Welcome to the a 16 seed pod cast some Zoran today. We have a special episode all about crypto that we present as a resource for people wanting to better understand what it is how it really works and why it matters. This is an audio sa featuring hallway style conversations with the a 16z crypto team as well as outside experts in these brief segments will take you from the ground up from the basics to the most current developments and beyond that to a look at what we might see in the future. This audio, essay is broken down into four parts. We start at the beginning that means the origin.
Ian's of Bitcoin which is the first major cryptocurrency and in this section will answer all of the basic questions like how and why did Bitcoin start how is it created? What is mining and how do we know it's secure the next section is about expansion and how Bitcoins programming Concepts started a wave of innovation. We explain the blockchain how it enabled the entire idea of decentralized networks of participants and we touch upon the significance of the second-largest blockchain aetherium. We also explained tokens and how they're leading to new ownership models for creators and networks.
Next we talk about the right now. That is what our Krypton the blockchain making possible today, including the concepts of defy or decentralized Finance new protocols to borrow loan and leverage cryptocurrencies and nft Zorn on fungible tokens. Finally. We'll look to the Future. What are some of the implications of all this Innovation. How does it compare to previous Tech paradigms and what might we see in the next era as cryptos infrastructure continues to be built out. Please note that none of the following should be taken as investment advice.
Ca-16 z.com / disclosures from more important information but let's start at the beginning. In fact before the beginning and let's start with Stanford computer science professor and a 16z advisor Dan Bonet explaining that the desire to create a digital form of money started. Well before Bitcoin
kurtag refers have been interested in building a digital currency now for quite a while actually from the mid 80s or so. There was quite a strong interest in building digital coins basically taking physical coins and making them available.
In digital form the difficulty of building a digital coin is that you have to make sure that it cannot be double spent. So a physical coin is very difficult to double spend but a digital coin is really easy to replicate you just copy it and you get two coins and so the challenge was how do you build a digital objects that can only be spent once and this challenge became even harder when we wanted to add anonymity properties to it. Just like physical coins have anonymity properties in that if I
send a coin somewhere. Nobody might know that it's actually me. We'd like to do the same thing with a digital coins. I'll be able to spend it somewhere and nobody should know that it's me and even though nobody knows it's me. I should still not be able to spend the same coin at two different places that turns out to be a really interesting cryptographic Challenge. And basically it's brought the 80s and 90s and even in the early 2000s. There were many many many papers and many cryptographers worked on constructing Anonymous digital cash systems.
So these are
Attempts at creating digital money didn't quite work then in 2009 a nine-page whitepaper popped up on an obscure cryptography mailing list. It was entitled Bitcoin a peer-to-peer electronic cash system and it was published under the pseudonym Satoshi Nakamoto to this day. We don't know who Satoshi Nakamoto is it's one of the all-time great Tech Mysteries, the white paper got noticed because of the Technical Solutions that came up with to the problems that had been nagging cryptographers and computer programmers for years. How do you move digital money in a
a wide-open decentralized ledger called a blockchain and we'll talk more about what a blockchain is later without someone Behaving Badly
Satoshi published the Bitcoin paper, which actually had a number of amazing Innovations in it, but maybe one of the core innovations that really sticks out is the ability to do what's called open consensus with an honest majority. So open consensus means that it's not a fixed set of participants who are writing blocks to the blockchain. It's actually anyone who wants to can
Disappeared in a consensus protocol and help with writing blocks at a blockchain that's open and honest majority means that we just need to assume that majority of the participants are honest. So they're not all trying to destroy the system interestingly. There was a lower bound that said if you just allow anybody to participate in the consensus protocol, then it's not possible to do and the reason it cannot be done is because there's a generic attack called a civil attack. We're basically one participant can masquerade
Wade as thousands of participants. So the amazing innovation in satoshi's paper is
that so she realized the way we prevent a civil attack
is by this mechanism of proof of work. We're in order to masquerade is a thousand people you basically have to do the work of a thousand people but that's going to cost you a thousand times the work of a single person and so as long as we assume that 51 percent of the work that goes into a consensus protocol is done by Honest parties should toast you basically showed that it is a
Be possible to implement an open consensus before satoshi's paper. It was kind of believed that this is impossible. And as proof of work idea is what made this all possible.
