The Web's Next Great Leap with Chris Dixon of a16z
To mark the 100th episode of The Money Movement, Jeremy Allaire sat down with the investor and author Chris Dixon in New York for a wide-ranging interview about Web3. Their interview covered key themes from Dixon’s new book “Read Write Own” as well as:
- [1:47] – Web3: How far along is it?
- [6:11] – Open vs. closed systems
- [8:42] – Old things vs. new things
- [16:46] – DAOs
- [21:00] – Blockchains: new kinds of computers
- [28:11] – Restricting bad behavior
- [32:28] – Crypto is purple
- [39:35] – Remaining tech gaps
Chris - 00:00:00:
All new technologies tend to do two things. They tend to do old things better and new things you couldn't do before.
Jeremy - 00:00:18:
Hi, I'm Jeremy Allaire, and this is The Money Movement. We have a very special guest and a very special episode.
For those of you that have listened to the podcast over the years, this is our 100th episode of The Money Movement, and I'm really thrilled to be joined here in New York City with Chris Dixon. Chris. Hey, Jeremy. Amazing to have you.
Chris - 00:00:40:
Thank you for having me.
Jeremy - 00:00:41:
We've had conversations on these topics for over 10 years.
Chris - 00:00:45:
Yeah.
Jeremy - 00:00:46:
And I think one of the things that I often hear, and I hear about you, and I hear also in reference to me, as well, is we both come from a background of working on earlier stages of the internet, and you speak and write about that, obviously, as well. And I think one of the things I find that's really often most helpful for people who are trying to think about crypto and who are trying to think about this particular kind of technology epoch that we're in is, how do we think about the earlier epochs of the internet and their application today? And lots of places to go with that, obviously, in terms of the conversation, but maybe one starting point would be, where are we relative to internet 1.0 or web 2.0,and obviously, let's just say web 3.0 in this case. Where do you feel like we are in that cycle? And is that even a useful framing? Because the internet's evolved so much. It's sort of difficult to kind of exactly juxtapose in that way. But I'd love to just start with your view of kind of where we are in the epoch relative to past internet epochs.
Chris - 00:01:56:
Yeah, I mean, so like you, Jeremy, I got involved with the internet, you know, in the sort of 90s and for me in earnest in the early 2000s, inspired by the idea that the Internet was this open decentralized network that anyone could access. That sort of the money and the control went to all the users and the creators and the software developers. And that was very exciting to me. Over time, I believe and I argue and I think most people would agree that the Internet has become more consolidated. If you look at the kind of the traffic figures, for example, it's something like 90% plus of the social media and search traffic go to the top five sites. Similarly, the 90 percent of the money that kind of flows through the system goes to a very small number of big tech companies. And generally, I think that's a bad thing. It's become overly concentrated. We've lost a lot of the original vision. It's less open. It's harder for software developers to build businesses. It's harder for for, you know, creators to earn a living. It's harder for small businesses. And I think that's generally a bad thing. Right? And I go through in my book, Read, Write, Own. I go through, you know, sort of in detail the history of that and how that happened and sort of how how sort of good intentions and people trying to build interesting things led to this consolidation, which happened because, as I sort of argued, these these sort of big companies had network effects and other kinds of scale effects that sort of led to this rich get richer phenomenon. I think today there's sort of two ways to look at the Internet. There's the I would call the more cynical way, which I think is actually the more common view in the public, which is the internet has matured. It's like similar to how, you know, the automobile industry started in the 1900s with thousands of car companies. And then eventually there were like Ford, GM and a few others. Right. And maybe now there's some renaissance companies. Yes. Like most industries eventually mature and consolidate. And I think that's sort of the cynical view of the Internet. Right. Is that it's it's now mature and it's over. And sure, we'll build a lot of new things.
Jeremy - 00:03:45:
There are robber barons of the internet.
Chris - 00:03:46:
That's right. Yeah, that's exactly so that, yeah, the Googles and Microsofts, and Facebook are exactly that. The robber barons or something of the internet. The only real remedy is things like antitrust, which we're seeing, you know, activity there.
Jeremy - 00:03:58:
Right.
Chris - 00:03:59:
And that's sort of the, that's kind of what I would call the cynical view. And I think, you know, that view also allows for technology innovation, but it's more like AI, which is more of a kind of-
Jeremy - 00:04:08:
It's industrialized.
Chris - 00:04:09:
Yeah, and it's like the big companies get even bigger, essentially, because they build these giant data centers and you need 10 billion, hundreds of billions of dollars. Exactly. I think the other view, which I would like to believe and do, you know, hope for, is that the internet is different than other industries and that it's a software-based network. It's a network that's, software has the feature of being highly malleable, highly, very, very plastic. Software can reinvent itself in a way that hardware can't. And we've seen that over and over in the history of software with kind of new, I think of software, and I talk about this in the book, as more, it's almost a mistake to sort of analogize it to engineering fields like bridge building, where you're much more constrained in the degrees of freedom of what you can do. Software to me is much more like a creative activity, like writing novels. And new genres emerge, new movements emerge. And the movement that we're part of, the crypto blockchain movement, I think of as the most interesting and important kind of movement of the last 10 to 15 years, which is a new, it's a new way to think about software. It's a new software, it's about new software architectures, new ways to design things with this specifically important feature of what blockchain, and this is kind of the core argument of my book, what blockchains really are is a new way to build internet services that are architected in a way that there's no gatekeeper and no toll keeper. So you know, in your case, your company Circle, you're building a network that involves money and dollars, but the key, the sort of salient feature of the network you're building and how it's different than let's say Visa's network or traditional. It's an open permissionless infrastructure. It's an open permissionless infrastructure, which has all these other implications. And so, so it just quickly in the book, sort of the first third, I go through the history of this, how this happened.
Jeremy - 00:05:42:
Yeah.
Chris - 00:05:43:
The next third, I talk about these blockchains and these blockchain networks and all the kind of different properties and why they would, why you would prefer your solution to Visa. And then the last third, I kind of go through specific applications, including, including your application.
Jeremy - 00:05:55:
Yeah.
Chris - 00:05:57:
And, try to tease out the specific possibilities of what could happen in the future.
Jeremy - 00:06:00:
Yeah. Well, it's I think this, this idea that, you know, we're, this is a new infrastructure layer for the internet. It's obviously software, fundamentally software powered, although there's a hardware piece of all this too. Yeah. That, that, that, that was really what drew me to this, you know, 11, 12 years ago and sort of a belief that open source communities of developers that were contributing could continuously improve this, led phenomenon, which is really fundamental. And I think, we've had various degrees of orientation of the big tech companies to open versus close, you know, famously Microsoft, or super close, then Google tried to be the more open. It is fundamentally all out in the open with some exceptions, obviously. I think, like, as a technologist and as someone who looks at the technology, one of the things that people grapple with, and this is, I think, actually a lot of people who are just innocently trying to figure out, well, what is this, you know, how is this better? Like, the internet does all these things. How is this better? And, you know, I often try and start by talking about, like... The technology solving problems that the internet couldn't solve before. You know, the sort of shared state, right? Like we have this ability to have, you know, trustless shared state or transactions on that state without depending on anyone or compute that's verifiable. Like there's these technical things that are possible that these blockchain networks allow for. But a lot of times, you know, that's sort of techno speak, right? I think if you're oriented technically, you go, oh, that's really powerful, that makes a lot of sense. I could see what you could build with that and how that's different. When you kind of characterize like fundamentally, let's just say we are where we are today, or just fast forward even 12, 24 months and blockchain network infrastructure is at state X. What do you believe are the kind of step function things that people can build that are these fundamentally better designed applications, utilities, protocols, across a lot of different categories. What are those and kind of maybe in some ways do like the Coke versus Pepsi or whatever it is like, that in the there's the Uber version here and then there's the Uber version over here and talk about that. And obviously if there's current apps that you're super excited about that manifest in this way, it'd be great to talk about that too.
Chris - 00:08:44:
Yeah, I mean, so a framework I like for technology is all technology. All new technologies tend to do two things. They tend to do old things better and new things you couldn't do before. And it's useful to separate those two things, I find, especially with kind of software innovations. So old things better, what does that mean with blockchains? It means, for example, what you're doing, which is old things paying people with dollars, but you're doing it better and a big benefit is the economics of it, right? So if you're buying a hotel room or a piece of digital art or music or just anything on the internet, a significant portion, you know, two and a half percent roughly typically goes to just paying for moving those. Trillion dollar tax on the global economy. It's a trillion dollar tax on the economy. And that can be really meaningful in certain industries that are lower margin. So that's old things better. So you can do and, you know, a small software developer wants to build an application that involves money and paying people and paying people in the countries that don't support dollars, things like better global distribution, better economics. Better participation. So then those are very, I think, clear benefits of stablecoin. over the traditional payment system.
Jeremy - 00:10:01:
Yeah.
Chris - 00:10:01:
Now then. So that's sort of old things better. Then there's a new things you couldn't do before and those are always harder. This second category is always harder to imagine. Because it takes 10 plus years to figure out.
Jeremy - 00:10:12:
So, totally.
Chris - 00:10:18:
So, let's take mobile smartphones is analogy when smartphones came out 15 years ago. Old things better. Well, now you can do shopping in social networking on your phone. Instead of in a desktop.
Jeremy - 00:10:18:
Right.
Chris - 00:10:18:
But new things couldn't do before that was the Uber and Snapchat and look, the reality is-
Jeremy - 00:10:18:
The mashup of new things that we're just weren't possible.
Chris - 00:10:18:
Yeah. They want usually compounding things that just happened.
Jeremy - 00:10:18:
That's right.Yeah.
Chris - 00:10:18:
And I'm going to give you some speculations on that, but the reality is it usually takes time for that to play out because entrepreneurs are very creative and they're more creative than I am. And I wouldn't have thought of all the ideas.
Jeremy - 00:10:28:
I use the exact same analogy when I explain this. And I often say, like, we haven't hit the iPhone moment, meaning the surface to build on isn't quite there, but we're darn close.
