A conversation with a16z partner Chris Dixon: thoughts on stablecoins, regulation and the crypto market crash

Web3 is an all-encompassing approach to building a web, a web3 web is not owned by a company, but by a community of users, there would be no Google in Web3.

Chris Dixon is one of Silicon Valley’s most ardent crypto evangelists. As a general partner at venture capital firm Andreessen Horowitz (a16z), he is currently leading a16z Crypto, which seeks investment opportunities in the Web3 space.

Last week, bitcoin hit an 18-month low, ethereum’s value has fallen to a quarter of its November 2021 peak, cryptocurrency exchange Coinbase announced it would lay off nearly 20% of its workforce, and cryptocurrency lending platform Celsius suspended Withdrawals, various black swan events occur frequently.

Against this backdrop, Chris Dixon recently gave New York Times reporter Kara Swisher an exclusive interview about Web3, stablecoins, regulation, and the crypto market crash, excerpted below:

Kara Swisher: Can you briefly explain Web3, and how Web3 differs from Web2, can you give a more concise explanation? Maybe this concept cannot be summed up simply, but please give it a try.

Chris Dixon: Well, in a nutshell, Web3 is an all-encompassing approach to building the web, and the Web3 web isn’t owned by a company, it’s owned by a community of users. So, you know, you can have a social network, and through tokens and other types of mechanisms, the community gets the economic advantages of the network, they control the rules of the network, and thus combine the best features of openness, Web3 is like the integration of Web1 Centralized protocols and advanced modern features of Web2.

Kara Swisher: In other words, there will be no Google in Web3.

Chris Dixon: I hope so. In Web1, no company benefited from the growth of the Web. I mean, there are individual companies on the network, but no company owns the network, right? Whereas in Web2, you have a group of companies that own a network. And I think we’re now in an age where four or five companies control most of the internet. I think this is a bad thing for many reasons. I think Web2 makes the whole thing less dynamic and interesting, but I think, more importantly, for creative people, if you do what you do, or if you’re an artist, or you’re Do – you are now being mediated by these companies and they are very, very good at withdrawing all the money.

Kara Swisher: Well, Andreessen Horowitz will be a big part of Web3.

Chris Dixon: Exactly.

Kara Swisher: There seems to be no doubt about that.

Chris Dixon: Exactly.

Kara Swisher: Yes.

Chris Dixon: We are part of Web3.

Kara Swisher: But the crypto market doesn’t seem to be doing well these days. So let’s talk about what’s happening now, can you explain the cryptocurrency crash and how you as an investor evaluate it.

Chris Dixon: Of course. Actually, I mean, I guess my view right now — I mean, nobody really understands the full macro picture. In my opinion, it’s not just cryptocurrencies that are falling in the market.

I mean, for example, if you look at high-growth tech stocks, they’ve actually fallen a lot as well. I don’t know what’s going to happen next, but it feels more like 2008 to me, I would say. It feels like a macro thing with inflation and everything else. Again, I’m not an expert on this. I think the first to be affected are highly liquid, high growth stocks like crypto and tech. So we’ll see how it ends. But I do think it’s-

I think a few things are going on. So cryptocurrencies must have been very volatile over the years, no doubt about it. This is an emerging industry category. I mean, we in the VC category put a lot of emphasis on early-stage technologies that are being built, but those technologies may not be very mature in the first place, so that’s definitely a factor. But I think it’s also a whole macro thing, and we’re going to see how the macro economy plays out in the crypto market.

Kara Swisher: Okay. Let’s talk about this crypto market crash. Bitcoin and other entire industries you’ve been investing in have been hit especially hard than any other. Currently, the Bitcoin price is around $22,637. (Note: The figure is the BTC price at the time of the interview)

In fact, just recently, in November 2021, the Bitcoin price hit $68,000. At the peak of cryptocurrency, the overall market capitalization was basically maintained at $3 trillion, but now it is only $1 trillion. By the way, Ethereum is worth around $1,200, down from November’s highs of $5,000. As an investor, how do you solve this problem?

Chris Dixon: Well, we have a venture capital model, right? So we’re not a hedge fund, so we’re not going to buy a bunch of stuff and bet on momentum or something. So we do.

By the way, this is a very prudent choice. We deliberately said that we are going to be a venture fund. We want to have a long-term view. Our limited partners (LPs) are the same as the limited partners in our main fund, basically for a term of 12+ years. We tell them, look – there’s bound to be bad news in the market, but I believe in crypto and I’m going to dedicate my career to it, but you should opt in if you want, we’ve actually attracted a bunch limited partner.

Kara Swisher: So essentially, these people give you money bags and you take them.