So with proof of work an unlimited number of people around the world can actively cooperate on a network without knowing each other or having to trust each other and without any third party enforcing anyone's actions because the security mechanisms are encoded in the architecture of the network itself. Here's Alex prudent Chief strategy officer of crypto privacy.
Lalo systems and a former a 16z crypto partner explaining how the proof of work system that underpins Bitcoin actually works.
It's kind of like this idea of rolling a dice right and like a very simple kind of proof-of-work algorithm is I could ask you to roll a die until you roll five sixes in a row, right? And so using some basic facts about probability. I can tell you how long it's probably or on average going to take to roll five sixes in a row right or to roll 10 or 15 or
Hundred the only way to do that is to keep rolling the dice until you get the right sequence of numbers and this is essentially what a computer does for proof of work except that instead of rolling a dice. They compute what are actually called hash functions and the additional benefit of a hash function is that it's difficult to compute but it's actually very very easy to check so that for other computers to check that this is correct. They don't have to do the equivalent of rolling that same diet that many times in a row. They can just do a quick simple check of this hash function and tell whether or not
It was done correctly.
You might ask yourself why someone out there in the world would choose to essentially volunteer to protect and verify the legitimacy of a decentralized network. Like Bitcoin after all no one works for Bitcoin. There is no Bitcoin ink, so why do they do it? The answer is that by doing this work these proof-of-work computations? They receive a reward. This is part of the system Satoshi Nakamoto devised the reward for these Network validators are verifiers or minors is a few Bitcoin freshly created by the network cryptographically.
According to the schedule the Satoshi set up back in 2009 and that will eventually end with the creation of the twenty one millionth Bitcoin in the year 2140. Here's Alex on why this mining activity is all important for Bitcoin
mining incentivizes a large number of individual non-related decentralized actors to all participate in validating blocks to make sure they are valid because if they do that job, well, they get rewarded by the network and if they
Don't do it. Then. The other nodes will reject those transactions with overwhelming probability. So it's sort of self-policing in that way everyone checks everyone else's work. And so the incentive to try and be the cheater is low because with overwhelming likelihood you'll be discovered and the work that you put into creating that block will go to waste and so this incentivizes the minors who are validating blocks to do it right the first time to not try and include
An invalid State transition to include a double spend of a token or something like that because if they do with overwhelming likelihood the other nodes on the network will reject it and they will forgo the rewards they would have gotten had they behaved according to the rules.
So who are these miners who don't work for anyone are basically Anonymous and somehow are able to secure this network
when Bitcoin was invented and the network first launched in 2009. Actually, there is only one computer mining Bitcoin it was
The inventor Satoshi Nakamoto, his computer was mining all the Bitcoin in the network for you know, the first almost a year and then slowly but surely other individuals kind of got involved and then you started have a group of people who were mining doing these calculations with their home computers basically with basic, you know, general-purpose CPUs and then over time it evolved. So the evolution was one of from CPUs to something called gpus which are Graphics processing units used for computer games. And then from there moving all the way to what are called a success.
Application specific integrated circuits. So with that Evolution and Hardware the way the mining Market has gone is it's not even individuals who are running these CPUs or gpus or even a 6 in their homes. They're actually pulling them collectively across the internet and forming these things called mining pools to actually collectively work to earn these rewards and then be paid out in proportion to the amount they contribute.
Okay. So let's take stock of where we are in our introduction Bitcoin was invented. It solved some technical.
Challenges for digital money and a system was devised to secure it and created on an ongoing basis until the supply is capped at 21 million Bitcoins according to the code sometime in the next Century, but despite all this why would Bitcoin actually have any value if it's digital money that you can actually see your touch and it's not produced by any government. How can it be worth anything? Here's a 16z crypto partner Ariana Simpson.