Chris - 00:10:38:
That's right. I think we're getting really close. Yeah. But so new things you couldn't do before, just to give you some speculations, you know, with your kind of internet digital money, I think you could do interesting things where instead of having a person pay a business, you could have a machine or AI system pay another AI system. Machine to machine. Machine to machine payments.
Jeremy - 00:11:00:
Financial activity.
Chris - 00:11:01:
That's right. Micropayments, you know, very small payments. So you, you know, you maybe you have a system where you're, you know, you visit 10 different media sites that month. And then the. And then. And your software and your client divvies it up.
Jeremy - 00:11:12:
Tying together the physical world, human activity and economic value.
Chris - 00:11:17:
Yeah, exactly. And then and then just more broadly in the blockchain area, there's a whole bunch of what I kind of go through in the third part of my book. There's a whole bunch of new ideas sort of that, for example, entrepreneurs that we've invested in are building. So as an example, one area I'm very excited about is is this idea of in a, post-generative AI world, a world where anyone can push a button and create a movie and create a story, what are the business models for creative people? And so, for example, we have some interesting investments where they allow communities of people to come together and create intellectual property, and the system will automatically sort of say, this person contributed this much to the new narrative universe you created, and this person created this much. And then as that intellectual property is reused around the internet, people pay for using it, and the money cascades back to the original sort of people creating it. So it's a way to kind of track copyright intellectual property provenance in a way that's aligned with the internet's desire to remix and reuse content and have sort of an open system that's very accessible, but also make sure people that create a content are paid. Or for example, if your data is used for training data in AI algorithm, you should get paid. Today, it's very opaque. People are suing each other. It's frankly kind of a mess.
Jeremy - 00:12:28:
Yeah.
Chris - 00:12:28:
A blockchain is a very good way to keep track of these things.
Jeremy - 00:12:30:
Right.
Chris - 00:12:30:
So that's another example.
Jeremy - 00:12:32:
For sure.
Chris - 00:12:33:
You know, obviously, there's interesting stuff that's already happened around sort of DeFi. There's interesting new systems where digital artists are creating things like NFTs, and there's a whole new wave of video games that sort of have economies that are more open and peer-to-peer. So there's a whole kind of range of interesting things going on, some of which are kind of, again, old things you could do better, and some of which are just sort of brand new, interesting ideas that will probably kind of surprise all of us.
Jeremy - 00:12:59:
Totally. Yeah. I mean, the PFP stuff that happened was like, and all these kind of play to earn as well, PDE, like all these were like, wait, these are new behaviors, et cetera. I want to kind of ladder off of that a little bit. And first, kind of a tangent question, and then I want to come back into what I'll sort of say is more mainline, which is this ability to kind of convene a community of people from effectively anywhere in the world, and organize work and have a belonging, which is credentialed, like a credentialed belonging to an organization. What we talked about is DAOs, and DAOs are still talked about a lot. These on-chain organizations, it's fascinating. And I think one of the things that I think about a lot is, well, if we keep growing the number of on-chain organizations and they're using on-chain money like USDC and they're structuring their economic relationships on-chain, when do we need better laws? And I'm not talking about crypto markets regulation or stablecoin regulation. We'll come back to policy in a moment. But do we need laws for how these on-chain organizations themselves manifest and connect to, quote unquote, the real world? And or should we just not worry about that yet? I mean, we have, obviously, people designing DAOs under legal DAO frameworks in Wyoming and with LLC structures that are legal, in terms of the way in which the members exist in that. But there's a lot of experimentation. And I believe that a lot of this kind of new forms of work, new forms of coordination, new forms of value creation, in particular in the on-chain world, will happen this way. And I think it could be quite big. And so how do you think about that? Because you invest in a lot of different things and presumably, in a sense, you participate in DAOs. And just where do those lines, need to be drawn? And yeah.
Chris - 00:15:04:
Just, to kind of put it in historical context. So I think this is in sort of the context of kind of the death of Coase's theorem. So for those, you know, there's a famous economist, I think Ronald Coase is his name, who wrote a paper, I think, in the 30s or 40s. Yeah, Theory of the Firm. And the kind of question you're trying to answer is why, you know, in a capitalist market-based economy, why do you have firms at all? Why do you have organizations at all? Why can't you just go out on the street and bargain and create a deal for every kind of...
Jeremy - 00:15:31:
Yeah.
Chris - 00:15:31:
Transaction you do? And the basic idea was it would be a pain to go and do it. To sign a contract with everybody.
Jeremy - 00:15:37:
It's information theory. I don't know, Herbert Simon wrote a lot of it.
Chris - 00:15:40:
Yeah, yeah, yeah. So the basic concept was because of the difficulties of transferring information and trust and a bunch of other things, we create these sort of...we do this hack and we create these organizations where the trust is kind of baked in.
Jeremy - 00:15:51:
Yeah.
Chris - 00:15:51:
Right? And so one of the things people talked about in the 90s and 2000s with the rise of the Internet was the Internet was going to sort of remove the need for these hierarchical traditional organizations.
Jeremy - 00:15:59:
Right. Right.
Chris - 00:16:00:
And you could just sort of have this ad hoc group of people.
Jeremy - 00:16:01:
Yeah.
Chris - 00:16:02:
Get together and do things. And you did see that play out to some extent.
Jeremy - 00:16:05:
Yeah.
Chris - 00:16:05:
Like, look, open source software has become the biggest success in my mind is open source.
Jeremy - 00:16:08:
For sure. I mean, huge development of technical IP.
Chris - 00:16:11:
Yeah. Like, open source software is, you know, went from a fringe movement to 90% plus...
Jeremy - 00:16:14:
Scientific discovery, similar, right?
Chris - 00:16:16:
Yeah, scientific, like, you know, the stuff on archive with AI stuff happening there, stack overflow, math overflow.
Jeremy - 00:16:22:
All of these are great.
Chris - 00:16:23:
Like, you know, to some extent you could say things like DoorDash and Uber, the kind of gig economy stuff is like this. Wikipedia. That's right. That's right. But, so, I think there has been stuff. But, I think it's for these, the people that are true believers like I am, it's sort of underachieved in a way.
Jeremy - 00:16:37:
It is totally underachieved. Yeah. Yeah.
Chris - 00:16:38:
Like it's, and it feels like it could do more. So when DAOs came along, so DAOs are sort of, you create, you know, similar ideas to these, but now you have sort of economic relationships on a blockchain and people can sort of organize and coordinate work and pay each other.
Jeremy - 00:16:50:
Exactly.
Chris - 00:16:50:
And do all sorts of things.
Jeremy - 00:16:51:
They're having on-chain money and on-chain verifiable membership and obviously voting and like...
Chris - 00:16:58:
That's right. That's right.
Jeremy - 00:16:58:
You have corporate substance.
Chris - 00:17:00:
Yeah. Yeah. You can do a lot more things. And that, you know, that sort of, I mean, really DAOs started four or five years ago. People got really excited two years ago. And now there's like the excitement is a little bit down, but I think it'll come back.
Jeremy - 00:17:10:
Totally.
Chris - 00:17:11:
But to your point, there's a really kind of tough set of questions around how does kind of your on-chain relationships, transactions, trust map to the traditional legal world.
Jeremy - 00:17:22:
Right.
Chris - 00:17:22:
As you alluded to, there have been some, I think some important, there's some important developments. There's new corporate structures. So for example, Wyoming passed a law.
Jeremy - 00:17:29:
Yeah.
Chris - 00:17:29:
It's called the DUNA. I hope that spreads.
Jeremy - 00:17:32:
UAE did something.
Chris - 00:17:33:
That's right.
Jeremy - 00:17:33:
A lot of jurisdictional experimentation.
Chris - 00:17:36:
Yeah. And so these are new kind of corporate forms that are meant to sort of match and, I don't know, sort of align with these DAOs. And that's great. I think there needs to be other, there's other questions like you have, you know, a DAO does something like it buys a building and then there's a dispute and how do you adjudicate that dispute and what jurisdiction is it in?
Jeremy - 00:17:54:
Right.
Chris - 00:17:55:
I think those things can all be figured out with a good faith policy process. I mean, we can talk about policy here. Is that a lot of the policy makers we feel like, you know, not some of the early policy makers did not necessarily have a good faith process.
Jeremy - 00:18:07:
Yeah.
Chris - 00:18:07:
But these are all sort of solvable problems, I think.
Jeremy - 00:18:09:
Yeah.
Chris - 00:18:09:
And I think we'll get there and we're making progress. And as we do, that will kind of, I think, unlock a new wave of innovation around these ideas.
Jeremy - 00:18:20:
Yeah. I want to come back to that for sure. I believe very much in the proliferation of these kinds of organizations and I think that, you know, it'll be interesting to see if in three, four, five years, maybe it's longer, I don't know, where an entity that is coordinating work and labor and output and out-competing a large multinational corporation and to sort of see that. I think we will see that.
Chris - 00:18:46:
Right.
Jeremy - 00:18:46:
We will see that. And one could argue DeFi is sort of doing some of that even today.
Chris - 00:18:50:
I think there's also like there's a formal DAO but there's also like all the people contributing to your network.
Jeremy - 00:18:56:
Oh, yeah.
Chris - 00:18:56:
And building around it.
Jeremy - 00:18:58:
Absolutely.
Chris - 00:18:58:
And you have shared incentives. You can argue in a sense that all of those people and I'm sure there are many thousands, if not tens of thousands, are all sort of members in some sense of an organization.
Jeremy - 00:19:06:
Yeah. And we conceptualize it that way very much. But interesting. Okay. So that was a tangent which then comes back to maybe a more central question which is the role of digital tokens. And obviously, like blockchain networks and digital tokens are malleable. They can be, you know, represent anything, right? So, it's data effectively, provable data. And so, there's not really, there doesn't need to be a regulatory framework on just sort of like provable stored data on the internet per se. But when we start to sort of think about like digital tokens that provide economic incentives or incentives for coordination or incentives for governance. Now we start, you know, more powerful uses of digital tokens. Which are really central to innovation and building these new kinds of more decentralized applications and the like. In that place, do you feel like there's a clear, in your mind, a clear way to delineate between, let's just say, media or data and digital tokens that are, have this kind of accommodate, they can, like Heisenberg's principle, I don't know if that's the right metaphor, but basically, they can be multiple things at the same time. These digital tokens that have utility, they're used for governance, they have economic incentives, Is there a way in which you think about differentiating those in your mind, which is a leading question on the policy side of things as well? Maybe help us just think about token taxonomy.
