May 8, 2019 · 50m · a16z
Seven Trends in Blockchain Computing (Spring 2019)
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In this a16z interview, Chris Dixon and Olaf Carlson-Wee discuss seven fundamental trends shaping blockchain computing, covering developer tooling, scalability, Proof of Stake, autonomous smart contracts, DeFi, market cycles, and decentralized Web3 applications.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 6.3 Guest teaching 3.6 Guest disagreement 1.6 The host pushing back 1.7
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:38 Olaf dismisses proof-of-stake security skepticism
Olaf forcefully rejects the premise that proof-of-stake governance is easily vulnerable, pointing to live networks like Tezos and Cosmos operating with active multi-million dollar economic attack bounties.
Hardest push from the host ▶ 13:08 Chris challenges proof-of-stake plutocracy and bribery risksChris directly confronts the guest with common skeptic arguments, asking if proof-of-stake governance inevitably devolves into a plutocracy controlled by large investors or becomes vulnerable to bribery attacks.
Biggest teaching moment ▶ 14:31 Olaf educates on proof-of-stake slashing mechanicsOlaf clearly reframes the security dynamics of consensus algorithms, demonstrating that proof-of-stake allows targeted deletion of an attacker's funds via hard forks, whereas proof-of-work forces the network to brick mining hardware for both good and bad actors.
The host holds their own ▶ 4:28 Chris breaks down hardware processors vs blockchain ledgersChris demonstrates authoritative technical expertise by re-contextualizing early Bitcoin architecture, explaining how WebAssembly runtimes transform blockchains from simple storage ledgers into full-featured virtual processors.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Olaf Carlson-Wee's Early Background in Cryptocurrency | 6 | 3 | 1 | 1 | Chris Dixon leads the interview by drawing parallels between early Bitcoin scripting limitations and the developer abstraction breakthrough enabled by Ethereum, comparing it to the iPhone software stack. Olaf Carlson-Wee elaborates on his early background and how Ethereum wallets acted more like browsers than bank accounts. | |
| Trend 1: WebAssembly and Upgrading Developer Abstractions | 7 | 3 | 1 | 1 | Chris demonstrates strong technical depth by explaining the difference between a blockchain ledger and a full computing platform processor, as well as detailing how WebAssembly allows developers to leverage existing compiler toolchains like Python and Rust. | |
| Trend 2: Blockchain Scalability, Parallelism, and Sharding | 6 | 4 | 2 | 3 | Chris outlines the transition to wave three smart contract platforms, focusing on sharding and scale-out architecture, while asking about protocol upgrade trade-offs. Olaf explains on-chain governance as a method to align protocol development funding through coin dilution. | |
| Trend 4: Proof of Stake Security, Finality, and User Experience | 6 | 6 | 3 | 5 | Chris presses Olaf on skeptic arguments regarding plutocracy and bribery attacks in proof-of-stake systems. Olaf counters forcefully, educating Chris on how proof-of-stake allows targeted slashing of attacker funds via hard forks compared to catastrophic proof-of-work hardware bricking. | |
| Trend 5: Autonomous Software and Smart Contract Composability | 7 | 3 | 2 | 2 | Chris provides historical context on platform adoption using early Apple II marketing analogies and critiques the misapplication of Web2 daily active user metrics to Web3 financial protocols. Olaf agrees, noting that financial services on open source move at rapid speeds. | |
| Internet-Native Autonomous Entities and Permissionless Architecture | 7 | 3 | 1 | 1 | Chris highlights smart contract composability using Lego brick metaphors and platform lock-in risks seen with Web2 platforms like Twitter and Facebook. Olaf clarifies that decentralization is a technical architecture designed for permissionless building rather than a political ideology. | |
| Navigating Market Cycles and the Two-Step Go-To-Market Model | 6 | 4 | 2 | 2 | Olaf reviews the 2017 funding wave versus 2019 protocol launches like Cosmos, framing the current phase as developer-focused. Chris formalizes this as a two-step go-to-market strategy where developer infrastructure must precede end-user applications. | |
| Trend 6: Decentralized Finance (DeFi) and Stablecoin Architecture | 7 | 4 | 1 | 1 | Olaf breaks down MakerDAO and crypto-collateralized stablecoins as foundational building blocks for DeFi. Chris presents Balaji Srinivasan's framework and offers an insightful conceptual model comparing money to an open file format rather than a gated web service. | |
| Education, Perception Gaps, and Incentivized Infrastructure | 5 | 3 | 2 | 1 | Chris observes the huge delta between media public perception of crypto and the underlying technical reality found in whitepapers. Olaf agrees, pointing out that media coverage typically reflects short-sighted investor price speculation rather than protocol building. | |
| Trend 7: Vertically Integrated Web3 Applications | 7 | 3 | 1 | 1 | Chris introduces the trend of vertically integrated Web3 applications using the Blackberry full-stack mobile precedent. Olaf illustrates this dynamic using 0x, Celo, and mobile-first stablecoin infrastructure. | |
| Decentralized Resource Markets, AI Data, and Privacy Cryptography | 6 | 4 | 1 | 1 | Chris proposes decentralized data protocols for AI training and genetic research. Olaf explains how homomorphic encryption and federated learning allow machine learning models to train on encrypted user data without exposing plain text. | |
| Non-Fungible Tokens (NFTs), Digital Goods, and Gaming Economies | 6 | 3 | 2 | 1 | Chris discusses non-fungible tokens (NFTs) and digital goods, referencing early World of Warcraft gold farming as a precedent for legitimate digital ownership. Olaf expands on how open standards enable cross-game modding economies and crowdfunding. |
Statements from this episode (27)
Carlson-Wee: Bitcoin enables internet digital scarcity and sovereign-free finance
“It means that for the first time you can have digital scarcity on the internet, And of course you could move to a global unified financial and monetary system that's outside the scope of any sort of sovereign state political control and is really opt in by all…”
Carlson-Wee: Ethereum wallets function more like web browsers than bank accounts
“For me, I started seeing a big, like, breakthrough in my head was when I realized that Ethereum wallets were actually more like browsers than bank accounts.”
