- Chris Dixon is a general partner at Andreessen Horowitz who focuses on crypto investments.
- He recently shared his views on the future of the crypto industry and the trends he’s excited about.
- Dixon discusses Blockchain, Ethereum updates, the future of NFTs, and much more.
- See more stories on Insider’s business page.
Crypto is having a moment.
The price of Bitcoin, the largest cryptocurrency by market cap, has risen 87% since the beginning of the year. Coinbase has helped legitimize cryptocurrencies with its public debut, bringing new institutional investor focus to the crypto market that promises to boost the industry’s fortunes. And Dogecoin, the most beloved cryptocurrency on the internet, is going to the moon.
But Andreessen Horowitz general partner Chris Dixon thinks that the future of crypto is so much more than just cryptocurrencies.
He ought to know — three years ago Dixon helped launch Andreessen Horowitz’s a16z Crypto, a crypto-focused venture fund with $350 million in starting capital. Dixon also led the firm’s 2018 investment in Coinbase, among other successful crypto investments, and last year he became co-lead of a second Andreessen Horowitz crypto fund armed with $515 million for making even bigger bets on the future.
Despite the enormous growth the crypto industry has enjoyed over the last year, Dixon believes that the best is yet to come. In a recent interview on Patrick O’Shaughnessy’s podcast “Invest Like the Best,” he said that while some people may believe that the next wave of advances in computing technology will come from the realms of AI or virtual reality, he thinks that “the most exciting new computing wave is blockchain and crypto.”
Dixon went on to outline five trends in the crypto industry that he’s excited about, including how he believes blockchain technology can expand beyond cryptocurrencies, and why he thinks NFTs will usher in a “20-year golden period Renaissance for creative people.”
1. Blockchain: The foundation for future innovation
According to Dixon, one of the fundamental attributes of Blockchain is that it “lets you write code that can make strong commitments about how it will behave in the future.” Bitcoin’s blockchain DNA, for example, means that the protocols the cryptocurrency is built upon will never change. The fact that there will only ever be 21 million Bitcoins is “guaranteed by the blockchain,” not its creator, he added.
He notes that the internet of the early nineties was so successful because it was built on open protocols that made implicit commitments to developers that the rules of the web wouldn’t change overnight. “Because there were open protocols it was a level playing field upon which entrepreneurs could build,” leading to a “massive wave of innovation, investment, et cetera.”
Fast forward to today and you see a “long, long history of platforms changing the rules, changing the take rates, changing the APIs, etc,” says Dixon, pointing to Apple as being particularly notorious for its “capricious rules.”
“With Blockchain it’s like the web was; it’s a predictable, consistent set of rules that simply can’t change.”
2. DAOs: A new way to do business
Blockchain’s open and committed nature has also created opportunities for innovation in the world of business.
For instance, Blockchains allow the creation of smart contracts, agreements that are set in stone and executed automatically according to their programming. Dixon is particularly excited about DAOs, or decentralized autonomous organizations, which use a set of smart contracts to create a pre-programmed, fully-functioning, and completely automated business that’s “kind of like a Delaware C Corp, like a traditional company, but one that exists solely in software.”
A DAO is “just a set of smart contracts on Ethereum. So there’s no company there but the smart contracts enforce the deal, ” Dixon said.
While DAOs are innovative in their own right, Dixon says that the interesting stuff starts to happen when people get together and put DAOs to use. He points to the Reddit-fueled surge in Gamestop earlier this year as a prime example of what could be accomplished with a DAO.
“That was a group of people getting together and just sort of ad hoc deciding to go and buy the stock. What if there were a set of set of code that let them come up with rules that said ‘hey, if you join this group and this buying group has this piece of code and you can join this and you get a token or something to show that you joined, and then you can vote using that token and what the group does, but we’re all gonna do it together?’ So it’s this way to kind of enforce this collective action together, which is what a company is.
3. DeFi: Removing the middleman
DeFi refers to “decentralized finance,” a concept that is simple in theory but grand in scope. The idea is that modern financial systems and institutions are inherently complex, making the process of things like getting a loan from a bank confusing and intimidating. Blockchain technology would make the process far more straightforward and transparent.
“I think you can make a strong argument that a lot of what happened in 2008, with mortgage loans and things, was around just this incredible complexity and opacity of the system,” says Dixon. “Everything in DeFi, everything on Blockchains is open. It’s all publicly available.”
Blockchain would also remove the layers of fees in between lenders and borrowers while providing better security through encryption.
“The current model of security for the whole world is, essentially, put the gold in the middle of the village and then have big walls around the village and hope nobody breaks in. But how well does that work? Everything in the world’s been hacked at this point, it’s not a good system.”
4. Ethereum: Big changes are on the way
Throughout his conversation with O’Shaughnessy, it was clear that Dixon is enthusiastic about Ethereum. He sees the token as far more expressive and versatile than Bitcoin, which is more conservative and focused on security.
Many of the concepts Dixon covered in his interview, such as DAOs and DeFi, are built on Ethereum, which he said will soon be getting a complete overhaul. One of the biggest changes coming is a switch from proof-of-work mining to proof of stake.
Proof-of-work mining requires massive amounts of energy to provide the computing power necessary to mine currencies like Bitcoin — but with proof-of-stake mining, the requirements are much lower, as is the likelihood of negative environmentalist pushback.
According to Dixon the Ethereum update will happen “probably in the next 12 months,” and will “improve the performance of the system, security, and a bunch of other things.”
5. NFTs: Creators finally get a cut
Dixon says that NFTs allow fans to support artists directly, and points to the video game industry as a roadmap of where NFTs can go from here. Games like Fortnite, where the game itself is free but virtual goods like skins and emotes sell in exchange for the virtual currency Vbucks, are precursors to what Dixon calls social tokens.
Social tokens are in-network currencies used by what Dixon calls sub-networks of people with common interests. The example he provides is of a
streamer who has their own social tokens that fans can use to purchase physical merchandise and support the streamer.
Dixon said that social tokens are high on his list of “the next things that could really get big in crypto,” and it’s easy to see why when he broadens the scope beyond video games and streamers. Podcasters, influencers, streamers, musicians, writers — creators of all shapes and sizes could establish their own social tokens to fund their work.
I think it’s going to be a 20-year golden period Renaissance for creative people,” he said.
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