Chris - 00:20:49:
Sure, sure. So, and this is a great question. So this is a big question. Maybe I could frame it a little bit, which is, so the kind of my argument, and it's not unique to me, but it's sort of core to my book is, that blockchains are new kinds of computers that let you do new things, and a particularly important thing they let you do is they let you have this concept of digital ownership. So that means that for the first time, I as a user... So the way that the Internet's architected today is you go to Twitter... You go to a service like Facebook, you go to a service like Uber, you log in, and you may be assigned certain things. Like you're assigned, I'm given a username on Twitter, I have a follower list, I have money in my Uber account, whatever it might be, but you have very little power as a user. You don't really, like on the example of a social network, I don't really own that name, my name's C. Dixon. I don't really own my follower list. I sign up, it's a terms of service.
Jeremy - 00:21:41:
You sign a TNC. Yes.
Chris - 00:21:41:
They can do whatever they want. I can't take that and move from one service to another, for example. Right? So there's no, there's a sense in which. The internet of today, there is no sense of kind of user ownership.
Jeremy - 00:21:52:
Until GDPR came along.
Chris - 00:21:54:
Yeah, well, the GDPR, that complicates things. But so the idea that a blockchain, so you think about Bitcoin, what was interesting about Bitcoin for the first time, right, is people had digital money that wasn't just sort of a record in PayPal's database under their terms of service. You truly, as long as you had that private key, you truly own that Bitcoin. And what people have done over the last 15 years is they generalized that idea. And so you can, an NFT is the idea that you can own a piece of digital media.
Jeremy - 00:22:21:
Unique digital certificates, et cetera.
Chris - 00:22:23:
That's right. So, the, kind of the, I guess the important point, it's basically what you're doing is you're introducing property rights to the internet.
Jeremy - 00:22:29:
Right.
Chris - 00:22:30:
And those property rights can, just as in the real world, you can own a house, you can own a piece of art, you can own a piece of money.
Jeremy - 00:22:35:
Right.
Chris - 00:22:36:
Similarly, in a digital world, they can be all sorts of things. From a policy point of view, what we argue is that we should think of it, again, as the analogy to the real world. It depends on how it functions. That's right. So it's not like, so for example, we have been arguing that a one size fits all policy of like everything that's a token is a security.
Jeremy - 00:22:53:
Makes zero sense.
Chris - 00:22:53:
Everything is a commodity.
Jeremy - 00:22:54:
Makes zero sense.
Chris - 00:22:55:
Makes no sense. It depends how it's used. So for example, if I create a token and that token gives you a right to the cash flow of my company, like that's probably a security because that's what securities are. If I create a token and it's like, you know, let's say Ethereum, where it's like this thing that you use, it's kind of fuel to run applications on that network, that behaves more like a commodity. And by the way, that's what the policymakers, you know, the SEC and those folks have said is that Ethereum is therefore a commodity. There are other things like something you might buy in a video game or some other object, which might just be sort of a good, you know, regular goods like you buy an orange at the store. So our argument is it depends on how it's used, the context, you know, and sort of, and you should basically take, we're not, you know, contrary to some of what our critics say, we're asking for like special rules. We're not. We're asking for the same rules you have in the physical world. Take those rules of how you classify
different types of things in the non-digital world and apply those to the digital world. And those tests in the offline world, they're functional tests. They're about how they're used, how they're designed. They're case by case.
Jeremy - 00:23:59:
Yeah.
Chris - 00:23:59:
They're criteria based. They're not sort of like all tokens are securities.
Jeremy - 00:24:03:
So I generally agree with all that. I think one of the things that I've advocated for some time. Digital tokens are a new, these types of on the internet, digital tokens can kind of have multiple functions, right? And so.
Chris - 00:24:21:
So each, a single one can kind of morph.
Jeremy - 00:24:23:
A single one can morph at any given moment in terms of what it does. And, you know, if I'm, for example, like I play a game and I get a token that I get rewards from for activities in the game that conveys sort of more community power for me in the game different ways. Or it becomes swappable for other artifacts in the game. It also maybe is liquid against something like USDC. So I could actually take it and convert it into dollars. But it also conveys voting activity. And like if I'm like a teenager playing a game or even a 23-year-old or whatever you are and you're interacting with this, like part of the beauty, part of the magic is that you can in fact do all those things. It can have all those manifestations. You know, there may be reasons why you want to have rules around how it's traded in a market. So the concept of a rules-based system is there. But if you attempt to say. It's a security under 1933, you know, securities law. Well, then you can't use it for these other things because the market structure and the regulatory structure that exists just won't work. Like are you going to have transfer agents and like qualified custodians like embedded in games all over the place? And so it feels like we need more malleability here in policy. And it feels like, you know, there's, this is a moment in time where policymakers need to accept more, degrees of freedom and more latitude and stick to foundational principles on some of this, but not try and superimpose the infrastructure side of the implications of what something is. And I feel like other jurisdictions are doing that better. They're sort of saying, hey,
there's digital assets. Here's how you want to issue one and promote it and market it. If an exchange wants to list it, here are the rules. But, its general utility is not prescribed in terms of the market infrastructure that it has to run on per se. There's more latitude in terms of its actual utility. And so I worry about that because I really think that we want to encourage entrepreneurial and developer creativity for how to apply these things. And even some of the bills that are being talked about, I worry that they actually put too much structure on some of these things.
Chris - 00:26:57:
Yeah, I think that's a great point. And I think part of your point, right, is that... That we want to leave freedom, like openness there for, because developers are very creative. And so if you overly prescribe the outcomes, but like, I think, so like FIT21, which is sort of the prominent market structure bill that the house passed, that's now, you know, some form of which may at some point be taken up by the Senate, which I think is, you know, there's always issues with bills, but I think it's generally a smart bill. The way I think it approaches it is on a risk-based approach, meaning, so like if you create a token and, you know, it's a sort of a network token, something like Ethereum or Bitcoin, and if a centralized organization originally creates it, as most things in the world are created, originally they're centralized, there are, for example, lockups placed on those investors and those founders for some period of time until there's no longer an information asymmetry so that they can't go out and promote the token and dump it. And I think those restrictions are very, we're very supportive of those restrictions. Those restrictions are gray area today and this would make it, and in many ways, this is, I think, this to me undermines one of the critiques of people like us. They say we want, they say that the crypto industry is lobbying to loosen regulations. It's actually, if they actually read the bill, it's the opposite in many cases. It's actually more restrictive in many cases.
Jeremy - 00:28:17:
Significantly more, right?
Chris - 00:28:18:
Yeah, it's just more restrictive, but it's restrictive in the smart way. So like what, like the bad behavior is, you know, project founders going and pump and dump and-
Jeremy - 00:28:26:
Yeah.
Chris - 00:28:27:
And things like this. And it's putting very, I think, I think much stronger restrictions on those types of things.
Jeremy - 00:28:32:
Right.
Chris - 00:28:32:
What it's allowing for is, you know, once, for example, once it's hit this threshold of decentralization and it's a commodity, you can do whatever, you know, the, those things you would want to do in your game. And you have a lot of sort of degrees of freedom to design things. There are still rules in place that like the CFTC rules for commodities and market manipulation and things like that, fraud rules, advertising rules. But there's a lot of freedom to sort of design things. So I think that's like the right, to me, the right kind of policy approach is to look at what the actual risks are. Design policy to mitigate those risks. And then on the rest of the things that aren't sort of risks allow for what you're describing, the creativity of entrepreneurs and developers and the sort of the humility to know that none of us really know where this will go.
Jeremy - 00:29:20:
Right. Right. And, you know, I think about, you know, when platforms and Web2 platforms emerge like Facebook and Twitter and the like, the ways in which just businesses like thought about how to apply and use this stuff was incredible. There was this incredible. And then those platforms started building a lot of products and features that were like really useful for people who are communicating in different ways or gathering communities in different ways and the like. If I think about on-chain, if I'm a consumer-facing company, I want to make sure there's clarity so that as a consumer-facing company, I might want to have many different digital tokens that are part of my toolbox in terms of incentives, rewards, engagement, economics, and stakeholder participation, all these things. It's got to be clear enough that these are not the equivalent of filing Form 4s or whatever to the SEC.
Chris - 00:30:23:
I totally agree. By the way, this sort of same discussion is playing out in other areas. So for example, AI, like a bad approach to AI regulation, in my opinion, is what you see in some of these bills, including the EU Act, AI Act, which is, you know, all models above a certain computational threshold, a number of 10 to 25 flops.
Jeremy - 00:30:43:
Have to be registered.
Chris - 00:30:44:
Yeah, have to go through some big process, right? That's just a sort of silly thing. In fact, funny enough, a lot of those thresholds they said have already been surpassed by open source models and the world hasn't ended and it's been sort of the doomers have overhyped it. A smart way to regulate AI is to say, hey, if you build an AI system that helps you create a bomb, you know, you go to jail. Like that's a smart regulation, right? So the point is a smart way to, like a bad way to do it is to make these arbitrary technological kind of limitations that reign in the creativity of entrepreneurs and developers. A smart way to do it is to say, what are the actual risks and how do we disincentivize that behavior, right? As opposed to kind of fearing and banning and slowing down the technology overall. Which is, you know, I just think we're living in a time right now for whatever reason where there's a lot of negativity towards technology and you see this with all of these emerging areas like crypto and AI where there's kind of these-
Jeremy - 00:31:36:
A lot of fear.
Chris - 00:31:36:
Yeah, and it's really kind of blunt instruments being applied to what you're describing. As you're describing, it should be much more of a nuanced approach.
