Jan 2, 2019 · 22m · a16z
a16z Podcast | Trends in Cryptocurrencies
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Recorded at the 2017 a16z Summit, host Chris Dixon moderates a panel with Protocol Labs founder Juan Benet and Polychain Capital CEO Olaf Carlson-Wee on the evolution of cryptocurrency infrastructure, decentralized protocols, capital formation, and protocol governance. The panelists examine how foundational Web3 technologies like IPFS and Filecoin aim to overcome current scalability limits and create censorship-resistant alternatives to centralized cloud giants.
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 4.2 Guest teaching 4.3 Guest disagreement 1.5 The host pushing back 1.5
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:52 Olaf interjects on ICO quality
Olaf forcefully cuts across Chris's balanced topic introduction to declare ICOs mostly bad, dismissing the current market state as scammy and noisy.
Hardest push from the host ▶ 2:22 Chris questions the need for decentralizationChris poses a direct devil's advocate challenge, asking why decentralized protocols are necessary when corporate web giants already offer fast, free services.
Biggest teaching moment ▶ 9:44 Juan reframes Bitcoin's dismal throughputJuan educates the audience on why Silicon Valley initially dismissed Bitcoin because a mobile SQLite database could process more throughput, pointing out that critics missed the fundamental shift toward public verifiability.
The host holds their own ▶ 9:09 Chris details Ethereum throughput and Web 2.0 historical parallelsChris demonstrates host expertise by citing Ethereum's 10 transaction-per-second bottleneck and drawing explicit historical parallels to Web 2.0 infrastructure optimization from 1995 to 2010.
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 |
|---|---|---|---|---|---|---|
| The Value of Decentralized Protocols and Peer-to-Peer Marketplaces | 5 | 4 | 1 | 3 | Chris plays devil's advocate regarding why decentralized protocols are needed when centralized web services are free and fast, offering the Airbnb for storage analogy. Juan validates the analogy while explaining bandwidth costs and verifiable security benefits. | |
| Web3 Infrastructure vs. Application Layer Development | 6 | 4 | 1 | 1 | Chris demonstrates strong technical context by framing Ethereum's scaling bottleneck at ten transactions per second and drawing parallels to Web 2.0 infrastructure evolution. Olaf and Juan explain off-chain computation and Web3 stack layers. | |
| Initial Coin Offerings (ICOs) and Market Dynamics | 2 | 5 | 3 | 1 | Olaf immediately interrupts Chris's introduction to label ICOs as mostly bad, introducing a contrarian perspective on market noise and scammy behavior. Juan elaborates on capital flooding and the need for rigorous investor curation. | |
| Protocol Governance and On-Chain Upgrades | 2 | 5 | 2 | 1 | The guests critique open-source and crypto governance models, with Juan calling Bitcoin block size debates an ideological holy war over minor parameters. Juan compares governance challenges to Linux delegation and warns against proof-of-stake plutocracy. | |
| Cryptographic Incentives and Resource Efficiency | 6 | 4 | 1 | 2 | Chris active leads the topic by explaining Bitcoin's energy consumption and reframing it as a testament to the power of Satoshi's incentive design. Juan adds context comparing Bitcoin's power expenditure to the entire country of Slovenia. | |
| Future Outlook, Smart Contracts, and Internet Freedom | 4 | 4 | 1 | 1 | Chris prompts Juan about real-world anti-censorship applications of IPFS. Juan explains how the Catalan government used IPFS to bypass state domain censorship during their independence referendum. |
Statements from this episode (19)
Carlson-Wee: Polychain invests exclusively in crypto protocols, not company equity
“So Polychain is an investment fund that invests exclusively in cryptocurrency protocols. We do not invest in the equity of private or public companies at all.”
Benet: Storing petabytes on AWS S3 is prohibitively expensive
“One is, these things in volume are not actually free, so if you try to store hundreds of terabytes or petabytes in Amazon S III, you're gonna have a bad time. Just thinking about the bandwidth alone, ah, if you actually want to access all that data, it's gonna…”
Carlson-Wee: Buying Filecoin tokens is the only direct exposure to the protocol
“So if you want to invest in the Filecoin protocol, the only way to invest in that is to buy Filecoins. There's no company you can really back, per se, to get exposure directly to that protocol.”
