this a lot from policymakers. I hear this a lot from people in the community. I think it's a really important point, so I do want to touch on that.

• 51:22Ezra Klein?

  Yeah.

• 51:22Speaker 01

  One thing that's not appreciated is, first of all, I often hear, hey, crypto's bad for the environment. Period. Without any further nuance. Did you know, Ezra, there are blockchains out there that are actually carbon negative? And there are hundreds, if actually not more than hundreds, of course, there are, of blockchains out there. And the majority of modern blockchains are actually, have adopted what's called a proof-of-stake consensus mechanism, not a proof-of-work. So the problem you're talking about, electricity usage, is really just a problem with one type of consensus mechanism that relies on computing power, and that's proof-of-work. There are these other systems that more modern blockchains now use.

• 52:05Speaker 01

  Proof-of-stake, proof of space and time, proof of authority. The list goes on and on. There are different consensus mechanisms that aren't nearly as energy-intensive.

• 52:14Speaker 01

  Now, let's get to the proof of work consensus mechanism with Bitcoin. And you said, well, because there's no company and no board, you know, they won't do anything about it. And I want to push back on that a little because right now 76% of Bitcoin miners are incorporating renewables into their mix. And that comes from a study by Cambridge University that was put out. You can go look that up. And by the way, that's probably not enough. But I have a lot of confidence in the Bitcoin community that actually this is a problem they're well aware of and would like to solve. You might ask like, why would they like to solve it? And I can't speak for the Bitcoin community. It's large and it's composed of thousands, tens of thousands of individuals all over the world.

• 52:55Speaker 01

  But one thing I can tell you is that, you know, we start seeing institutions adopting Bitcoin. When we see institutions adopt Bitcoin, what happens? Demand goes up, price goes up. And one of the things that institutions are very focused on, and I know this because I talk to a lot of these institutions, is exactly what you just said. It's about energy consumption when it comes to proof of work systems.

• 53:19Ezra Klein?

  I want to push on this because one, that study doesn't sound like it gives me a lot of information. I would want to know the percentage of energy going into Bitcoin that is renewable, not the percentage of people who are trying to add a bit of renewables into the mix. Like you can put up a solar panel and potentially that qualifies for you. But what I'm saying, even if that's true, right? There are a lot of players coming into the Bitcoin market who worry about this. And I believe that to be true. I don't think people, people don't buy Bitcoin because they hate the environment. They buy Bitcoin because they want to buy Bitcoin. It just, it seems to me that a problem that you can see conceptually there is that if Bitcoin were made by somebody who had control over it, they would have tried to port it, change it, transfer it over to these more modern

• 54:03Ezra Klein?

  proof of stake schemas that you're talking about. Because yes, it was not my point that you cannot have green crypto.

• 54:08Speaker 01

  Right.

• 54:08Ezra Klein?

  You certainly can.

• 54:09Speaker 01

  I just wanted to make sure your listeners knew that because we do hear that a lot.

• 54:11Ezra Klein?

  Bitcoin is not. And I think in any other ownership structure, they would have been pushed into doing this. I mean, as you say, people would like to do something, but they can't. It's very hard to do. And I mean, you're on startups. Like startups make huge mistakes all the time. Technology startup with a lot of mistakes. Making rules that are very hard to change or unchangeable can create rolling disasters because Bitcoin is now incredibly lucrative, right? I mean, billions and billions and billions. I mean, it's over a trillion in market cap, I believe. So that's kind of my question. What do you do about some of the rigidities of these contract mechanisms?

• 54:46Speaker 01

  Well, I think it's actually such a fascinating point you're making. And of course, like, I'm not trying to say that energy consumption with Bitcoin is not an issue. I fully acknowledge that. All I'm saying is because you don't have a centralized group of actors, I don't think that that means that, you know, the community can't do things to solve it. One thing to note, though, is Ethereum, which is, you know, a major blockchain, is supposed to be migrating to proof of stake next year. And, you know, Ethereum is a great example of a decentralized technology. I mean, we know that the US government has said it's decentralized, and it's a decentralized technology that is migrating to proof of stake. And so I think it's a really interesting policy question. I think your presumption is just because there's a central group, things will change,

• 55:30Speaker 01

  and they'll change for the better. You know, I think a lot of companies do a lot of things that might be good or might be not good, under pressure.

• 55:37Ezra Klein?

  Well, I think that's true. I mean, the Ethereum example is interesting. I'm much more positive on Ethereum than I am on Bitcoin. But I think a real difference there is Ethereum has its founder, Vitalik, or it's one of its co-founders, Vitalik Buterin, who, if you're going to have somebody running a major cryptocurrency, he seems like the guy you want to do it. I have a lot of, I have a lot of respect for the way Buterin's thought through a bunch of these things. But that's why the Bitcoin one is interesting to me of things that you have incentives to remain in, but are very hard to change. I don't want to harp on this forever, because I think that makes a point.

• 56:11Speaker 01

  But I think they're different models.

• 56:12Ezra Klein?

  But yeah, that's the question of what do you do if some of these become big? Nobody has the ability to control or transform them, and they just begin to have their own rolling incentives, even though the underlying system structure has changed.