Jeremy - 00:31:44:
Yeah. So let's actually, I want to kind of talk about politics and policy for a moment. And, you know, This episode is being released before the presidential election and many, many other elections of people in Congress and the Senate. There's a lot of active dialogue going on about what should crypto policy be? How should the country think about it? Policy platforms are being developed by both of the campaigns. You know, this is all kind of taking shape literally as we speak. And, you know, I think you've heard me talk about this. Like, I, you know, circle is purple, as I like to say. And we really are. And our view is that, like, you know, I've been building this company through three different administrations, Republican, Democrat, a lot of different stuff. And sort of it's been the same message for 11 years. And so here we are. It seems like we're on the cusp of significant policy work that's going to happen here. Whether it happens pre-election or post-election, it's going to happen. And, um... And rather than sort of talk about, you know, one party or another, what their platform is, it's just... If you agree with me that crypto is purple. Because it is a generalized technology. There are people who argue that actually, no, it's fundamentally a libertarian technology and therefore you ought to vote along a libertarian pathway. I believe it's actually like strategic, important technology infrastructure that makes America competitive, makes for, you know, accomplishes all the things that you believe can be accomplished through this technology. So if you take that view, what is the message to all of those politicians who are trying to figure out what they should think. And they're trying to figure out what stake they should put in the ground when people ask them, what's your position on crypto? Like, you know, step aside from the bills and the nuance, which we were just in, but just get to the basics of like, what should someone think for America specifically, for the United States? What should they be thinking about as they engage with their constituents over these coming couple months?
Chris - 00:34:11:
Well, I think that, like, I think that policymakers, I think kind of the, if you chart out the history of this topic, People kind of ignored it for the most part, you know, for. So say the 2010s, the policymakers did. There was some activity, but it wasn't, I mean, sort of a prominent issue. And then, you know, then there was sort of this 2022 period with SBF and things like this and then the crash. And then we had a very aggressive kind of executive branch, agency led approach to this. And I think a lot of people who were kind of leading that effort thought that they would just sort of kick it and it would go away.
Jeremy - 00:34:46:
Right, right, right.
Chris - 00:34:47:
And the reality is it hasn't gone away. It's not going to go away. And you now have, you know. Hundreds, if not thousands of very strong entrepreneurs in the United States, building this technology, 52 million Americans, according to the latest surveys, own crypto. And frankly, the policy approach is a mess. So the SEC has approached this through what people call regulation by enforcement. They've refused to give out any guidance, which is the normal way that agencies are supposed to regulate new industries. They've done it through enforcement, which means legal actions. We now have contradictory court rulings. So you literally don't know what, we literally do not know what-
Jeremy - 00:35:23:
This is what Congress is made for.
Chris - 00:35:25:
Yeah, we literally do not know, like if we tell, like the best evidence we have to tell entrepreneurs what to do are court rulings. And many of those now contradict each other, right? And they're district level courts of equal standing. There has, over the many years that will get appealed and worked out maybe at the Supreme Court level. But for now, we don't actually, we literally don't have rules. So I've been going, look, I think as you have, I've been going to DC for a couple of years now. I go at least every month.
Jeremy - 00:35:49:
You go in 11 years.
Chris - 00:35:50:
Yeah. So- And I just hear again and again, and this is, by the way, is very bipartisan. It's very much on the Democratic side as well, that like, this is a mess. We need to fix it. Like that is the growing consensus, right?
Jeremy - 00:36:02:
Yeah.
Chris - 00:36:02:
And so then, and I, and, and, so just empirically, that is a bipartisan. I mean, I, half, if not more of the meetings I've had are with Democrats. Like there are obviously some Democrats who, who hate crypto and will always do that. But I think that's the minority of the party.
Jeremy - 00:36:16:
Eventually they'll come around.
Chris - 00:36:18:
Yeah, but most of the party in Congress and the House and the Senate realize that they need to address this and want to approach it in a reasonable way. Of course, people debate the specifics, but the basic idea is how do you put guardrails around it and allow for innovation, right? So I think there's a growing consensus on that issue. I would also say to the crypto industry, there's some people in the industry that think, oh, the... This should be a partisan issue. I just think, look, putting aside their politics, I disagree with them just on a purely tactical level.
Jeremy - 00:36:46:
It's like saying AI should be partisan.
Chris - 00:36:48:
Well, yeah, and it's also just tactical. The only way to really get a solution here is legislation. Otherwise, it's every couple of years you have a new president, things switch around. Entrepreneurs can't build in that environment. We need to get together and through a democratic process decide on what are the rules of this game. And the best way to do that and to entrench that and to make sure that it lasts and to make sure that entrepreneurs have predictable ground on which they're building, solid ground on which they're building, is to pass legislation. And I think we're close to doing that on stable coins, on market structure, on a bunch of other topics.
Jeremy - 00:37:19:
It's going to be more.
Chris - 00:37:20:
And that needs to be bipartisan. It has to be. It just has to be bipartisan. And so that's the only way in my mind to approach this. And there's a lot of support on both sides. And I think it will be. I think it will be. I think in the end, this will be a super majority bipartisan agreed on issue. And people will look back on this period as like, I can't believe that they thought they could just ignore this.
Jeremy - 00:37:39:
Yeah. Yeah.
Chris - 00:37:40:
Or use this ridiculous process they're doing now. Yeah. Which is just not working. It's it's I think, you know, today, like it's like all that that approach is done in my mind is hurt the good entrepreneurs. And if anything, scams and bad actors are greater than ever. Like it's doing exactly the opposite of what a smart policy should do. So it's just simply not working. And more and more people are realizing that. And I think we're going to we're going to see a change.
Jeremy - 00:38:06:
100% agree. And I'm optimistic about that. And my hope, obviously, is that, you know, the creativity that people have in what they're building on chain and they're building on this infrastructure is, you know, reasonably unencumbered. So that, like, because there's so much that's in front of us, right? And which actually kind of leads to my last, like, key question. I kind of, I'll draw on, you know, one of the comments that you made earlier, and we're both kind of had the glean in the eye around, like, I think we're really close to, like, where the, you know, the user experience in a sense, right? All these things can come together, the infrastructure, the user experience, what developers can do, like, all this, the iPhone moment idea. And I really... It feels like all of this could line up really nicely where we have. Legal clarity. At least significant legal clarity, and we have this kind of technology readiness, and then the creativity happens and blossoms in that way. But with that in mind, what are the things that... You see today that in your gut say, I think we're really close. Why are we really close? What are the gaps to close still? Forget about policy for a minute, just purely at a technology and a capabilities level. What are the gaps to close and what do you think that looks like?
Chris - 00:39:33:
Yeah, and so, I mean, to your point, I think the technology has gotten, the technology gaps have almost all gotten closed. And it's happened very recently. And so the fact that you can build on a, you know, on a layer two on Ethereum, so something like base or optimism, you can build on Solana.
Jeremy - 00:39:47:
Yeah.
Chris - 00:39:47:
You can, you know, build. Relatively easily with low gas, with low transaction. The prices have gotten low enough now that the applications can subsidize them, which I think is a critical point, right? Which means you can basically like raise venture capital.
Jeremy - 00:40:01:
It was like when bandwidth got cheap enough that you could like push meaningful content and apps out, right? You're sort of the equivalent.
Chris - 00:40:07:
And so we're now there, and it's really only been this calendar year that that's been the case because you had a lot of big upgrades to these systems. So just look, there's still lots of little things like everyone always complains about the number of steps you have to go through to like onboard and go through.
Jeremy - 00:40:18:
The crypto should be more invisible.
Chris - 00:40:19:
Yeah, and some of this is like regulatory. You've got a KYC and you've got to do other things, but some of it is just, I think just kind of working out the kinks. But I think we're getting very close. I think the big thing is the policy side. This is why I spend so much time on it. Like to me, that's the big missing thing. I think the technology actually, unlike three years ago.
Jeremy - 00:40:36:
So on the policy side, the capital and the entrepreneurship will just kind of really, really go.
Chris - 00:40:39:
I mean, look, there's all little things here and there, but I think the core technology is, or another way to say it is if you kind of think of blockchains as mapping historically onto, you know, the past computing trends where there's kind of a Moore's law, there's kind of a price performance curve. I think we're at the point of the price performance curve where we're good enough. And this is probably the first time this year where we are. Whereas like three years ago, we weren't. Because three years ago, it costs $5 sometimes to do a transaction. And that meant you just, you couldn't do things like social networks and games. Now you have real social networks, games, you know, anything you can do. It's an internet service today. You can do as a crypto blockchain.
Jeremy - 00:41:13:
We need chain of traction to be more of a thing.
Chris - 00:41:16:
Yeah, there's things like this and user experience. Yeah, there's still like you have to, you see too much of the underlying, you know, stuff. Like you said, like which chain you're on shouldn't even be a thing that consumers know. So there's definitely improvements to make. And I'm sure you're working on a bunch of them. And, you know, Coinbase is and a bunch of other great companies. But I think the big, like I just say this as someone who speaks to entrepreneurs all the time, like a lot of entrepreneurs who are really good at building applications don't want to enter the space right now with the policy uncertainty. They don't want to, no one wants to say, I'm going to start a company and then maybe I'll get, you know, because it's basically a random number generator, so whether you get sued because there seems to be no like principled action. Do I, am I going to just randomly get, spend the next five years getting sued by random government agencies?
Jeremy - 00:41:57:
Right.
Chris - 00:41:58:
Because they have some political cracks to grind.
Jeremy - 00:42:01:
Right.
Chris - 00:42:01:
And so no one wants to do that. And so we've seen like as a result, a lot of the best entrepreneurs are going into AI and other areas. So policy is not just about policy. It's about creating a conducive environment for entrepreneurs to work in.
Jeremy - 00:42:15:
Rules of the road.
Chris - 00:42:16:
Yes, rules of the road, where you incentivize the best people to enter, and you disincentivize the bad actors. And right now we have a system that incentivizes the bad actors and disincentivize the good actors. And so that, that's why policy is so important. I mean, obviously it's important in and of itself, but it's important for the secondary thing of who it incentivizes.
Jeremy - 00:42:30:
Yeah. I definitely see that. I think. Well, I want to make a date with you. I think we started talking about the possibilities of this. Over 10 years ago, I think. I remember sitting down with you over a meal and talking about visions of some of this stuff. So in 10 years, let's get together and we'll make another episode. All right, sounds good. And I suspect that we'll be incredibly pleased with the progress and probably like, blown away. So we'll like commit to like rewatch this then and see what that looks like. So 2034, stay well. Great to have you and wonderful conversation, Chris.