Carlson-Wee: P2P protocols will eventually compete with Web 2.0 giants like Uber and Twitter
“Many of the major Web two point O companies that have seen a substantial growth in the last 15 years, this is Twitter, Tumblr, Etsy, eBay, Uber, every single one of these companies could someday see competition from a peer peer-to-peer protocol.”
Carlson-Wee: A decentralized Twitter requires Filecoin's storage infrastructure
“Until you have IPFS and an incentive system using something like Filecoin, on top of that, you can't really have reliable peer-to-peer file storage. So you can't really build Twitter the protocol until Filecoin is deployed and robust and easy to use.”
Olaf Carlson-Wee: Decentralized consumer apps will arrive in three years
“I think it's early, but the consumer apps will come in, you know, call it three years or something like that.”
Dixon: Ethereum throughput is limited to roughly 10 transactions per second
“So, Ethereum can, what, handle, like, 10 transactions a second or something, which is just many orders of magnitude lower than... A system like Facebook, right?”
Benet: Silicon Valley dismissed Bitcoin by missing its core value of verifiability
“And so it's partly for that reason, I think, that Silicon Valley effectively dismissed a lot of the potential of Bitcoin. It just looks like such the wrong thing. If you could, you know, beat the throughput of Bitcoin with a SQLite database in your phone, why …”
Benet: High-throughput blockchain scaling implementations will be live within two years
“So expect that to happen over the next year or two. Already there's a bunch of academic results that show this is not only possible, but it's provably so. So now people are building those Implementations, and we'll see them live in the next two years or so.”
Carlson-Wee: Crypto development pace will never slow down post-ICO inflection
“I think that despite ICOs right now being very noisy, sort of scammy and all these things, it has created an inflection point where when you have a brilliant idea, the capital is much more readily available from a large group of people that actually conceptual…”
Benet: 2017 ICO hype cycle peak will lead to greater investment rigor
“We're seeing probably, like, hopefully this is the peak of the hype cycle. Hopefully this will not get worse next year. So hopefully we have now peaked this and it's gonna go back down. And then suddenly we'll get a lot more rigor in investing.”
Carlson-Wee: Almost no live crypto protocol has formal governance
“And right now, in pretty much every live system, there isn't a clear governance model. There's no formalization around how decisions are made or executed.”
Benet: Academic research proved doubling Bitcoin block size has minimal impact
“The debates that have been raging for the last two years are about relatively minor things, so increasing the block size became this huge holy war, and when you step back and look at what they're talking about, it's just increasing one factor, either by, you k…”
Benet: Democratic voting in open-source software often drives projects into the ground
“People did try to come up with voting systems for a lot of open source, and it ended up going worse. So there's some open source projects that were running to the ground effectively by just communities of people effectively using democracy to kind of drive the…”
Benet: Bitcoin mining energy consumption exceeded Slovenia's total power expenditure
“Yeah, last we calculated it was more power expenditure than all of Slovenia and so, I think it's much more now because of the recent spike, a lot of miners came in in the last couple of months, so it's a lot of power,”
Carlson-Wee: Blockchain protocols are decentralized tools for human organization
“Ultimately a blockchain protocol is just a way to organize humans very, very precisely without a central hierarchy telling people what to do.”
Carlson-Wee: ICOs are the most efficient capital coordination mechanism in history
“With ICOs, I think that it's probably the fastest and most efficient capital coordination we've ever seen in capitalism, like, since money was invented.”
Benet: Formal verification will soon eliminate costly smart contract bugs
“I would say, in the short term, things like formal verification coming to smart contracts, so we don't have single line bugs that lock up hundreds of millions of dollars.”
Benet: Catalan government used IPFS to bypass Spanish censorship
“Yeah, so, Catalonia tried to declare independence and tried to vote for it. The Spanish government censored the website, and so then the Catalan government Put their website on IPFS and distributed it that way. So it was pretty cool to see the Catalan presiden…”