Chris Dixon: Crypto Isn't Dead, Web 2.0 Is Broken

"People that say crypto is dead, I don't agree," declares Chris Dixon from a16z, one of Silicon Valley's most influential voices on blockchain technology. While skeptics point to FTX collapses and market crashes as proof of crypto's demise, Dixon sees something entirely different.

As the founder of Andreessen Horowitz's crypto fund and the investor behind Coinbase's early success, Dixon has witnessed every boom and bust cycle in tech for 25 years. From the dot-com crash to AI winters to blockchain volatility, he's learned that the most transformative technologies often look dead right before they change everything.

In this candid interview, Dixon reveals why he believes we're on the brink of Web 3.0's true breakthrough moment - and why the current "crisis" in internet business models might be exactly what blockchain needs to finally fulfill its promise of returning power to users.

Chris Dixon: My name's Chris Dixon. I'm a general partner at Andreessen Horowitz, and I am the founder and managing partner of our crypto fund. I have worked in the Internet business for my entire career, for about 25 years. I started off as a software engineer and then I became an entrepreneur.

My first company was a security company which was acquired by McAfee, the large security provider. My second company was an AI company which was acquired by eBay. I also started angel investing about in 2006. Invested in a bunch of prominent internet startups like Pinterest and Stripe, Kickstarter.

I joined Andreessen Horowitz in 2013. I led our investment in Coinbase in 2013. Oculus, the VR company that Meta acquired about five years ago, started our crypto fund practice which I lead today.

Chris Dixon: So when the internet started in the 90s, most internet services were what we call kind of the technologies, technologists call read only, meaning you'd go to a website and you consume information. And back then they kind of looked like magazines or brochures and for the most part, you didn't have things like social media in the 90s.

And then there was a movement called at the time, in the 2000s, I was part of this movement. It was called Web 2. It was also called the read-write movement. The motivating concept behind that movement was the Internet can be more than it is today. It can be more than sort of a passive consumption consumptive medium and specifically what that meant is we can build social media, what we call social media today.

So we can build websites and services where instead of you just going and reading content that an editor wrote, you can submit content so you can build Facebook and Twitter where you can post content and read that content, right? That was the web too movement. It was about making the internet a full kind of participatory medium, allowing people to not only read, i.e., consume information, but also write, i.e. publish information.

The most important internet services are networks. So if you think about Facebook and Uber and WhatsApp, these are networks, and a network means they're services that connect people together and networks have what are called network effects, which means that the more people that use them, the more valuable they get and one consequence of that is that as some of these services have gotten very big, they've gotten very, very powerful.

As a result, I think we're at a serious risk right now of ending up with an internet that is really just sort of 4 or 5 large internet companies like Google and Amazon and Apple and Facebook and so forth, which I think would be a bad outcome for startups and for society more generally.

Chris Dixon: The promise of the Internet initially was to be a decentralized network that returned power and money to the users of the network instead of sort of central intermediaries the way that prior media industries looked. If you think about, at least in the United States like TV and radio and all the other kind of media businesses were very centralized. There were a few big channels that kind of controlled everything, controlled all the money.

And the internet, when I got involved and I think a lot of people in the 90s got involved, what was very exciting about it, it would shift the money flow and the power back to the edges of the network. And that happened somewhat for the 90s, but then in the 2000s, a lot of that kind of started to reconsolidate and you fast forward to today and the top five tech companies account for 50% of the NASDAQ 100 market capitalization.

In the second part of my book, I argue that the best kind of countermeasure, the best way to counter this consolidation is a new wave of internet services built on top of blockchains to kind of think of the simple way to think about a blockchain-based internet service is it's a service that removes the gatekeepers and the tollkeepers.

If you look at Facebook and Uber and Amazon, all these services, YouTube, Twitter, one of the key features is that money flows through these systems, whether it's money paid for by advertisers or through commerce, people sending money. Those services have what are called take rates, and take rates, it's a term Internet term that means the percentage of the money that flows through the network that goes to the owner of the network. Internet services, they have very high take rate from 50% to 100%. Most of the money flowing through these systems go to these service providers.

What I see is the potential of blockchains is to introduce a new element, a kind of a new capability of the internet which is ownership. So blockchains are powerful inventions that can do many things. I refer to them as kind of a new class of computer that exists on the internet, sort of cloud-based computers. They can do many things, but one of the key things they can do is they can enable digital ownership.