• 56:25Speaker 01

  Well, and I think you, you talked about earlier centralized companies and deplatforming, right? Or changing the rules, you know, which we've certainly seen plenty of central actors do that. I think the difference with crypto is that there are different choices, there are different blockchains, number one, there are different communities and a different ethos with each of those communities. I mean, some of them are overlapping and share overlapping principles. But there's also transparency. There's starting to be governance. I think this is important.

• 56:52Ezra Klein?

  So one of the other things in the kind of vision around corporations weakening their control. This is something that I feel ambiguous about, so I'm gonna, I'm gonna frame this in an ambiguous way. You see this in music. There are a lot of artists who miss the old record labels because the old record labels could take a lot of chances on people who are unknown. Or I'm a fan, I want to say in Substack discourse, and I know A160 is a Substack investor. I'm a fan of Substack. I'm pro the Substack world. But I do worry about a world where the stars can leave institutions very easily and make their full market value, which is, you know, a good world for me in a way. But there's a lot about institutions that is valuable.

• 57:34Ezra Klein?

  They can take chances on people. They train new people within media. They fund investigative reporting. You see this in a bunch of different places. And it's something I wonder about, not specifically for crypto, but just in a decentralized vision, whether or not there are values that institutions, corporations, just bigger groups play, that as the internet in sort of different iterations of it, but continuing on, if we go to this web three, as it keeps kind of more and more empowering the individuals, it creates more and more winner take all dynamics. And so things that are less profitable, people who are just having a bad year, but would have been fine in a bigger umbrella. If we're losing some of the structures that created a broader middle in the past, they did make it so people at

• 58:19Ezra Klein?

  the top did not get as much of their, you know, again, for some, some version of this full value, quote unquote, but they did create a little bit less of a kind of precarious gig class. And I wonder if you have reflections on that, not as a technological, but as a social question?

• 58:33Speaker 01

  Yeah, I think it's a great question. I think the one thing that we're starting to see with crypto, because were I not in this space, I think I would think, oh, of course, you know, you're right. However, I want to push back on this notion that there's this middle class that is just, it's okay with the big corporations. I think we're seeing that that's actually as we're not true. And one of the things I think that's exciting about crypto is, again, democratizing participation and economic ownership. And that's at the very heart of crypto. But you mentioned, you know, will these projects get funded? You mentioned investigative reporting as one example. Interestingly enough, there have recently been some, and again, this is just starting to happen. So you might tell me, oh, well, that's just a couple anecdotes. And I would tell you, right, this behavior

• 59:18Speaker 01

  is just starting to take hold and we're just starting to see that this is possible. But recently, there was funding for a movie that was crowdsourced with crypto. Would that movie have been funded otherwise by one of the big studios? Would they have, as you said, take a chance on this project? I'm not so sure. Investigative reporting is another area. You know, I was actually talking with someone about this because of course investigative reporting, I think, and you know, as you might know, I was formerly a federal prosecutor. And I often said to some investigative reporters, you know, our jobs aren't sometimes so different. I mean, obviously they were very different in many ways, but it was always about getting sources, getting people to trust you, uncovering the truth, writing up what the truth is and kind of convincing people that that was the truth.

• 1:00:02Speaker 01

  So I think that investigative journalism is really important in our society. And yet I think that, you know, what we've learned with crypto is that people can crowdfund projects very quickly. So I actually would push back a little bit with the idea that, you know, people won't ever be able to be discovered or projects will never get off the ground without these huge corporations. I don't think that's true.

• 1:00:23Ezra Klein?

  So I don't want to like push heavy levels of confidence in this, but I recognize in some ways you'll be more optimistic than me about crypto just naturally. But I always want us to take seriously that even if the thing works, it will have downsides. I mean, we've lived through the internet version of this again and again. Facebook gets the world connected and for a while it's great and it's easy to talk to grandma and show her baby pictures. And then we all know the stories, a lot of bad stuff begins happening when that goes too far. I mean, in media, it has been true for a long time. You can crowdsource a project here or there, but those are passion projects. They, things get crowdsourced that light a fire under people, which is great. Some of those are really, really important.

• 1:01:05Ezra Klein?

  There is just a lot of boring, important work done by midsize daily metros. And by the way, my institution, the New York Times, is a beneficiary of this winner take all market that New York Times has.

• 1:01:15Speaker 01

  The advertising.

• 1:01:16Ezra Klein?

  Yeah. Oh, well, and more than that, the subscriptions, right? Like has more subscribers and readers than it ever has before, but the hollowing out of the middle of journalism is, has been a real problem, right? The state and local side of it. And so I just wonder about that in decentralization. If what this does is it allows creators to much more directly capture their full value. And as such, it begins to break down institutions that by their nature end up like kind of averaging out the value of many different creators. Do you worry about what happens to the people who may be left behind in that, who aren't able to stay afloat quite on their own, but in the old institutional contexts, either their work would have had other values or they just would have been, you know, fine because like things get spread out.