A lot of monetary systems are really built on a shared belief in
System and if you think about government-issued currencies Fiat currencies as we call them typically they're not really backed by anything in particular. So even in the United States, obviously the dollar used to be backed by gold and then in 71 Nixon announced that the u.s. Was going off of the gold standard and so that kind of fundamentally shifted how the u.s. Dollar is backed the key question. I think when you consider
or a system of money is really scarcity because that is what determines its value really more so than anything else the fact that I can't print infinite dollars means that that allows it to maintain its value and the fact that the supply of Bitcoin for example is capped basically takes the digital concept of something that in theory could be produced in large quantities and makes it such that it does remain scarce.
So the longer the system has been around the more people use it the more this shared belief in it. And the more useful it is for all the participants of that system.
Okay. So this brings us to the question of what people can actually do with Bitcoin right now most holders of Bitcoin. Don't use it to purchase Goods. Although some merchants and companies do accept it as payment. Most people are holding on to it. This makes Bitcoin what's called a store of value and it's sometimes referred to as
as digital
gold more and more of our lives are moving into the digital sphere. And so it makes sense that while gold was often something that people held almost as a hedge against Fiat currencies or the policies that their governments might put in place which could result in inflation the new form of gold would now become something like Bitcoin which, you know, it's not controlled by a government and its Captain Supply.
It also has other properties that make it very useful. For example, it's very easy to transport and it's infinitely divisible and it just in many ways fits better with the point in time in which we are now,
we've talked about some of the advantages of Bitcoin. It's cryptographically sound so you can transact peer-to-peer and it's deflationary because only 21 million will ever be created but what about security crypto is secured through private keys or passwords that only the crypto
a holder or their financial custodian nose and which gives them the ability to access their Holdings, but what if someone loses their password this is actually happened to some early bit coin holders who will never be able to access Holdings now worth in some cases hundreds of millions of dollars. Here's Alex prudent
the traditional Financial system is We Trust Banks and our banks Trust commercial Banks and Commercial Banks trust the fed and it's kind of a hierarchy and if for whatever reason that fraudulent transaction happens, there's like a legal mechanism by which those
You can actually kind of be reversed and that doesn't exist in crypto necessarily because the whole point of it is to be decentralized and kind of prevent any one party from having that power. And so what ends up happening is a lot of people will trust third parties to custody these private keys for them. So this most commonly happens with crypto currency exchanges The Exchange keeps an internal balance of how much crypto that I own but they are the one that maintains this private key. So the best
exchanges and the best wallet products out there use the most cutting-edge cryptographic and computer security technique what you're getting there is Best in Class security like you would see at a bank in terms of like their level of digital protection.
So we've talked about Bitcoins underlying properties now in section 2 of this podcast on the expansion of crypto, let's quickly explain the blockchain and talk about how it enabled crypto to move Beyond Bitcoin first. Here's a 16z data scientist at allow ziran explaining why it's called.
Watching when transactions are submitted to a blockchain. They go into a large queue that minors who are continuously verifying the state of the network. They grab these transactions and they bundle the new transactions into these blocks that are committed to the end of the chain of blocks. This block is inextricably tied to the previous block using cryptography.
Quickly, the hash function is connecting your transactions to the most previous recognized status of the blockchain everything that's in the new blocks State can't disagree with the previous block and in fact any of the blocks before that, so that's how the blockchain works. But that basic concept opens up many new possibilities for computing. So let's go up a level to the big picture a 16z general partner. Chris Dixon has talked about crypto in the block.
Being a new Computing Paradigm similar to mainframes in the 50s the internet in the 90s and Mobile in the 2000s. Here's Chris on how he sees the blockchain and what you can do with it
the way I think of what a blockchain is. It's a virtual computer that sits on top of a network of physical computers sometimes called minors or validators that can make strong game theoretic guarantees that the code it runs will continue to operate as designed. In other words. It's a computer that can make commitments can make commitments to users it can make
It means to developers and make commitments to anyone that's accessing it and you can rely on those commitments by simply reading the code and looking at the architecture of the computer without knowing anything about the people that created the computer or the people that are running the computer. You just have to look at the code and you can trust in the code. Why would you want to block chain? Because a blockchain can do new things that prior computers couldn't do specifically a blockchain allows you to create new Computing Primitives such as digital money.