Chris Dixon: You’re right. Yes, LPs are the ones who give us the money. So we have a group of investors who have chosen this model. I mean, they’re big institutions, I don’t know the exact numbers, but they probably put 0.1% of their endowments and stuff into these kinds of projects — they know it’s venture capital, right? 

Kara Swisher: You guys are already a $4.5 billion crypto fund.

Chris Dixon: Yes, that’s our new fund.

Kara Swisher: Focus on blockchain investment?

Chris Dixon: Yes, we just closed our new fund raising.

Kara Swisher: Yeah, that’s the time. Did you get a lot of calls today, this week or recently?

Chris Dixon: From LPs?

Kara Swisher: Yes.

Chris Dixon: Honestly, I didn’t get a single call.

Kara Swisher: Really?

Chris Dixon: Yes.

Kara Swisher: Don’t they look at the current market situation and don’t worry and say: Oh, oh, God, it’s not good.

Chris Dixon: Actually, many of our LPs have been working with a16z for over 10 years. We spend a lot of time trying to educate and get people to understand things. I’ll be doing some kind of webinar or something at some point, probably talking to people and things soon. But no, I think our LPs are very patient.

Kara Swisher: So they’re not freaking out now? After all, people are afraid of the market crash.

Chris Dixon: No.

Kara Swisher: So, are you still bullish on the crypto market right now? Is it time to go the extra mile with your ideas? 

Chris Dixon: Yes, I am very bullish on the crypto market. I mean, the way I look at encryption, you know the history of the internet and technology, I think it’s two separate processes that happened. On the financial side, I felt that last year cryptocurrency prices were too high, and of course I feel that this year they fell too low. This is my understanding and I am not giving investment advice. But to me it seems very unstable in a way that doesn’t quite make sense. In terms of product and technology, I think about: what is the pipeline for a good product? How is the infrastructure? Is it built? So you think, I put blockchain in history, and if you go back to World War II, every 10 or 15 years or so, there’s a new wave of computing. I’ve spent a lot of time thinking about this and reading its history.

Each wave has what I call an incubation phase. In mobile computing, for example, we see companies like General Magic emerge. I think ’93 or ’94 or something, right? Just so early. I was watching Die Hard the other day and for some people – not “Die Hard”, was it – “Lethal Weapon”. 

Kara Swisher: You’ve seen this before. But let’s focus on the news first. I would like to draw an analogy to some other things like the crypto bank Celsius stopped withdrawing funds for nearly 2 million users, and the crypto exchange Binance briefly stopped trading. It feels like we’ve all seen “It’s a Wonderful Life” and we know what a bank run is like, right? What will people think when this happens?

Chris Dixon: Well, I think we should talk about regulation, and I think a lot of the issue here is that there isn’t enough regulation around these things. We’re not directly involved with Binance or Celsius or Terra or any of those, but my point is that, in general, we’ve had very little guidance from regulators, and what they’ve been doing is actually what’s called enforcement regulation. So selective regulatory action, I’ve been on Coinbase’s board for a long time, and what frustrates me the most is that they spend a lot of time and money on compliance, and then they always have some kind of disregard for the rules. onshore competitors. What will eventually happen is that, for whatever reason, regulators spend all their time on Coinbase. Let’s take the example of stablecoins and see that Terra Luna has hit the headlines, right? I think USDC is the gold standard for stablecoins.

Kara Swisher: Explain what USDC is. Is it US dollars?

Chris Dixon: USDC is a $1 blockchain token because they actually have $1 in the bank, right. and reviewed. Like, is it perfect in terms of regulation? I have no idea. Maybe they can upgrade a bit.

Kara Swisher: USDC considered one of the safest stablecoins?

Chris Dixon: Yes. But I mean, they do have a dollar in the bank. This is very, very different from some of these so-called uncollateralized stablecoins, which have nothing in the bank. Yes, an uncollateralized stablecoin is just backed by another token. Then, they had a bank run. So I think in a sensible regulatory regime, it’s the regulators who differentiate between those two things, right? They will say, well, there are rules.

If you’re going to call yourself a stablecoin and you’re going to market it and you’re going to say it’s safe – I think that’s the worst part, marketing to consumers – you need to do something, but the rules don’t does not exist.

Kara Swisher: So, let’s talk about the 2008 analogy and mainstream cryptocurrencies. To what extent is the current market crash a recognition of systemic risk? Some people compare it to the 2008 financial crisis, do you agree? Some people feel that the crypto market is still a small area, after all, real estate is a $43.4 trillion industry, and gold has a market value of $10 trillion. Of course, those have experienced a lot of volatility, especially housing.

Chris Dixon: I think the combined market capitalization of all crypto assets, including Bitcoin, as of today is about $1 trillion, which is half the value of Apple stock. But, I mean, the crypto market is literally insignificant in the global economy, tiny, nothing compared to housing, credit, stocks.