• 1:01:57Speaker 01

  Absolutely, I do. I think with any technology, and look, I saw this in government firsthand, and I see it now as just living in the world. Any technology that I'm aware of, like really any technology that you could name for me right now, has definite pros and cons. Name for me a piece of technology that only has pros to it. Like, I'm actually hard-pressed to think of one. And so, of course, I think about this, and I think there are negatives with crypto. I'm not going to sit here and say that it's only good things. There are only good things that can come from, you know, a world where we fully embrace crypto. I think it's a technology. I think that the societal benefits that I see with crypto are outweighing right now, vastly outweighing if it reaches its full potential,

• 1:02:38Speaker 01

  some of the downsides, but it's very important to have the conversation around those downsides. So, I'm not going to sit here and tell you that crypto is perfect and will save everything. But I do think it's a step-level improvement upon the current system. And when we talk about the current tech giants gaining more and more power, and I think that's only continuing, right? And I think people will say, "Oh, well, the government will do something about that." We'll see. There are a lot of things we think government would do something about. And I'm not, by the way, I'm not advocating for government intervention here either. I think sometimes when government sets out with good intentions, there are a lot of second-order consequences that they haven't thought through, and I hope that doesn't happen with crypto. So, of course, I think about that, but when we talk about Web 2,

• 1:03:21Speaker 01

  and, you know, just again, to level set what we're talking about, we're talking about a phase of the Internet that started with a whole lot of promise. Open protocols, you know, we talk about TCP/IP, HTTP, all of the protocols that anyone can build on, but that, really, what happens are companies, tech companies, that are building on top of them. And they benefited a lot from the open source and the open nature of those open Internet protocols. And you know, at first it seemed great because like you said, everyone relied on what they thought were free platforms, but they're not free. We know that now. We know that aside from advertising, and I don't know about you Ezra, but like the internet should be getting prettier to scroll and it's getting uglier. I was telling someone that the other day. I

• 1:04:02Speaker 01

  can't even read a news story anymore. Seriously, on my phone, because it's so much, there's like pop-ups that I think I've disabled and haven't. There's cookies, there's constant links. The internet should have gotten to be a prettier place and it's gotten to be an uglier place. Um, just, you know, from an aesthetic point of view because of web two and the clicks and the advertising, you know, everyone's posting all aspects of their life online and these platforms are collecting vast amounts of data as we know. And so we are all the content creators. We're just creating it all for free. So it's not free. We're not getting paid for that. And I think web three could change this. What would a world look like where users actually owned their data? Where users had a choice? And

• 1:04:45Speaker 01

  by the way, the thing we haven't even talked about is there are right now on top of crypto protocols being built decentralized social platforms. And they're very early. And the notion is that, you know, users have the power to say what the rules of the road are going to be. And they're going to be able to decide whether they want to sell their data or whether they want to share their data. And if, if they do, whether they want to gain some kind of micropayment for it. Or if you, for example, you're contributing to a platform if you give a thumbs up or if you give a love on Twitter or on Facebook. What if instead you gave someone a micropayment? That's not possible right now with web two. That could be possible in decentralized social or with web three, where communities own

• 1:05:27Speaker 01

  these open platforms. And I think that's really interesting. And no, we're not there yet, but I think that's a really powerful idea. And so this is just some of the good that can come. In many ways, actually, web three and crypto ironically is an alternative to big tech. And we're not there yet today, but I do believe that if crypto is allowed to reach its full potential, we will be there someday.

• 1:05:51Ezra Klein?

  I think that's a good place to end. So always our final question then, what are three books you've read that have influenced you that you'd recommend to the audience?

• 1:05:57Speaker 01

  Well, one book that we spend a lot of time talking about as a team in crypto is called The Company. And at first, it sounds boring because it's about the creation of the LLC, limited liability corporation, which at the time was a very controversial idea. I think it's fitting as well because at the time, a controversial idea is about governance. And why should people have limited liability corporations? What would that do? That would actually harm society. Turns out, no, people wanted limited liability corporations to build things like railroads for society to progress. Now, that got rid of unlimited liability, but it also caused railroads to be built and then ushered in the Industrial Revolution. So if you talk about two sides of, you know, a benefit and a negative, I

• 1:06:39Speaker 01

  think that's a great read. Another book is my friend Indra Newy's book. And it's all about her life kind of growing up in India as a girl and then kind of came and ran one of America's largest corporations and was the CEO of that corporation for many years. And she's on the Amazon board. And it's all about her life and balancing family, work, and everything else along the way. So those are two books that come to mind. A third, really, that I enjoy, and it's mostly because of my personal background, having lived in Cairo, Egypt, growing up, is called Nagib Mafouz's Palace Walk. And that's just a fascinating book that gives a snapshot into what life was like at turn of the century in Cairo.

• 1:07:18Ezra Klein?

  Katie Haun, thank you very much.

• 1:07:20Speaker 01

  Thanks for having me, Ezra.

• 1:07:31Ezra Klein?

  Here's a clown show is a production of New York Times Opinion. It is produced by Jeff Geld, Roji Karma, and Annie Galvin. Fact checking by Michelle Harris. Original music by Isaac Jones and mixing by Jeff Geld.