Chris - 00:43:11:
All right. Thanks, Jeremy.
All new technologies tend to do two things. They tend to do old things better and new things you couldn't do before.
Jeremy - 00:00:18:
Hi, I'm Jeremy Allaire, and this is The Money Movement. We have a very special guest and a very special episode.
For those of you that have listened to the podcast over the years, this is our 100th episode of The Money Movement, and I'm really thrilled to be joined here in New York City with Chris Dixon. Chris. Hey, Jeremy. Amazing to have you.
Chris - 00:00:40:
Thank you for having me.
Jeremy - 00:00:41:
We've had conversations on these topics for over 10 years.
Chris - 00:00:45:
Yeah.
Jeremy - 00:00:46:
And I think one of the things that I often hear, and I hear about you, and I hear also in reference to me, as well, is we both come from a background of working on earlier stages of the internet, and you speak and write about that, obviously, as well. And I think one of the things I find that's really often most helpful for people who are trying to think about crypto and who are trying to think about this particular kind of technology epoch that we're in is, how do we think about the earlier epochs of the internet and their application today? And lots of places to go with that, obviously, in terms of the conversation, but maybe one starting point would be, where are we relative to internet 1.0 or web 2.0,and obviously, let's just say web 3.0 in this case. Where do you feel like we are in that cycle? And is that even a useful framing? Because the internet's evolved so much. It's sort of difficult to kind of exactly juxtapose in that way. But I'd love to just start with your view of kind of where we are in the epoch relative to past internet epochs.
Chris - 00:01:56:
Yeah, I mean, so like you, Jeremy, I got involved with the internet, you know, in the sort of 90s and for me in earnest in the early 2000s, inspired by the idea that the Internet was this open decentralized network that anyone could access. That sort of the money and the control went to all the users and the creators and the software developers. And that was very exciting to me. Over time, I believe and I argue and I think most people would agree that the Internet has become more consolidated. If you look at the kind of the traffic figures, for example, it's something like 90% plus of the social media and search traffic go to the top five sites. Similarly, the 90 percent of the money that kind of flows through the system goes to a very small number of big tech companies. And generally, I think that's a bad thing. It's become overly concentrated. We've lost a lot of the original vision. It's less open. It's harder for software developers to build businesses. It's harder for for, you know, creators to earn a living. It's harder for small businesses. And I think that's generally a bad thing. Right? And I go through in my book, Read, Write, Own. I go through, you know, sort of in detail the history of that and how that happened and sort of how how sort of good intentions and people trying to build interesting things led to this consolidation, which happened because, as I sort of argued, these these sort of big companies had network effects and other kinds of scale effects that sort of led to this rich get richer phenomenon. I think today there's sort of two ways to look at the Internet. There's the I would call the more cynical way, which I think is actually the more common view in the public, which is the internet has matured. It's like similar to how, you know, the automobile industry started in the 1900s with thousands of car companies. And then eventually there were like Ford, GM and a few others. Right. And maybe now there's some renaissance companies. Yes. Like most industries eventually mature and consolidate. And I think that's sort of the cynical view of the Internet. Right. Is that it's it's now mature and it's over. And sure, we'll build a lot of new things.
Jeremy - 00:03:45:
There are robber barons of the internet.
Chris - 00:03:46:
That's right. Yeah, that's exactly so that, yeah, the Googles and Microsofts, and Facebook are exactly that. The robber barons or something of the internet. The only real remedy is things like antitrust, which we're seeing, you know, activity there.
Jeremy - 00:03:58:
Right.
Chris - 00:03:59:
And that's sort of the, that's kind of what I would call the cynical view. And I think, you know, that view also allows for technology innovation, but it's more like AI, which is more of a kind of-
Jeremy - 00:04:08:
It's industrialized.
Chris - 00:04:09:
Yeah, and it's like the big companies get even bigger, essentially, because they build these giant data centers and you need 10 billion, hundreds of billions of dollars. Exactly. I think the other view, which I would like to believe and do, you know, hope for, is that the internet is different than other industries and that it's a software-based network. It's a network that's, software has the feature of being highly malleable, highly, very, very plastic. Software can reinvent itself in a way that hardware can't. And we've seen that over and over in the history of software with kind of new, I think of software, and I talk about this in the book, as more, it's almost a mistake to sort of analogize it to engineering fields like bridge building, where you're much more constrained in the degrees of freedom of what you can do. Software to me is much more like a creative activity, like writing novels. And new genres emerge, new movements emerge. And the movement that we're part of, the crypto blockchain movement, I think of as the most interesting and important kind of movement of the last 10 to 15 years, which is a new, it's a new way to think about software. It's a new software, it's about new software architectures, new ways to design things with this specifically important feature of what blockchain, and this is kind of the core argument of my book, what blockchains really are is a new way to build internet services that are architected in a way that there's no gatekeeper and no toll keeper. So you know, in your case, your company Circle, you're building a network that involves money and dollars, but the key, the sort of salient feature of the network you're building and how it's different than let's say Visa's network or traditional. It's an open permissionless infrastructure. It's an open permissionless infrastructure, which has all these other implications. And so, so it just quickly in the book, sort of the first third, I go through the history of this, how this happened.
Jeremy - 00:05:42:
Yeah.
Chris - 00:05:43:
The next third, I talk about these blockchains and these blockchain networks and all the kind of different properties and why they would, why you would prefer your solution to Visa. And then the last third, I kind of go through specific applications, including, including your application.
Jeremy - 00:05:55:
Yeah.
Chris - 00:05:57:
And, try to tease out the specific possibilities of what could happen in the future.
Jeremy - 00:06:00:
Yeah. Well, it's I think this, this idea that, you know, we're, this is a new infrastructure layer for the internet. It's obviously software, fundamentally software powered, although there's a hardware piece of all this too. Yeah. That, that, that, that was really what drew me to this, you know, 11, 12 years ago and sort of a belief that open source communities of developers that were contributing could continuously improve this, led phenomenon, which is really fundamental. And I think, we've had various degrees of orientation of the big tech companies to open versus close, you know, famously Microsoft, or super close, then Google tried to be the more open. It is fundamentally all out in the open with some exceptions, obviously. I think, like, as a technologist and as someone who looks at the technology, one of the things that people grapple with, and this is, I think, actually a lot of people who are just innocently trying to figure out, well, what is this, you know, how is this better? Like, the internet does all these things. How is this better? And, you know, I often try and start by talking about, like... The technology solving problems that the internet couldn't solve before. You know, the sort of shared state, right? Like we have this ability to have, you know, trustless shared state or transactions on that state without depending on anyone or compute that's verifiable. Like there's these technical things that are possible that these blockchain networks allow for. But a lot of times, you know, that's sort of techno speak, right? I think if you're oriented technically, you go, oh, that's really powerful, that makes a lot of sense. I could see what you could build with that and how that's different. When you kind of characterize like fundamentally, let's just say we are where we are today, or just fast forward even 12, 24 months and blockchain network infrastructure is at state X. What do you believe are the kind of step function things that people can build that are these fundamentally better designed applications, utilities, protocols, across a lot of different categories. What are those and kind of maybe in some ways do like the Coke versus Pepsi or whatever it is like, that in the there's the Uber version here and then there's the Uber version over here and talk about that. And obviously if there's current apps that you're super excited about that manifest in this way, it'd be great to talk about that too.
Chris - 00:08:44:
Yeah, I mean, so a framework I like for technology is all technology. All new technologies tend to do two things. They tend to do old things better and new things you couldn't do before. And it's useful to separate those two things, I find, especially with kind of software innovations. So old things better, what does that mean with blockchains? It means, for example, what you're doing, which is old things paying people with dollars, but you're doing it better and a big benefit is the economics of it, right? So if you're buying a hotel room or a piece of digital art or music or just anything on the internet, a significant portion, you know, two and a half percent roughly typically goes to just paying for moving those. Trillion dollar tax on the global economy. It's a trillion dollar tax on the economy. And that can be really meaningful in certain industries that are lower margin. So that's old things better. So you can do and, you know, a small software developer wants to build an application that involves money and paying people and paying people in the countries that don't support dollars, things like better global distribution, better economics. Better participation. So then those are very, I think, clear benefits of stablecoin. over the traditional payment system.
Jeremy - 00:10:01:
Yeah.
Chris - 00:10:01:
Now then. So that's sort of old things better. Then there's a new things you couldn't do before and those are always harder. This second category is always harder to imagine. Because it takes 10 plus years to figure out.
Jeremy - 00:10:12:
So, totally.
Chris - 00:10:18:
So, let's take mobile smartphones is analogy when smartphones came out 15 years ago. Old things better. Well, now you can do shopping in social networking on your phone. Instead of in a desktop.
Jeremy - 00:10:18:
Right.
Chris - 00:10:18:
But new things couldn't do before that was the Uber and Snapchat and look, the reality is-
Jeremy - 00:10:18:
The mashup of new things that we're just weren't possible.
Chris - 00:10:18:
Yeah. They want usually compounding things that just happened.
Jeremy - 00:10:18:
That's right.Yeah.
Chris - 00:10:18:
And I'm going to give you some speculations on that, but the reality is it usually takes time for that to play out because entrepreneurs are very creative and they're more creative than I am. And I wouldn't have thought of all the ideas.
Jeremy - 00:10:28:
I use the exact same analogy when I explain this. And I often say, like, we haven't hit the iPhone moment, meaning the surface to build on isn't quite there, but we're darn close.
Chris - 00:10:38:
That's right. I think we're getting really close. Yeah. But so new things you couldn't do before, just to give you some speculations, you know, with your kind of internet digital money, I think you could do interesting things where instead of having a person pay a business, you could have a machine or AI system pay another AI system. Machine to machine. Machine to machine payments.
Jeremy - 00:11:00:
Financial activity.
Chris - 00:11:01:
That's right. Micropayments, you know, very small payments. So you, you know, you maybe you have a system where you're, you know, you visit 10 different media sites that month. And then the. And then. And your software and your client divvies it up.