Chris Dixon: You think about something like a Bitcoin. One of the interesting properties of a Bitcoin is that if you have the private key, if you have the code for a Bitcoin, you own that Bitcoin in a way that you don't own, for example, your data on Twitter and Facebook.

So like I have a following on Twitter and I've built it up over many years, but if the owners of Twitter decide they want to take that away tomorrow, they can. So in that sense, I don't own that. And there have been many cases of this, by the way, where people have lost their accounts and lost their data or whether it's objects in a game or stuff on social media or your account on PayPal, in the existing dominant paradigm of the internet, there is no kind of concept of user ownership.

In the new model, in the blockchain model, users can own things and what that does is that shifts power back to the users. So if the user can own something, then it can't be taken away. And so just to give you the example of social media, if I own my handle and I own my followers. If I don't like what the service is doing, I can take that handle and take those followers and switch, and I can go to a different service.

In the kind of the new blockchain paradigm. I can own that name. I can own my follower list. I can own my data. I can own a set of data that I contribute to an AI algorithm. In the existing dominant paradigm, the only kind of things that can own things on the internet are services or the companies behind services.

Chris Dixon: We're at a point now where the web 2 companies like Facebook have billions of users and blockchain services, well, if you count like the number of people that own crypto, it's in the hundreds of millions, but the number of people that use internet services like this new wave of games and social media, it's in the tens of millions, which is a lot of people, but it's actually a small percentage of internet users, so we're still in a relatively early stage of this development.

I think that's due to a few things like one is the infrastructure, sort of the underlying infrastructure to use these services is still a little bit, it's taken some time to get it to be performing, low cost, high quality user experiences. I think we've just only recently gotten to that point where you can like, for example, play a blockchain-based crypto game and it feels kind of like a non-blockchain game and the whole user experience and the expenses and everything else. So we're still relatively early in that process.

Yeah, one of the concepts I talk about in my book is that I argue that there's two cultures, two different cultures that are excited about blockchains. I call one the casino and one the computer, and the casino are people who are more excited about the kind of speculative aspects of taking a token, meme coins, buying and selling things, sort of things like people that use FTX, and other kinds of services like that.

And then there's the computer which I see myself as part of which is the people that are much more interested in this kind of broader vision of building a new wave of internet services that enable digital ownership that have low take rates that are owned and operated by users and that's what we try to promote and invest in is the kind of computer side of things.

Chris Dixon: I think the casino side, by the way, has just gotten a lot more attention and has, I think negatively shaped the perception of the broader space and that's unfortunate. What I'm hoping is that we'll have smart policy and regulatory frameworks that really tamp down on the casino stuff and allow for the computer stuff.

I think there's been really bad policy decisions made, especially in the United States in the last couple of years that have actually encouraged the casino behavior. There were more meme coins created last month than there were 500,000 created something like that last month, so far more than any time in history, so the casino behavior is probably at an all-time high.

And meanwhile, the regulatory policy has actually significantly stifled the computer, the productive behavior, which is exactly the opposite of what a smart policy would do. I'm hoping that will change. I think there's a lot of good signs.

Chris Dixon: And look, I think crypto has had its challenges for sure and specifically, you know, FTX in the US and I think Terra Luna in Korea, right? I mean there have been a bunch of, there were a bunch of bad things that happened a couple of years ago. People that say it's dead, like I don't, I don't agree and I think that every interesting technology has gone through waves.

It's a mistake to jump from there were bad uses of this technology to therefore that technology is bad. The technology itself is neutral. My experience has been that every interesting technology has gone through waves, you know, AI neural networks have been around since 1943, so 80 years. The concept of neural networks and then artificial intelligence has been around equally as long, you know, Alan Turing wrote his famous paper where he described what's now called the Turing test. I think that was 1950.

There was a lot of research going on, people building systems to play chess, so-called expert systems, which are systems that would try to replicate expertise in, let's say, medical or legal knowledge. People forget this, but there was actually an AI financial kind of boom in the 1980s in America. There were a bunch of companies building expert systems that went public on the market, so there was a lot of government funding.

If you haven't been paying attention, it may seem like AI is new. It's actually a very old area that's had a lot of ups and downs, which by the way, is, I think it's true of a lot of technologies and we'll talk about crypto and blockchains. I think it's also had its ups and downs. You know, mobile computing's had its ups and ups and downs. Most people didn't experience the internet until the 90s when it went mainstream, but actually, you know, the internet started in the 60s and there was actually fairly large companies in the 1980s and a bunch of activity in the 1970s.