Carlson-Wee: People underestimate how much developer abstraction matters
“And this is one of the things I think people really underestimate how much the developer abstraction matters.”
Dixon: WebAssembly will become the world's most dominant software runtime environment
“There are now billions of computers that run WASM natively and it will soon become, or already is, and it's going to continue to become the most dominant kind of runtime environment for software in the world.”
Dixon: Security audits consume at least half of Ethereum project development time
“Like, I think at least half the development time probably is security audits.”
Dixon: Third wave of blockchain computing will arrive in 12 to 24 months
“And now I think what we're seeing over the next 12 months or so, maybe 12 to 24 months, is the kind of the wave three happening, right, which is taking the ideas of Ethereum upgrading the developer experience like you just discussed very importantly, upgrading…”
Carlson-Wee: Delegated Proof of Stake Sees 70-80% Token Holder Participation
“So in a lot of these, Delegated proof of stake protocols. You see, you know, 70, 80% of token holders participating in consensus.”
Carlson-Wee: Secure On-Chain Governance Is Achievable and Primary
“I'm very skeptical that we can't achieve very secure on-chain governance. I think we can. And to me, it's a very big deal because if you get governance right, in theory, everything else should be a sort of waterfall down from that.”
Carlson-Wee: Ethereum has 100 times more app developers than core developers
“Ethereum has this weird problem where there's probably a hundred X the number of developers building apps on top as there are building core protocol stuff for Ethereum.”
Carlson-Wee: Mitigating 51% attacks is significantly easier in proof-of-stake networks
“The second thing is that if you attack a proof of stake network, mitigation of the attack after it happens is significantly easier. So if you, come in with, you know, 51% of the coins, and in, in most proof of stake, it's actually 34% of the coins is enough to…”
Dixon: Sub-second transaction finality is impossible in proof-of-work systems
“You just simply can't have, ah, like sub-second transaction finality in a proof of work system. Like, so Bitcoin, like you really need to wait, you know, each block is 10 minutes, and it has to do with the coordination among the network, and the network propag…”
Carlson-Wee: Almost every blockchain launching in 2019 uses proof-of-stake
“There's a reason that every, you know, I think 2017 was a major year of fundraising. And 2019 is a major year of launches, and there's a reason that every blockchain that's launching today is mostly using proof stake.”
Carlson-Wee: Daily active users is the wrong metric for financial crypto products
“People are talking about daily active users, but of like financial products. It's just odd thing. So like, are you a daily active user of your mortgage, right? It's like the wrong framework. It's just the wrong question, right?”
Dixon: Web2 prioritized DAUs because its main business model was advertising
“Well, the reason everyone was so focused on DAUs for web two was because the main business model was advertising. And that was driven, so it was a proxy for what the business model was, right? But ultimately, if you have a business model that is not dependent …”
Dixon: Core blockchain innovation is autonomous software with game-theoretic guarantees
“This is the sort of idea to me, the key idea of a blockchain is that the code continues to run as designed and it has sort of game theoretic guarantees that it will. Right? And that gives code this autonomous, at least autonomous, not in the sense of like AI a…”
Carlson-Wee: Decentralization is an architecture for permissionless building, not an ideology
“Decentralization is not an ideological thing. It's an architecture to support that permissionless building.”
Carlson-Wee predicts DAOs will use internet money for financial contracts
“If we do have these sort of decentralized, autonomous corporations or something, they're going to be using the internet money in order to communicate among each other and create financial contracts and things like that.”
Carlson-Wee: Cosmos is first system enabling cross-blockchain interaction
“And Cosmos is a great example, launched just about a month ago. And it's sort of the first system we've ever seen that will allow cross blockchain interaction.”
Dixon: Layer-one blockchains take at least 12 months to get quality apps
“Even when you launch these new layer ones, I think it's probably, I don't know, at least 12 months, probably before you see, like, higher quality applications coming out.”
Carlson-Wee: 2% of all Ether is locked in MakerDAO
“It's about two percent of all ether is, is held in the MakerDAO contract, and now that's hard capped by the protocol.”
Carlson-Wee: Locking 5% of Ether in MakerDAO creates systemic risk
“Now I do think it almost starts to create systemic risk at around, say, five percent of all ether.”
Carlson-Wee: Stablecoins will be critical for high-level crypto applications
“I think that stablecoins are going to be a critical part of the recipe for a lot of more abstracted, higher level use cases.”
Dixon: Crypto has the largest reality-perception gap in tech
“Tech is often misunderstood, but this is by far the most, at least that I've worked in, by far the most, the delta between the reality and the perception”
Dixon: Web3 startups should adopt Web2 user experiences before decentralizing
“The model is sort of start web two like just to get the user experience right, but then have the business model that's sort of web three and therefore lets you have this great property of grow the pie, not fight over the pie.”
Carlson-Wee: Homomorphic encryption enables machine learning on private, encrypted user data
“One interesting intersection is homomorphic encryption, which allows you to train a machine learning system based on data that you actually don't know the plain text, so you only see the encrypted version. It allows people to say, okay, I'm going to share the …”
Carlson-Wee: Web2 ad business models create adversarial relationships with users
“Today, yes, Facebook loves its users, but also it wants to put as many ads in front of the users as it possibly can, which actually disrupt the user experience. So it's yeah, it's an odd relationship, I think, that these web two platforms have with their user …”