Jeremy - 00:11:12:
Tying together the physical world, human activity and economic value.
Chris - 00:11:17:
Yeah, exactly. And then and then just more broadly in the blockchain area, there's a whole bunch of what I kind of go through in the third part of my book. There's a whole bunch of new ideas sort of that, for example, entrepreneurs that we've invested in are building. So as an example, one area I'm very excited about is is this idea of in a, post-generative AI world, a world where anyone can push a button and create a movie and create a story, what are the business models for creative people? And so, for example, we have some interesting investments where they allow communities of people to come together and create intellectual property, and the system will automatically sort of say, this person contributed this much to the new narrative universe you created, and this person created this much. And then as that intellectual property is reused around the internet, people pay for using it, and the money cascades back to the original sort of people creating it. So it's a way to kind of track copyright intellectual property provenance in a way that's aligned with the internet's desire to remix and reuse content and have sort of an open system that's very accessible, but also make sure people that create a content are paid. Or for example, if your data is used for training data in AI algorithm, you should get paid. Today, it's very opaque. People are suing each other. It's frankly kind of a mess.
Jeremy - 00:12:28:
Yeah.
Chris - 00:12:28:
A blockchain is a very good way to keep track of these things.
Jeremy - 00:12:30:
Right.
Chris - 00:12:30:
So that's another example.
Jeremy - 00:12:32:
For sure.
Chris - 00:12:33:
You know, obviously, there's interesting stuff that's already happened around sort of DeFi. There's interesting new systems where digital artists are creating things like NFTs, and there's a whole new wave of video games that sort of have economies that are more open and peer-to-peer. So there's a whole kind of range of interesting things going on, some of which are kind of, again, old things you could do better, and some of which are just sort of brand new, interesting ideas that will probably kind of surprise all of us.
Jeremy - 00:12:59:
Totally. Yeah. I mean, the PFP stuff that happened was like, and all these kind of play to earn as well, PDE, like all these were like, wait, these are new behaviors, et cetera. I want to kind of ladder off of that a little bit. And first, kind of a tangent question, and then I want to come back into what I'll sort of say is more mainline, which is this ability to kind of convene a community of people from effectively anywhere in the world, and organize work and have a belonging, which is credentialed, like a credentialed belonging to an organization. What we talked about is DAOs, and DAOs are still talked about a lot. These on-chain organizations, it's fascinating. And I think one of the things that I think about a lot is, well, if we keep growing the number of on-chain organizations and they're using on-chain money like USDC and they're structuring their economic relationships on-chain, when do we need better laws? And I'm not talking about crypto markets regulation or stablecoin regulation. We'll come back to policy in a moment. But do we need laws for how these on-chain organizations themselves manifest and connect to, quote unquote, the real world? And or should we just not worry about that yet? I mean, we have, obviously, people designing DAOs under legal DAO frameworks in Wyoming and with LLC structures that are legal, in terms of the way in which the members exist in that. But there's a lot of experimentation. And I believe that a lot of this kind of new forms of work, new forms of coordination, new forms of value creation, in particular in the on-chain world, will happen this way. And I think it could be quite big. And so how do you think about that? Because you invest in a lot of different things and presumably, in a sense, you participate in DAOs. And just where do those lines, need to be drawn? And yeah.
Chris - 00:15:04:
Just, to kind of put it in historical context. So I think this is in sort of the context of kind of the death of Coase's theorem. So for those, you know, there's a famous economist, I think Ronald Coase is his name, who wrote a paper, I think, in the 30s or 40s. Yeah, Theory of the Firm. And the kind of question you're trying to answer is why, you know, in a capitalist market-based economy, why do you have firms at all? Why do you have organizations at all? Why can't you just go out on the street and bargain and create a deal for every kind of...
Jeremy - 00:15:31:
Yeah.
Chris - 00:15:31:
Transaction you do? And the basic idea was it would be a pain to go and do it. To sign a contract with everybody.
Jeremy - 00:15:37:
It's information theory. I don't know, Herbert Simon wrote a lot of it.
Chris - 00:15:40:
Yeah, yeah, yeah. So the basic concept was because of the difficulties of transferring information and trust and a bunch of other things, we create these sort of...we do this hack and we create these organizations where the trust is kind of baked in.
Jeremy - 00:15:51:
Yeah.
Chris - 00:15:51:
Right? And so one of the things people talked about in the 90s and 2000s with the rise of the Internet was the Internet was going to sort of remove the need for these hierarchical traditional organizations.
Jeremy - 00:15:59:
Right. Right.
Chris - 00:16:00:
And you could just sort of have this ad hoc group of people.
Jeremy - 00:16:01:
Yeah.
Chris - 00:16:02:
Get together and do things. And you did see that play out to some extent.
Jeremy - 00:16:05:
Yeah.
Chris - 00:16:05:
Like, look, open source software has become the biggest success in my mind is open source.
Jeremy - 00:16:08:
For sure. I mean, huge development of technical IP.
Chris - 00:16:11:
Yeah. Like, open source software is, you know, went from a fringe movement to 90% plus...
Jeremy - 00:16:14:
Scientific discovery, similar, right?
Chris - 00:16:16:
Yeah, scientific, like, you know, the stuff on archive with AI stuff happening there, stack overflow, math overflow.
Jeremy - 00:16:22:
All of these are great.
Chris - 00:16:23:
Like, you know, to some extent you could say things like DoorDash and Uber, the kind of gig economy stuff is like this. Wikipedia. That's right. That's right. But, so, I think there has been stuff. But, I think it's for these, the people that are true believers like I am, it's sort of underachieved in a way.
Jeremy - 00:16:37:
It is totally underachieved. Yeah. Yeah.
Chris - 00:16:38:
Like it's, and it feels like it could do more. So when DAOs came along, so DAOs are sort of, you create, you know, similar ideas to these, but now you have sort of economic relationships on a blockchain and people can sort of organize and coordinate work and pay each other.
Jeremy - 00:16:50:
Exactly.
Chris - 00:16:50:
And do all sorts of things.
Jeremy - 00:16:51:
They're having on-chain money and on-chain verifiable membership and obviously voting and like...
Chris - 00:16:58:
That's right. That's right.
Jeremy - 00:16:58:
You have corporate substance.
Chris - 00:17:00:
Yeah. Yeah. You can do a lot more things. And that, you know, that sort of, I mean, really DAOs started four or five years ago. People got really excited two years ago. And now there's like the excitement is a little bit down, but I think it'll come back.
Jeremy - 00:17:10:
Totally.
Chris - 00:17:11:
But to your point, there's a really kind of tough set of questions around how does kind of your on-chain relationships, transactions, trust map to the traditional legal world.
Jeremy - 00:17:22:
Right.
Chris - 00:17:22:
As you alluded to, there have been some, I think some important, there's some important developments. There's new corporate structures. So for example, Wyoming passed a law.
Jeremy - 00:17:29:
Yeah.
Chris - 00:17:29:
It's called the DUNA. I hope that spreads.
Jeremy - 00:17:32:
UAE did something.
Chris - 00:17:33:
That's right.
Jeremy - 00:17:33:
A lot of jurisdictional experimentation.
Chris - 00:17:36:
Yeah. And so these are new kind of corporate forms that are meant to sort of match and, I don't know, sort of align with these DAOs. And that's great. I think there needs to be other, there's other questions like you have, you know, a DAO does something like it buys a building and then there's a dispute and how do you adjudicate that dispute and what jurisdiction is it in?
Jeremy - 00:17:54:
Right.
Chris - 00:17:55:
I think those things can all be figured out with a good faith policy process. I mean, we can talk about policy here. Is that a lot of the policy makers we feel like, you know, not some of the early policy makers did not necessarily have a good faith process.
Jeremy - 00:18:07:
Yeah.
Chris - 00:18:07:
But these are all sort of solvable problems, I think.
Jeremy - 00:18:09:
Yeah.
Chris - 00:18:09:
And I think we'll get there and we're making progress. And as we do, that will kind of, I think, unlock a new wave of innovation around these ideas.
Jeremy - 00:18:20:
Yeah. I want to come back to that for sure. I believe very much in the proliferation of these kinds of organizations and I think that, you know, it'll be interesting to see if in three, four, five years, maybe it's longer, I don't know, where an entity that is coordinating work and labor and output and out-competing a large multinational corporation and to sort of see that. I think we will see that.
Chris - 00:18:46:
Right.
Jeremy - 00:18:46:
We will see that. And one could argue DeFi is sort of doing some of that even today.
Chris - 00:18:50:
I think there's also like there's a formal DAO but there's also like all the people contributing to your network.
Jeremy - 00:18:56:
Oh, yeah.
Chris - 00:18:56:
And building around it.
Jeremy - 00:18:58:
Absolutely.
Chris - 00:18:58:
And you have shared incentives. You can argue in a sense that all of those people and I'm sure there are many thousands, if not tens of thousands, are all sort of members in some sense of an organization.
Jeremy - 00:19:06:
Yeah. And we conceptualize it that way very much. But interesting. Okay. So that was a tangent which then comes back to maybe a more central question which is the role of digital tokens. And obviously, like blockchain networks and digital tokens are malleable. They can be, you know, represent anything, right? So, it's data effectively, provable data. And so, there's not really, there doesn't need to be a regulatory framework on just sort of like provable stored data on the internet per se. But when we start to sort of think about like digital tokens that provide economic incentives or incentives for coordination or incentives for governance. Now we start, you know, more powerful uses of digital tokens. Which are really central to innovation and building these new kinds of more decentralized applications and the like. In that place, do you feel like there's a clear, in your mind, a clear way to delineate between, let's just say, media or data and digital tokens that are, have this kind of accommodate, they can, like Heisenberg's principle, I don't know if that's the right metaphor, but basically, they can be multiple things at the same time. These digital tokens that have utility, they're used for governance, they have economic incentives, Is there a way in which you think about differentiating those in your mind, which is a leading question on the policy side of things as well? Maybe help us just think about token taxonomy.