Chris Dixon: All technologies can be used for good and bad. A hammer can be used to build a house and it can be used to destroy a house, right? Fertilizer can be used to grow crops and it can be used to build explosives. AI can be used for cheating and scams, creating bioweapons, or it can be used for enhancing human creativity and flourishing. Blockchains can be used for scams or they can be used for productive new wave of internet services that shift money and power back to internet users.

The way that we make sure that a technology is used for good and not for bad is by putting rules around it. And so I think it's a mistake to conflate, to confuse specific applications of a technology with the technology itself. And what I try to do in Read Write Own. I try to fully describe the productive use of blockchains.

It's a mistake to jump from there were bad uses of this technology to therefore that technology is bad. The technology itself is neutral. It's up to people and governments to channel the potential of that technology in positive ways.

Chris Dixon: So you think about Google, you know, you search for something, you still click through and go to these websites. And those websites make money on advertising and paywalls and other things. In an AI world, you're not gonna need to go to the websites, OK? So we're very clearly, quickly entering a world where a lot of these creators will not have an economic model anymore, right?

Why would I pay an illustrator when I can just go to Mid-Journey and create an illustration? And of course Mid-Journey and all these services probably learned a lot of their AI from that data, but they're not paying them any money. I think that's kind of a depressing outcome. You're gonna end up with the internet with 5 services. And it's going to disenfranchise all of those people who currently make money on the internet.

And so I think we're headed to kind of a crisis in the next 3 to 5 years on the internet where there isn't gonna be a lot of existing business models are just gonna go away.

Chris Dixon: One of the many things I think exciting about theory Protocol idea is it introduces a new business model in that world. You get sort of what's beautiful about the internet. You get the combined creativity of all these people. Maybe one person's good at creating stories, one person's good at inventing characters, somebody else is good at combining them together.

Someone else takes that and forks it the way you fork a software project and creates a different version of it. Maybe one person creates a comic, one person creates a video game. Maybe one person does it by hand and someone else uses an AI system and all of that stuff is allowed as long as the person creating that Lego brick decides it's allowed. They can set those terms and so that's what Story Protocol does is it lets you set the, create those objects, set the terms, track that on a blockchain.

Blockchains are very good at tracking that in an immutable way and then for every blockchain object that corresponds to a legal agreement that can therefore if necessary be enforced through the legal system. So it's not relying simply on people trusting the blockchain, there's sort of this connection to the existing copyright world and it doesn't hold back AI.

AI can be part of it, it's like you can use an AI system to create these Lego bricks, you can use an AI systems that consume these Lego bricks like that's fine as long as you comply with the economic terms that are specified in the blockchain, you're allowed to participate in whatever way you want, but it provides a sort of internet scale system for allowing anyone to contribute and be creative and get paid for that creativity.

Chris Dixon: So my book is called Read Write Own, and it's about the potential of blockchain and crypto technology. Over the years I have had many conversations with people about the value and promise of blockchains, and in the course of those conversations I often found that it was a challenge to explain it all in a single meeting because there was kind of prior knowledge required.

The value of writing, whether it's a blog post or a book is a couple of things. One is what I like to do is to try to kind of nudge entrepreneurs into, you know, like put out ideas that might help them and help accelerate their thinking and hopefully, you know, attract more people into the space, get them thinking about the technology kind of along the right way.

So the key feature of blockchain is you can build new internet services and those services can be anything we use on the internet today. They can be social networks. They can be games, they can be marketplaces, they can be AI services, but they're internet services where there is no gatekeeper and there is no tollkeeper. The service is controlled by the users. The money flows to the users.

What I hope it is, the book is, you know, it's a comprehensive guide written in a very kind of plain English way, a plain, you know, kind of a straightforward way for non-technical people to get a full kind of understanding of how the internet works, the history of the internet, and the promise of blockchains and why I'm excited about them, why entrepreneurs are excited about them, and I look, I also wrote it for policymakers.

Chris Dixon: I started my career when people said the internet was dead. I mean, I started my first company in 2003 and 2004. I've found all the best opportunities in my career have been when people say something is dead. My experience has been there's lots of ups and downs. AI had its ups and downs. The internet has its ups and downs. Crypto's had its ups and downs.

If you wait till things are up, you're gonna be, you know, there's gonna be a huge crowd doing the exact same thing you're doing. The way that you actually are successful, in my experience as an entrepreneur or investor is you've got to have high conviction and be willing to bet on things through ups and downs.