Kara Swisher: But from your perspective, is this the “2008 moment” for cryptocurrencies?

Chris Dixon: Well, when I did it in 2008, I thought about it more — I mean, as I said when I was talking to friends in the financial world that were wider than cryptocurrencies, my Meaning, since 2008, I haven’t seen such negativity. Like the end of the world. Don’t know if you’ve had this experience, I’m amazed at how negative people are.

Kara Swisher: Right right right, is it too early to say how great encryption is? 

Chris Dixon: I’m not saying how great encryption is. But look, I think — let me say something else, I think in the crypto industry, there are really two factions, right. There is a faction that we think we belong to, and that’s what I described earlier, the Web3 Builder faction. And then there’s another aspect that I call “casinos”. I generally don’t like people who bet on encryption, and I don’t support them either. I don’t like these promotional ads, I don’t think they talk about innovation, they send the wrong message. I don’t think these things are good, and I don’t know if they need to be regulated or whatever.

I think the core technology is very important and in the short term we need some smart regulation. I want to see balance so that we can still build what I’m describing. We can build social networks and marketplaces and all kinds of new things. And, look, I think that’s the most important thing to balance the power of big tech. There are no other credible disruptive competitors – in my opinion, there is no other disruptive technology in the world that has a real chance of beating these companies than Web3 at the moment.

Kara Swisher: However, Jack Dorsey (I call it a crypto evangelist) is also against people investing like yourselves, he is against centralization.

Chris Dixon: We got hit from all sides.

Kara Swisher: So let’s talk about this idea of ​​fraud and scams. We meet a lot of people saying that cryptocurrencies are massive scams? There are also a lot of plagiarism issues, can you talk about it specifically?

Chris Dixon: Yes. Look, as I mentioned, I think regulation would be great. I think there are a lot of such things. I mean, look, there are a lot of questions. We have maybe 80 crypto investments right now and they are all real entrepreneurs who can pass any test from any VC firm.

For example, we invested in a company called Uniswap, which pioneered this thing called a decentralized exchange. I won’t go into details. But what happened immediately was that they were copied, and since everything was open source, they were copied by Sushiswap, right?

Meanwhile, Uniswap, they’re in — I’m in New York, they’re in New York. They are on the streets of New York. They are all in the office. They are the most serious, geeky, greatest entrepreneurs you will ever meet, and they have a team of lawyers. Then they have all these dummy clones, so I think it’s necessary. It’s frustrating, frankly, but it’s also competition.

Kara Swisher: They have to deal with it. You guys actually saw it in some at least related issues, like you said, in one of your most recent investments, a plagiarism clone, OpenSea. It’s like eBay for NFTs. Blockchain validates a large number of scam cryptographic security breaches, but is not actually secure. How do you handle it when it’s open season like this? What is the mechanism for doing this?

Chris Dixon: Well, OpenSea is an example. We invested in them about a year and a half ago, and they were only 10 people at the time, and now there are several hundred people. If you look at their executive team, they were recruited from Facebook, you know, senior people at Facebook, Lyft, a whole bunch of other places. Opensea GMV numbers were low in 2020, but already in the tens of billions in 2021, they are growing at an astonishing rate.

Look, if you know Devin and CEO OpenSea, they are very, very serious, well-meaning entrepreneurs who are building things as fast as they can. But it’s not perfect. It’s growing very fast. Look, I’m biased, but I feel like some reports focus only on the negative.

Kara Swisher: Can you explain to someone who doesn’t know what a DAO is?

Chris Dixon: Of course, a DAO is — a Decentralized Autonomous Organization, basically a blockchain-based internet-native organization that can — whatever the organization can do. They can create software, they can, you know, play esports, they can do anything. But they are a group of people who come together.

Kara Swisher: Exactly.

Chris Dixon: The Community Comes Together

Kara Swisher: Yes.

Chris Dixon: I think it’s cool, you think about it — to me, Wikipedia is one of the greatest wonders in the world. In fact, a group of people on the internet is completely anonymous and they can come together and create what I think is a very good resource of information.

I think it’s a miracle we now have this “crowdsourced” encyclopedia, but Wikipedia runs out of money every year, right? Thank god, Wikipedia as a product doesn’t really require any product development. Yes, if they tried to build a search engine like this, they would end up spending all their investment and losing the game. So DAOs are exciting, and we now have a great internet-native behavior where a bunch of people come together. Unlike in the past, they can have resources now, and it’s an investment opportunity, that’s how I see it.

Kara Swisher: Anyway, Chris, thank you so much for the interview, I really appreciate it.

Chris Dixon: You’re welcome, thank you for inviting me.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-conversation-with-a16z-partner-chris-dixon-thoughts-on-stablecoins-regulation-and-the-crypto-market-crash/
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