Chris - 00:20:49:
Sure, sure. So, and this is a great question. So this is a big question. Maybe I could frame it a little bit, which is, so the kind of my argument, and it's not unique to me, but it's sort of core to my book is, that blockchains are new kinds of computers that let you do new things, and a particularly important thing they let you do is they let you have this concept of digital ownership. So that means that for the first time, I as a user... So the way that the Internet's architected today is you go to Twitter... You go to a service like Facebook, you go to a service like Uber, you log in, and you may be assigned certain things. Like you're assigned, I'm given a username on Twitter, I have a follower list, I have money in my Uber account, whatever it might be, but you have very little power as a user. You don't really, like on the example of a social network, I don't really own that name, my name's C. Dixon. I don't really own my follower list. I sign up, it's a terms of service.
Jeremy - 00:21:41:
You sign a TNC. Yes.
Chris - 00:21:41:
They can do whatever they want. I can't take that and move from one service to another, for example. Right? So there's no, there's a sense in which. The internet of today, there is no sense of kind of user ownership.
Jeremy - 00:21:52:
Until GDPR came along.
Chris - 00:21:54:
Yeah, well, the GDPR, that complicates things. But so the idea that a blockchain, so you think about Bitcoin, what was interesting about Bitcoin for the first time, right, is people had digital money that wasn't just sort of a record in PayPal's database under their terms of service. You truly, as long as you had that private key, you truly own that Bitcoin. And what people have done over the last 15 years is they generalized that idea. And so you can, an NFT is the idea that you can own a piece of digital media.
Jeremy - 00:22:21:
Unique digital certificates, et cetera.
Chris - 00:22:23:
That's right. So, the, kind of the, I guess the important point, it's basically what you're doing is you're introducing property rights to the internet.
Jeremy - 00:22:29:
Right.
Chris - 00:22:30:
And those property rights can, just as in the real world, you can own a house, you can own a piece of art, you can own a piece of money.
Jeremy - 00:22:35:
Right.
Chris - 00:22:36:
Similarly, in a digital world, they can be all sorts of things. From a policy point of view, what we argue is that we should think of it, again, as the analogy to the real world. It depends on how it functions. That's right. So it's not like, so for example, we have been arguing that a one size fits all policy of like everything that's a token is a security.
Jeremy - 00:22:53:
Makes zero sense.
Chris - 00:22:53:
Everything is a commodity.
Jeremy - 00:22:54:
Makes zero sense.
Chris - 00:22:55:
Makes no sense. It depends how it's used. So for example, if I create a token and that token gives you a right to the cash flow of my company, like that's probably a security because that's what securities are. If I create a token and it's like, you know, let's say Ethereum, where it's like this thing that you use, it's kind of fuel to run applications on that network, that behaves more like a commodity. And by the way, that's what the policymakers, you know, the SEC and those folks have said is that Ethereum is therefore a commodity. There are other things like something you might buy in a video game or some other object, which might just be sort of a good, you know, regular goods like you buy an orange at the store. So our argument is it depends on how it's used, the context, you know, and sort of, and you should basically take, we're not, you know, contrary to some of what our critics say, we're asking for like special rules. We're not. We're asking for the same rules you have in the physical world. Take those rules of how you classify
different types of things in the non-digital world and apply those to the digital world. And those tests in the offline world, they're functional tests. They're about how they're used, how they're designed. They're case by case.
Jeremy - 00:23:59:
Yeah.
Chris - 00:23:59:
They're criteria based. They're not sort of like all tokens are securities.
Jeremy - 00:24:03:
So I generally agree with all that. I think one of the things that I've advocated for some time. Digital tokens are a new, these types of on the internet, digital tokens can kind of have multiple functions, right? And so.
Chris - 00:24:21:
So each, a single one can kind of morph.
Jeremy - 00:24:23:
A single one can morph at any given moment in terms of what it does. And, you know, if I'm, for example, like I play a game and I get a token that I get rewards from for activities in the game that conveys sort of more community power for me in the game different ways. Or it becomes swappable for other artifacts in the game. It also maybe is liquid against something like USDC. So I could actually take it and convert it into dollars. But it also conveys voting activity. And like if I'm like a teenager playing a game or even a 23-year-old or whatever you are and you're interacting with this, like part of the beauty, part of the magic is that you can in fact do all those things. It can have all those manifestations. You know, there may be reasons why you want to have rules around how it's traded in a market. So the concept of a rules-based system is there. But if you attempt to say. It's a security under 1933, you know, securities law. Well, then you can't use it for these other things because the market structure and the regulatory structure that exists just won't work. Like are you going to have transfer agents and like qualified custodians like embedded in games all over the place? And so it feels like we need more malleability here in policy. And it feels like, you know, there's, this is a moment in time where policymakers need to accept more, degrees of freedom and more latitude and stick to foundational principles on some of this, but not try and superimpose the infrastructure side of the implications of what something is. And I feel like other jurisdictions are doing that better. They're sort of saying, hey,
there's digital assets. Here's how you want to issue one and promote it and market it. If an exchange wants to list it, here are the rules. But, its general utility is not prescribed in terms of the market infrastructure that it has to run on per se. There's more latitude in terms of its actual utility. And so I worry about that because I really think that we want to encourage entrepreneurial and developer creativity for how to apply these things. And even some of the bills that are being talked about, I worry that they actually put too much structure on some of these things.
Chris - 00:26:57:
Yeah, I think that's a great point. And I think part of your point, right, is that... That we want to leave freedom, like openness there for, because developers are very creative. And so if you overly prescribe the outcomes, but like, I think, so like FIT21, which is sort of the prominent market structure bill that the house passed, that's now, you know, some form of which may at some point be taken up by the Senate, which I think is, you know, there's always issues with bills, but I think it's generally a smart bill. The way I think it approaches it is on a risk-based approach, meaning, so like if you create a token and, you know, it's a sort of a network token, something like Ethereum or Bitcoin, and if a centralized organization originally creates it, as most things in the world are created, originally they're centralized, there are, for example, lockups placed on those investors and those founders for some period of time until there's no longer an information asymmetry so that they can't go out and promote the token and dump it. And I think those restrictions are very, we're very supportive of those restrictions. Those restrictions are gray area today and this would make it, and in many ways, this is, I think, this to me undermines one of the critiques of people like us. They say we want, they say that the crypto industry is lobbying to loosen regulations. It's actually, if they actually read the bill, it's the opposite in many cases. It's actually more restrictive in many cases.
Jeremy - 00:28:17:
Significantly more, right?
Chris - 00:28:18:
Yeah, it's just more restrictive, but it's restrictive in the smart way. So like what, like the bad behavior is, you know, project founders going and pump and dump and-
Jeremy - 00:28:26:
Yeah.
Chris - 00:28:27:
And things like this. And it's putting very, I think, I think much stronger restrictions on those types of things.
Jeremy - 00:28:32:
Right.
Chris - 00:28:32:
What it's allowing for is, you know, once, for example, once it's hit this threshold of decentralization and it's a commodity, you can do whatever, you know, the, those things you would want to do in your game. And you have a lot of sort of degrees of freedom to design things. There are still rules in place that like the CFTC rules for commodities and market manipulation and things like that, fraud rules, advertising rules. But there's a lot of freedom to sort of design things. So I think that's like the right, to me, the right kind of policy approach is to look at what the actual risks are. Design policy to mitigate those risks. And then on the rest of the things that aren't sort of risks allow for what you're describing, the creativity of entrepreneurs and developers and the sort of the humility to know that none of us really know where this will go.
Jeremy - 00:29:20:
Right. Right. And, you know, I think about, you know, when platforms and Web2 platforms emerge like Facebook and Twitter and the like, the ways in which just businesses like thought about how to apply and use this stuff was incredible. There was this incredible. And then those platforms started building a lot of products and features that were like really useful for people who are communicating in different ways or gathering communities in different ways and the like. If I think about on-chain, if I'm a consumer-facing company, I want to make sure there's clarity so that as a consumer-facing company, I might want to have many different digital tokens that are part of my toolbox in terms of incentives, rewards, engagement, economics, and stakeholder participation, all these things. It's got to be clear enough that these are not the equivalent of filing Form 4s or whatever to the SEC.
Chris - 00:30:23:
I totally agree. By the way, this sort of same discussion is playing out in other areas. So for example, AI, like a bad approach to AI regulation, in my opinion, is what you see in some of these bills, including the EU Act, AI Act, which is, you know, all models above a certain computational threshold, a number of 10 to 25 flops.
Jeremy - 00:30:43:
Have to be registered.
Chris - 00:30:44:
Yeah, have to go through some big process, right? That's just a sort of silly thing. In fact, funny enough, a lot of those thresholds they said have already been surpassed by open source models and the world hasn't ended and it's been sort of the doomers have overhyped it. A smart way to regulate AI is to say, hey, if you build an AI system that helps you create a bomb, you know, you go to jail. Like that's a smart regulation, right? So the point is a smart way to, like a bad way to do it is to make these arbitrary technological kind of limitations that reign in the creativity of entrepreneurs and developers. A smart way to do it is to say, what are the actual risks and how do we disincentivize that behavior, right? As opposed to kind of fearing and banning and slowing down the technology overall. Which is, you know, I just think we're living in a time right now for whatever reason where there's a lot of negativity towards technology and you see this with all of these emerging areas like crypto and AI where there's kind of these-
Jeremy - 00:31:36:
A lot of fear.
Chris - 00:31:36:
Yeah, and it's really kind of blunt instruments being applied to what you're describing. As you're describing, it should be much more of a nuanced approach.
