Jan 2, 2019 · 32m · a16z
a16z Podcast | Cryptocurrencies, App Coins, and Investing in Protocols
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z podcast, host Sonal Chokshi speaks with Chris Dixon and Polychain Capital founder Olaf Carlson-Wee about protocol investing, token economics, and how crypto protocols enable a decentralized, user-owned internet.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 16.9% of the talking time here. How this is scored →
The host as informed peer 3.1 Guest teaching 5.9 Guest disagreement 2.4 The host pushing back 3.1
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 11:40 Chris Dixon rejects SPEAKER_01's framing
Chris directly interrupts and rejects SPEAKER_01's premise that closed web platforms won because of centralized user experience coordination, insisting instead it was entirely a superior business model and money advantage.
Hardest push from the host ▶ 6:11 Host challenges pure monetary extractionThe host refuses to accept protocol investing as inherently good, asking directly whether it is just monetary extraction rather than something that actually benefits the ecosystem.
Biggest teaching moment ▶ 15:44 Olaf educates on Turing completenessOlaf provides a thorough technical explanation breaking down how Ethereum's Turing-complete scripting language allows arbitrary smart contract execution compared to Bitcoin's low-level bytecode.
The host holds their own ▶ 29:24 Host refutes Chris's sarcastic corporate harmony claimWhen Chris sarcastically asserts that private corporations do not have politics or disagreements, the host immediately calls him out and rejects his premise.
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 |
|---|---|---|---|---|---|---|
| Understanding App Coins and the Golem Protocol | 2 | 6 | 1 | 2 | The host asks basic clarifying questions about app coins and makes lighthearted jokes about Golem. Olaf explains how peer-to-peer computing compute rental works on a protocol level using token incentives. | |
| Injecting Capitalism into Open Source Protocols | 3 | 6 | 2 | 4 | The host pushes on whether protocol investing is purely financial speculation rather than beneficial to the ecosystem. Chris and Olaf reframe the discussion by detailing how open source infrastructure like SSL was chronically underfunded. | |
| Open vs. Closed Web Platforms and Decentralized Infrastructure | 3 | 5 | 4 | 2 | Chris gives a historical overview of open versus closed web platforms. When SPEAKER_01 intervenes to argue that closed systems won due to centralized UX coordination, Chris forcefully disagrees, arguing it was driven entirely by superior business models and funding. | |
| Trustless Consensus Mechanisms and Protocol Scripting | 2 | 7 | 1 | 1 | The host asks basic clarifying prompts like 'what does that mean?' while Olaf educates on consensus and protocol scripting. Olaf contrasts Bitcoin's low-level assembly-like language with Ethereum's Turing-complete language. | |
| Emerging Protocols: Tezos, MakerDAO, and Decentralized Exchanges | 4 | 6 | 2 | 4 | The host challenges why a cryptocurrency would peg itself to the US dollar when the ethos is decentralization. Olaf breaks down algorithmic stablecoins, proof-of-stake governance in Tezos, and decentralized exchanges. | |
| Polychain Fund Mechanics and the Low-Level Decentralized Web Stack | 4 | 6 | 2 | 4 | The host presses on why a specialized hedge fund is necessary if open protocols are democratized for anyone to buy. Olaf clarifies the esoteric nature of crypto deals, highlighting transactions conducted entirely in crypto without bank accounts. | |
| Technical Challenges, Protocol Governance, and the User-Owned Web | 4 | 5 | 5 | 5 | The host asks a tough question regarding human conflict and governance in open source forks. Chris responds with sarcastic pushback about corporate harmony, which the host immediately rejects before discussing public protocol governance. |
Statements from this episode (25)
Carlson-Wee: About 15 new cryptocurrencies launched in March 2017 alone
“So in March alone, there have been about 15 launches of new cryptocurrencies.”
Carlson-Wee: Disproportionate economic value accrues to crypto protocols over applications
“I think in this space, disproportionate value accrues to that protocol level.”
Carlson-Wee: Token launches on Ethereum have raised over $300M
“Those token launches on top of Ethereum have raised over three hundred million dollars.”
Dixon: An asset tied to Linux adoption would have been legendary
“If you could have invested in something that, that, that had some correlation to the adoption of Linux, it would have been one of the all-time great investments.”
Dixon: SSL's supporting foundation operates on around $500K annually
“And I think their budget is like 500,000 a year or something.”