Smart contracts digital Goods decentralized organizations. These are Computing Primitives that could not have credibly existed on non blockchain architectures Bitcoin is a form of digital money that exists on the blockchain and one of the reasons Bitcoins can have value is that Bitcoin makes the commitment that there will only ever be 21 million Bitcoins and because it's built on a blockchain that commitment to the scarcity of Bitcoins is baked into the code itself into the network architecture itself.
Tough as opposed to having to rely on the Promises of a person or company if Google or if Chris Dixon said tomorrow, I'm going to have Google coin or Chris coin and there's only ever going to be 21 million of them. Why would you ever believe that you know, I could change my mind who could change its mind the special thing about a blockchain is the commitments are baked into the code and they can never change
soon after the Advent of Bitcoin programmers started seeing the possibilities to build on top of it and begin building their own applications that interact with other
Locations on the blockchain Eddie lateran. So Bitcoin was the first effort to create a system that accounts for Value a system of accounting just being able to send basically quantities around is great, but it's kind of the base layer for all these other kinds of interesting projects other projects are taking that idea of writing Computer Applications that don't need to rely on a central trusted entity and generalizing it to all kinds of computing.
Any kind of computing and any kind of applications the most prominent new blockchain built after the Advent of Bitcoin is called aetherium. It's a logical extension of Open Source software open source software is just code that everyone can read anyone can share anyone can run it themselves on their own machine, but it hasn't been true until recently with etherium and others that you can not just see the code, but you can actually interact with a computer.
Guaranteed to be running exactly that code which means you can make all kinds of interesting assumptions. You can write your own program that interacts predictably with their program and then other people can write code that runs against that program and before you know it you have something that looks like Central Bank or a loan platform or a voting system or a new Social Network. It's not just that we're writing on our own computers that communicate with each other now, we can write code that works on a giant shared computer.
And those giant shared computers can interact with other giant shared computers. Okay, we've talked about Bitcoin how it started everything how the blockchain is the underpinning of it all and how the idea is set out in satoshi's white paper back in 2009 have now been built upon to create not just a peer-to-peer digital money system, but open up all kinds of possibilities for how computers can interact and lead to Innovation at the heart of what people imagine the future of crypto to be is the idea that sharing value will become as easy and painless as the internet made sharing information.
And the way cryptos doing that is through a hugely important Concept in crypto called tokens tokens are not physical tokens a token is a representation of ownership of something on the blockchain. That's it. People can make tokens protocols can make tokens, but there's only a small number of tokens that represent real value. What makes a token valuable is that it is an indelible record of ownership of a thing and that it can be exchanged. They can be traded. So the
The key thing about tokens is that when you exchange them, you're not just exchanging information, you're exchanging actual value. This is not like online payments or debit card payments where you are sending money from your bank account to some third party and it's going through several other verification steps and clearinghouses and often taking several days to clear. This is instant transfer of value from peer-to-peer tokens with the heart of the crypto economy. Here's a 16z managing partner Scott Cooper think of the token really as performing a number of functions number one. It can be a
Medium of exchange for that Network in other words. If you have a network where you're trying to offer storage options to people for example to be able to store their files the rules of that Network might be that in order to procure storage than you might need to use a token. So in other words take your US Dollars purchase the token that is specific to that Network and be able to use that as the medium of exchange to be able to access the services on that Network. The other way to think about the token is it's really a economic incentive structure for the various.