Jeremy - 00:31:44:
Yeah. So let's actually, I want to kind of talk about politics and policy for a moment. And, you know, This episode is being released before the presidential election and many, many other elections of people in Congress and the Senate. There's a lot of active dialogue going on about what should crypto policy be? How should the country think about it? Policy platforms are being developed by both of the campaigns. You know, this is all kind of taking shape literally as we speak. And, you know, I think you've heard me talk about this. Like, I, you know, circle is purple, as I like to say. And we really are. And our view is that, like, you know, I've been building this company through three different administrations, Republican, Democrat, a lot of different stuff. And sort of it's been the same message for 11 years. And so here we are. It seems like we're on the cusp of significant policy work that's going to happen here. Whether it happens pre-election or post-election, it's going to happen. And, um... And rather than sort of talk about, you know, one party or another, what their platform is, it's just... If you agree with me that crypto is purple. Because it is a generalized technology. There are people who argue that actually, no, it's fundamentally a libertarian technology and therefore you ought to vote along a libertarian pathway. I believe it's actually like strategic, important technology infrastructure that makes America competitive, makes for, you know, accomplishes all the things that you believe can be accomplished through this technology. So if you take that view, what is the message to all of those politicians who are trying to figure out what they should think. And they're trying to figure out what stake they should put in the ground when people ask them, what's your position on crypto? Like, you know, step aside from the bills and the nuance, which we were just in, but just get to the basics of like, what should someone think for America specifically, for the United States? What should they be thinking about as they engage with their constituents over these coming couple months?
Chris - 00:34:11:
Well, I think that, like, I think that policymakers, I think kind of the, if you chart out the history of this topic, People kind of ignored it for the most part, you know, for. So say the 2010s, the policymakers did. There was some activity, but it wasn't, I mean, sort of a prominent issue. And then, you know, then there was sort of this 2022 period with SBF and things like this and then the crash. And then we had a very aggressive kind of executive branch, agency led approach to this. And I think a lot of people who were kind of leading that effort thought that they would just sort of kick it and it would go away.
Jeremy - 00:34:46:
Right, right, right.
Chris - 00:34:47:
And the reality is it hasn't gone away. It's not going to go away. And you now have, you know. Hundreds, if not thousands of very strong entrepreneurs in the United States, building this technology, 52 million Americans, according to the latest surveys, own crypto. And frankly, the policy approach is a mess. So the SEC has approached this through what people call regulation by enforcement. They've refused to give out any guidance, which is the normal way that agencies are supposed to regulate new industries. They've done it through enforcement, which means legal actions. We now have contradictory court rulings. So you literally don't know what, we literally do not know what-
Jeremy - 00:35:23:
This is what Congress is made for.
Chris - 00:35:25:
Yeah, we literally do not know, like if we tell, like the best evidence we have to tell entrepreneurs what to do are court rulings. And many of those now contradict each other, right? And they're district level courts of equal standing. There has, over the many years that will get appealed and worked out maybe at the Supreme Court level. But for now, we don't actually, we literally don't have rules. So I've been going, look, I think as you have, I've been going to DC for a couple of years now. I go at least every month.
Jeremy - 00:35:49:
You go in 11 years.
Chris - 00:35:50:
Yeah. So- And I just hear again and again, and this is, by the way, is very bipartisan. It's very much on the Democratic side as well, that like, this is a mess. We need to fix it. Like that is the growing consensus, right?
Jeremy - 00:36:02:
Yeah.
Chris - 00:36:02:
And so then, and I, and, and, so just empirically, that is a bipartisan. I mean, I, half, if not more of the meetings I've had are with Democrats. Like there are obviously some Democrats who, who hate crypto and will always do that. But I think that's the minority of the party.
Jeremy - 00:36:16:
Eventually they'll come around.
Chris - 00:36:18:
Yeah, but most of the party in Congress and the House and the Senate realize that they need to address this and want to approach it in a reasonable way. Of course, people debate the specifics, but the basic idea is how do you put guardrails around it and allow for innovation, right? So I think there's a growing consensus on that issue. I would also say to the crypto industry, there's some people in the industry that think, oh, the... This should be a partisan issue. I just think, look, putting aside their politics, I disagree with them just on a purely tactical level.
Jeremy - 00:36:46:
It's like saying AI should be partisan.
Chris - 00:36:48:
Well, yeah, and it's also just tactical. The only way to really get a solution here is legislation. Otherwise, it's every couple of years you have a new president, things switch around. Entrepreneurs can't build in that environment. We need to get together and through a democratic process decide on what are the rules of this game. And the best way to do that and to entrench that and to make sure that it lasts and to make sure that entrepreneurs have predictable ground on which they're building, solid ground on which they're building, is to pass legislation. And I think we're close to doing that on stable coins, on market structure, on a bunch of other topics.
Jeremy - 00:37:19:
It's going to be more.
Chris - 00:37:20:
And that needs to be bipartisan. It has to be. It just has to be bipartisan. And so that's the only way in my mind to approach this. And there's a lot of support on both sides. And I think it will be. I think it will be. I think in the end, this will be a super majority bipartisan agreed on issue. And people will look back on this period as like, I can't believe that they thought they could just ignore this.
Jeremy - 00:37:39:
Yeah. Yeah.
Chris - 00:37:40:
Or use this ridiculous process they're doing now. Yeah. Which is just not working. It's it's I think, you know, today, like it's like all that that approach is done in my mind is hurt the good entrepreneurs. And if anything, scams and bad actors are greater than ever. Like it's doing exactly the opposite of what a smart policy should do. So it's just simply not working. And more and more people are realizing that. And I think we're going to we're going to see a change.
Jeremy - 00:38:06:
100% agree. And I'm optimistic about that. And my hope, obviously, is that, you know, the creativity that people have in what they're building on chain and they're building on this infrastructure is, you know, reasonably unencumbered. So that, like, because there's so much that's in front of us, right? And which actually kind of leads to my last, like, key question. I kind of, I'll draw on, you know, one of the comments that you made earlier, and we're both kind of had the glean in the eye around, like, I think we're really close to, like, where the, you know, the user experience in a sense, right? All these things can come together, the infrastructure, the user experience, what developers can do, like, all this, the iPhone moment idea. And I really... It feels like all of this could line up really nicely where we have. Legal clarity. At least significant legal clarity, and we have this kind of technology readiness, and then the creativity happens and blossoms in that way. But with that in mind, what are the things that... You see today that in your gut say, I think we're really close. Why are we really close? What are the gaps to close still? Forget about policy for a minute, just purely at a technology and a capabilities level. What are the gaps to close and what do you think that looks like?
Chris - 00:39:33:
Yeah, and so, I mean, to your point, I think the technology has gotten, the technology gaps have almost all gotten closed. And it's happened very recently. And so the fact that you can build on a, you know, on a layer two on Ethereum, so something like base or optimism, you can build on Solana.
Jeremy - 00:39:47:
Yeah.
Chris - 00:39:47:
You can, you know, build. Relatively easily with low gas, with low transaction. The prices have gotten low enough now that the applications can subsidize them, which I think is a critical point, right? Which means you can basically like raise venture capital.
Jeremy - 00:40:01:
It was like when bandwidth got cheap enough that you could like push meaningful content and apps out, right? You're sort of the equivalent.
Chris - 00:40:07:
And so we're now there, and it's really only been this calendar year that that's been the case because you had a lot of big upgrades to these systems. So just look, there's still lots of little things like everyone always complains about the number of steps you have to go through to like onboard and go through.
Jeremy - 00:40:18:
The crypto should be more invisible.
Chris - 00:40:19:
Yeah, and some of this is like regulatory. You've got a KYC and you've got to do other things, but some of it is just, I think just kind of working out the kinks. But I think we're getting very close. I think the big thing is the policy side. This is why I spend so much time on it. Like to me, that's the big missing thing. I think the technology actually, unlike three years ago.
Jeremy - 00:40:36:
So on the policy side, the capital and the entrepreneurship will just kind of really, really go.
Chris - 00:40:39:
I mean, look, there's all little things here and there, but I think the core technology is, or another way to say it is if you kind of think of blockchains as mapping historically onto, you know, the past computing trends where there's kind of a Moore's law, there's kind of a price performance curve. I think we're at the point of the price performance curve where we're good enough. And this is probably the first time this year where we are. Whereas like three years ago, we weren't. Because three years ago, it costs $5 sometimes to do a transaction. And that meant you just, you couldn't do things like social networks and games. Now you have real social networks, games, you know, anything you can do. It's an internet service today. You can do as a crypto blockchain.
Jeremy - 00:41:13:
We need chain of traction to be more of a thing.
Chris - 00:41:16:
Yeah, there's things like this and user experience. Yeah, there's still like you have to, you see too much of the underlying, you know, stuff. Like you said, like which chain you're on shouldn't even be a thing that consumers know. So there's definitely improvements to make. And I'm sure you're working on a bunch of them. And, you know, Coinbase is and a bunch of other great companies. But I think the big, like I just say this as someone who speaks to entrepreneurs all the time, like a lot of entrepreneurs who are really good at building applications don't want to enter the space right now with the policy uncertainty. They don't want to, no one wants to say, I'm going to start a company and then maybe I'll get, you know, because it's basically a random number generator, so whether you get sued because there seems to be no like principled action. Do I, am I going to just randomly get, spend the next five years getting sued by random government agencies?
Jeremy - 00:41:57:
Right.
Chris - 00:41:58:
Because they have some political cracks to grind.
Jeremy - 00:42:01:
Right.
Chris - 00:42:01:
And so no one wants to do that. And so we've seen like as a result, a lot of the best entrepreneurs are going into AI and other areas. So policy is not just about policy. It's about creating a conducive environment for entrepreneurs to work in.
Jeremy - 00:42:15:
Rules of the road.
Chris - 00:42:16:
Yes, rules of the road, where you incentivize the best people to enter, and you disincentivize the bad actors. And right now we have a system that incentivizes the bad actors and disincentivize the good actors. And so that, that's why policy is so important. I mean, obviously it's important in and of itself, but it's important for the secondary thing of who it incentivizes.
Jeremy - 00:42:30:
Yeah. I definitely see that. I think. Well, I want to make a date with you. I think we started talking about the possibilities of this. Over 10 years ago, I think. I remember sitting down with you over a meal and talking about visions of some of this stuff. So in 10 years, let's get together and we'll make another episode. All right, sounds good. And I suspect that we'll be incredibly pleased with the progress and probably like, blown away. So we'll like commit to like rewatch this then and see what that looks like. So 2034, stay well. Great to have you and wonderful conversation, Chris.
Chris - 00:43:11:
All right. Thanks, Jeremy.
Jeremy Allaire
Co-Founder, CEO & Chairman at Circle
Chris Dixon
Author & General Partner, a16z