Carlson-Wee: Bitcoin creator holds over $1B in Bitcoin
“I mean, the creator of Bitcoin, whoever he or she or they are, has, you know, over a billion dollars in, in Bitcoin.”
Carlson-Wee: Golem token crowdsale raised $9M in 19 minutes
“When they launched this Gollum token network, they raised nine million dollars in 19 minutes.”
Carlson-Wee: Token ownership creates fanaticism by combining utility and financial gains
“People in Bitcoin are fanatics, and it's because they not only gain value in a more traditional sense of network effects when the user base grows, they also actually gain wealth from that user base growing.”
Dixon: Very few internet protocols in use were built after 1997
“There's very few protocols that we use today that were developed in the last 20 years, I can think of. I mean, maybe BitTorrent or something, but like, for the most part, like, you know, that's sort of niche.”
Dixon: Closed web platforms beat open protocols due to superior business models
“They, meaning closed, had the better business model for the last 15 years.”
Dixon: Crypto business models will shift capital back to open protocols
“Now open is developing its own kind of business model around this, which I think is going to shift a lot more energy, I hope, And money and funding and a whole bunch of other things back to the forces of open have a new set of new arsenal.”
Dixon: Blockchain miner networks operate as a decentralized, public version of AWS
“We've had open source software. We've never had open, open services. So these are services, OPEX, running So basically, effectively, it's a public AWS, is what you should think of as the miner network.”
Dixon: No one, including Vitalik Buterin, can cut developers off Ethereum
“As a developer, you can now invest in this. You can build things on top of Ethereum with the knowledge that no one can, you know, Vitalik, who's the kind of the, you know, the leader of Ethereum, can't pull the rug out from under you, even if you wanted to.”
Carlson-Wee: Blockchain protocol developers monetize with every new user
“Now as a lead developer behind one of these blockchain based protocols, You can actually make money every single time a new user signs up and is interacting with this blockchain.”
Carlson-Wee: Ethereum enables features simply not possible on Bitcoin
“So you can build all sorts of more advanced features in Ethereum that are simply not possible with Bitcoin.”
Dixon: Anyone with basic web scripting skills can write Ethereum contracts
“It's a very accessible language, so if you, if you're familiar with basic, you know, web scripting, you can kind of write an Ethereum contract.”
Carlson-Wee: Tezos executes protocol upgrades on-chain via coin-holder voting
“In Tezos, all of those governance decisions happen at the protocol level. People effectively vote with their coins, and the protocol will change based on what those coin holders want.”
Carlson-Wee: Lack of standardized terminology signals a genuinely new tech category
“If no one knows what to call something, it means it's new.”
Carlson-Wee: MakerDAO has high chance of failure, but massive upside if successful
“What the maker system is attempting to do, and I view it as hugely ambitious with, you know, likely a high chance of failure, but if they can pull it off, it's massive”
Dixon: Average retail investors not researching crypto full-time will lose money
“It's very likely that an average person who's not spending all day on these things will lose their money, so if you're listening to this, we are definitely not recommending it.”
Carlson-Wee: Polychain bought Maker tokens via Ethereum because Maker lacked bank accounts
“When we wanted to do a deal with Maker and purchase some of these tokens, there was no legal entity. Behind them. It's a pure open source project, and there was no bank account they had, so there was no way we could send them money. So we actually had to send …”
Carlson-Wee: Crypto assets are uncorrelated with traditional markets and commodities
“This is uncorrelated with Oil, gold, emerging market currencies, the equity markets, bonds, it's really just uncorrelated with everything else, and it's because it's a totally new phenomena.”
Carlson-Wee: Too early for viral consumer crypto app tokens
“It's too early still, in my opinion, for really viral end-user app coins or app tokens. So I think that's a lot of what we're thinking about is, is what technologies will enable that, and that's what we want to invest in right now.”
Carlson-Wee: Some crypto projects will fail because they are impossible
“We're actually creating things that previously did not exist, and some of the things will fail because they are literally impossible. So these are hard technology challenges where you're actually sometimes making a bet on something that it could turn out is no…”
Carlson-Wee: Future web value will accrue to protocol users, not VCs
“So all of the wealth that's been generated by venture capitalists and entrepreneurs of centralized companies, I think will get pushback to everyday investors who have access to all of these things, and that all the value that accrues will go to the early adopt…”