Participants who are managing and governing the network. They are people really who are responsible for the day-to-day governance and maintenance and activity of the network. And these are not necessarily employees of the company that might have started the network. They might just be developers out there or individuals who decide they want to be part of the governance structure and oftentimes the token in that case is used as a form of remuneration for their activities, so they will help verify that the system is working that the transactions are working in the way that we expect and
Time's the crypto network will use tokens as a way to compensate them effectively for that activity. But here's why tokens are really interesting and potentially transformative. They allow for the possibility of far-flung participants to not only build a network but also to profit from the growth of that Network, here's former a 16z partner and now the founder of the variant fund Jesse Walton
tokens are an innovation that are kind of akin to data packets in that there a standard way of moving bits of value just like we moved
it's of information and that is very granular Ali instantly to anyone anywhere in the world. And so what that means is it's now possible to distribute value to users of Internet platforms at scale and what I mean by that is, you know at the scale of platforms like Facebook or read it. If you imagine trying to put a few cents in the bank account of every user of Facebook many of them don't even have bank accounts. It gets pretty unwieldly very quickly, but that's exactly what's possible. Thanks to
Tokens. So one of the exciting things on the horizon that's just starting to be explored now is ownership of products internet products and services by the users that actually contribute to the value to those networks.
This has all kinds of implications for how networks will be built in the future. Here's a 16z general partner Alicia
think of for example, YouTube video creators or writers who write on sub stack will write on medium and traditionally all of those people have relied either on
sizing or on the patronage model through patreon or through direct payments from their fans and from their viewers crypto stands to provide that whole category with new business models and new ways of monetizing creative content online. And the way that I do that is by allowing a Creator to also build a kind of crypto economy to directly engage with their fans and with our readers and viewers in a way that's more creative.
Ben chose a simple payment like direct payment from the fans themselves. The design space is truly infinite and unbounded as our creator to engage your fan base in a way that's more creative and provides a new mechanism for monetizing your creativity online that is just truly inconceivable with the traditional Financial system, which kind of a bank in the middle if you were to try to do it that way and with a payment rails on and off as a way of trying to engage each of your users like the level of overhead that exists.
That kind of system makes it so much harder in the friction is so much higher than it is. If you really are just leveraging a blockchain instead.
Now, we're going to turn our attention to how cryptos being used in the world right now. The first use case to explore is a phrase you might have heard. It's decentralized Finance or defy and it's where a lot of the energy is in crypto right now with all kinds of new protocols networks exchanges in markets being developed and a growing number of users deploying real money. Here's Eddie lateran.
Defy stands for decentralized finance, but it's really more like open finance until now. The history of Finance has been centralized or closed you go up to a bank or some other kind of financial service provider and you engage in a relationship with them where they promised they'll do certain things often. They do do those things. But ultimately you're putting your money into a black box and you're hoping
and trusting that they're going to do it exactly like they said decentralized Finance Defy is an effort to deconstruct that and make all those pieces open and transparent in defy. You can examine the exact code that's governing what happens to your money and what determines the interest rate that you're receiving that operates without the control of any Central Authority. It operates in a totally transparent and open way and it relies on
Cryptographic Primitives to make sure that it's not interfered with one way defy has been used in recent months is through something called yield farming in which users of various crypto based Financial networks are protocols as they are often called can seek healthy Returns on the tokens. They possess and use Within These networks. He'll farming is rewarding those who provide those assets for others to borrow with an additional yield. You can think of it like a subsidy.
For borrowing and a subsidy for Lending that's paid by the protocol in ownership of the protocol itself. In other words. If you provide some asset to the protocol the protocol will give you ownership of itself a small percentage of it to thank you for doing so and the thing is that ownership of those protocols has value because it's represented in a token that can also be sold.
So what's interesting is you could be in a scenario where lending some of your assets to the protocol would normally be somewhat lucrative. But in addition to interest you are also receiving a little trickling faucet of ownership of the protocol. It becomes even more lucrative you can think of different strategies here as you receive ownership of the protocol. You can either accumulate that and hold it because you think that protocol is going to become more valuable or you
Immediately sell it in exchange for the thing that you are originally lending and start compounding your lending by just pushing it back into the protocol increasing your yield and that's what makes it yield for me recently another new crypto enabled innovation has caught on and spread quickly leading to multimillion-dollar auction sales in headlines worldwide. It's the biggest right now real world use case for crypto and recently a digital artworks old 469 million dollars at auction and everyone from artists to music.
