Crypto and Decentralization: Building Blocks | Summary and Q&A

TL;DR

In this conversation between Devin, Chris, and Ollie from a16z Crypto, they discuss the excitement around cryptocurrency, its different perspectives, and the potential for new crypto business models.

Key Insights

• 👶 Blockchain computers, like Ethereum and Bitcoin, provide new trust mechanisms for users and developers, enabling secure financial operations and collaboration.
• 😌 The potential of crypto lies in aligning the incentives of all participants, including developers, users, entrepreneurs, and investors.
• 📼 Stablecoins, which are cryptocurrencies pegged to stable assets like the dollar, can enhance the usability and mainstream adoption of cryptocurrencies.
• 🔐 Scalability, security, usability, and governance are the four key pillars to consider when building and evolving crypto networks.

Transcript

hi I'm Devin I am a software engineer and writer based out of San Francisco today I'm talking to Chris and Ollie from a 16z crypto about potential crypto business models and the building blocks that we need to put in place to take advantage of that full potential so for starters can you guys tell me a bit about why you're excited about crypto and w... Read More

Questions & Answers

Q: What are the different perspectives through which the cryptocurrency movement can be seen?

The cryptocurrency movement can be seen as a movement of software developers collaborating to build networks or as a financial alternative with store-of-value properties.

Q: What is the key advantage of blockchain computers like Ethereum and Bitcoin?

Blockchain computers provide trust through cryptographic and game-theoretic mechanisms, enabling provable guarantees for ownership and facilitating financial operations without relying on centralized authorities.

Q: How can blockchain computers enhance trust for developers?

Blockchain computers allow developers to build on a decentralized network, eliminating the risk of changing business interests from centralized organizations. This creates trust for developers, entrepreneurs, and investors.

Q: What are some potential crypto business models made possible by blockchain technology?

One innovative business model is to use the cryptocurrency itself as a funding mechanism for network development. This aligns the interests of developers, users, and investors, fostering collaboration and growth.

Summary

In this video, Devin interviews Chris and Ollie from a16z crypto about the potential business models in the crypto space and the building blocks needed to capitalize on its full potential. They discuss the excitement surrounding crypto, its potential as a new type of computer, the importance of trust in blockchain networks, and the role of incentives and identity in the crypto ecosystem. They explore the opportunity for new business models in crypto and touch on the building blocks still needed in the space, such as scalability, reputation systems, and tooling.

Questions & Answers

Q: How can we view the crypto currency movement from different lenses?

The crypto currency movement can be viewed as a movement of software developers collaborating to build projects and communities, as a financial asset and as an alternative form of finance. Another way to look at it is as a new type of computer, with unique capabilities that enable new applications.

Q: How can we compare blockchain computers to previous computers in terms of performance and capabilities?

Unlike previous computers that focused on performance and size improvements, blockchain computers like Ethereum are not as performant. However, they have a powerful new property of trust, which is achieved through cryptographic and game theoretic mechanisms. This trust enables provable guarantees for financial operations and ownership of digital assets, providing new capabilities for users and developers.

Q: How do blockchain computers enable trust for users and developers?

Blockchain computers enable trust for users by allowing them to feel ownership of digital assets and currency. This trust is achieved through cryptographic and game theoretic mechanisms, ensuring the security and integrity of the network. For developers, blockchain computers offer a trustless environment where they can build applications without relying on centralized organizations. This new trust extends to entrepreneurs and investors who can trust the network and its developers, leading to increased adoption and investment.

Q: What are the new capabilities provided by blockchain computers?

Blockchain computers provide new capabilities such as trust, security, and ownership, which are essential for financial operations and digital goods. They also enable new forms of collaboration and experimentation with incentive structures through smart contracts and decentralized applications (DApps). Additionally, they offer the potential for users to have control over their own data and identity, providing data sovereignty.

Q: What are the challenges in building systems on blockchain networks?

One challenge is that current systems have to assume that any participant in the network could be adversarial. This requires designing trust through game theoretic and cryptographic mechanisms, as individual actors cannot be fully trusted. Another challenge is the lack of effective reputation and identity systems on the blockchain, making it difficult to map public keys or addresses to real human beings. This "civil problem" needs to be solved to enhance trust and accountability in the network.

Q: How can identity and reputation systems be implemented on the blockchain?

Mapping public keys or addresses to real identities is a difficult problem known as the "civil problem." Potential solutions include building a certificate authority model for crypto, where trusted authorities verify the mapping of public keys to real identities, or creating a decentralized web of trust where participants vote for each other's identities. Effective identity and reputation systems would enhance trust and enable a wider range of applications to be built on top of the blockchain.

Q: What other building blocks are needed for the development of blockchain applications?

In addition to identity and reputation systems, other building blocks required for the development of blockchain applications include scalability solutions like sharding and layer 2 scaling, improved tooling, such as better libraries, debuggers, and verification tools, and a focus on privacy and secure transactions. There is also a need for continued experimentation and iteration to further enhance the capabilities and scale of blockchain networks.

Q: What are the advantages of the business model of cryptocurrencies like Ethereum?

The business model of cryptocurrencies like Ethereum is unique and aligns all participants in the network. In this model, the foundation or developers behind the network hold a certain amount of the cryptocurrency, which funds the operations of the company. As the network grows and the demand for the currency increases, the value of their holdings also increases. This model allows users and developers to participate in the upside of the network and aligns the interests of all stakeholders for mutual benefit.

Q: How does this business model differ from traditional web business models?

Traditional web business models often rely on centralized control and monetization through advertising and user data. In contrast, the business model of cryptocurrencies like Ethereum is decentralized and allows for the alignment of all participants' interests. This new model eliminates the need for intermediaries and enables users and developers to directly benefit from the success of the network. The native business model of cryptocurrencies and the native asset of the internet are crypto tokens, creating a more equitable and collaborative ecosystem.

Q: What other business models are made possible by cryptocurrencies?

Cryptocurrencies open up a wide range of new business models beyond traditional advertising and data-driven models. For example, the ownership and transferability of digital assets can create new markets for crypto collectibles and non-fungible goods. Additionally, decentralized finance (DeFi) offers new possibilities for lending, borrowing, and financial operations without intermediaries. The flexibility and programmability of cryptocurrencies enable innovative and diverse business models to emerge.

Q: What is the current state of building blocks and opportunities in the crypto space?

While there is still a lot of work to be done in terms of building the necessary infrastructure, such as scalability solutions and improved tooling, the crypto space presents an exciting opportunity for innovation and exploration. The talent pool is growing, with more people entering the space and seeing the potential of building on blockchain networks. With the right incentives, collaboration, and experimentation, the crypto ecosystem can continue to evolve and unlock new possibilities for business models and applications.

Takeaways

The development of the crypto space presents a unique and exciting opportunity for innovation and new business models. The blockchain technology provides trust, security, and ownership, enabling new financial operations and digital asset markets. Incentives play a critical role in aligning participants' interests and fostering collaboration in the crypto ecosystem. Building blocks such as scalability solutions, identity and reputation systems, and improved tooling are still needed to fully capitalize on the potential of the technology. The crypto space is still in its early stages, but it offers tremendous scope for growth and development, attracting talented individuals who want to be part of this pioneering industry.

Summary & Key Takeaways

• The cryptocurrency movement can be seen through multiple lenses, such as a movement of software developers collaborating to build networks.

• Cryptocurrency networks, like Ethereum and Bitcoin, provide new trust mechanisms for users and developers, enabling secure financial operations.

• The potential for new crypto business models lies in aligning the incentives of all participants and creating ecosystems that promote collaboration, trust, and value creation.