Fans and celebrities starting to explore the possibilities. We're talking about NF TS a type of token that opens up new opportunities for creators consumers and developers to interact and create new marketplaces. Here are Linda Che co-founder of scalar capital and former product manager coinbase and Jesse Walden on a recent podcast on an ft's with our editor-in-chief zonal
so n of T stands for non fungible token, which is just a term used to describe a unique digital asset whose ownership is tracked on a blockchain. This can be really broad set of assets.
From digital Goods like virtual Lans and artwork to Clement physical assets, like real estate or clothing items metaphor that I would offer as a definition is and of teaser way to make digital files ownable instead of a financial asset. You can now own a digital media asset on the internet and that's why the file metaphor is apt you can now own a JPEG on an MP3 and what you're essentially doing when you create an mft and sort of like metaphorically uploading that file to
to the Block Chain so that anyone can track its provenance an attribution. What's really powerful is crypto is you have all these open protocols that you can kind of plug into each other. And so when you have NF t s you can plug them into decentralized systems and be able to trade these entities with anyone in the world and have that be instantaneous and so n of T is on the blockchain allow anyone to permissionless Leone issue trade them that an empty lives on the blockchain alongside all of their transactions and everyone can see it and so if that NF
Changes hands and say Linda buys my nft. Everyone can see I transferred ownership to Linda and as a result, we start to build his very rich history of interactions people have with media on the internet,
but you may ask how our n of T is different from just sharing jpegs or gifts on existing social media sites part of the answer to that has to do with the decentralized nature of crypto and how it changes the dynamic between users and platforms
with social media today when you share a file or share a piece of media you upload the file to the
platform and what's actually happening under the hood as your copy-pasting ownership of the file to the platform what I mean, is that somewhere along the way you signed a terms of service that allows for the platform to monetize that piece of content as they see fit and maybe they give you a code of the revenue maybe not but the platform gets to make that call and they also get to make the call on how that content is consumed and there's not a whole lot of innovation going on there because any developer who plugs in to try to innovate has been shut down in past now contrast that
And of T is if you're uploading files to the box and then those files become in up to use and they behave in the way that other crypto assets behave that means that their permission lessly accessible to anyone anywhere with an internet connection. The implications are that any third-party developer can then innovate on the way that media is consumed like how the audience sees it how people can interact with it or program that
so NF T Zone early use case that has gotten a lot of attention because of what it says about consumer Market places and the relationship between
In creation of digital goods and ownership of digital Goods, but as Jesse mentions, they also highlight the potential of crypto more broadly for developers. This is because crypto apart from just in a tease creates new kinds of incentives for the developer ecosystem those incentives stand in contrast to the relationship between developers and Platforms in the web to era which featured asymmetrical power
dynamics in order to talk about the developer ecosystems in crypto. I think it's really helpful to look at recent history and in particular the sort of early days of platforms.
Twitter Facebook Spotify and others Each of which at one point had a very rich developer ecosystem built on top of their API and that ecosystem was rich with third-party applications that benefited users in the form of sort of more optionality more ways to interact with these platforms and benefit a developers and that it was a way to you know gain access to user base game distribution. And so it was a pretty exciting way to build a startup but as
As these platforms grew the sort of same pattern started to reoccur on each of them. And that was that many of the big internet Giants. They killed their developer ecosystems by turning off apis or severely limited them or changing the rules and as a result all the developers building these Innovative third-party startups on top of these platforms got burned and users got burned too because they lost optionality
for developers crypto seen as being a more friendly space in some ways.
The whole idea of crypto and blockchains is that they are not controlled by a centralized entity.
Not only our crypto networks open source. There are open source code that's run on machines that are distributed all over the world. And so there's no one person or one company that can change the rules specified in that code the result of this the open source and decentralized nature of crypto networks is that developers can trust that the platform that they're building on top of won't change.
The rules against their will or yank out the rug from underneath the project that they're building and what's more is that each application deployed to a crypto Network can become a permission list building block that any other developer can build on top of or extend for this same reason because they know that the rules won't change and the building block won't get yanked. And so this is a concept that in the crypto space is called composability what it essentially means is that
Developers can build more with less resources because they get to stand on the shoulders of all the other developers who've built stuff before them. And so if we're right about that, there's good reason to believe that crypto can be one of the fastest growing waves of software Innovation ever because of this idea of composability in the fact that developers can build more with less
this raises a question though, why would developers agree to give up some of the value of the Network's they create in this wide open d
centralized space where there are no owners and tokens are distributed to users of the networks within the developers who created the Network's want to keep all that value for themselves. Here's Aliyah decentralisation doesn't mean that you don't get to benefit from what you're building. It's the core value proposition of crypto. And so as a Creator if you're building a project in the space in your building a protocol and you're facing this question should I do the right thing and decentralize as per the ethos of the
Or should I try
to keep control
somehow maintain access through some backdoor have like the private key that controls everything and capture most of the value myself. The logic that follows is that if you were to take the ladder path, then you will most likely not really create anything that is of true long-term value in the space because you will just be creating something that looks very much like a traditional software that just runs on servers and databases that a single company or an
Visual controls and if you're going to do that, then you might as well just do that and not bother building on top of a block chain or not bother with the whole trip to aspect and of course, even
though you are working
toward decentralizing the protocol that you're building that is not to say that you're not going to benefit from it becoming an enormously
valuable protocol.
If you build it in the right way and you continue to own some subset of the tokens in the network that you build your still able to continue.
You to be part of the community that you build continue to own and benefit from the value that you create and continue to participate in governance and the kind of a community's Evolution over time. And even though you were giving some piece of it away as a
way of enabling the community and as a way of
decentralizing the overall effect is that the pie is just that much larger for everyone. So we've covered a lot of ground from the beginnings of cryptocurrencies with Bitcoin to new block chains in the ways. They've enabled Rich marketplaces of
total assets and new ways for developers to innovate. There's plenty more to talk about including the question of Regulation and how crypto might continue to enter the mainstream will have more of that in upcoming episodes. But let's end with a look at what the future holds one way to look at. The future of crypto is through the prism of the idea maze this vast space where technologists can try new things learn what works and what doesn't in adapt their Innovations to other parallel Innovations going on. This has happened in the development of the web and it figures to happen times a thousand in
Because of the way ideas can build on top of each other and interact on blockchains. So let's give the last word to Chris Dixon who provides context on where crypto fits in the history of computing and talks about the web 3 era that is beginning to emerge.
So the history of computing every 10 to 15 years. There's a new Computing cycle. So that's going back to the Advent of computing and World War II to then after that mainframes and mini-computers to PCS the internet in the 90s and then mobile phones in the 2000s with each computing.
Cycle there's a new kind of computer invented and then that kicks off with a wave of applications that are built on top and you end up with a virtuous flywheel with the new applications help reinforce the new type of computer in the new type of computer as it gets better helps reinforce a new kinds of applications. So leave you a crypto or blockchains as a new type of computer putting all those other Primitives together kind of think of them as Lego bricks, you can make bigger Lego bricks and one really exciting Lego brick people are designing or to called decentralized autonomous organizations. Why would you want to
Decentralized autonomous organization will one really interesting one is What's called the web three movement web three movement is a response to sort of the history of the internet. So the first year of the Internet Was a Very decentralized year where you sort of governed by protocols like HTTP SMTP and those open protocols led to a whole exciting wave of startup creation everything from Google to Facebook YouTube Etc. The web to movement was also very exciting. These were Facebook Twitter and other kinds of large platforms, but when negative of the web to movement was those are closed.
Platforms that didn't really allow Innovation on top of them the web 3 movement is trying to kind of take the best about web one and web to and so have the Open Access of the first year of the web while also the advanced functionality the second year of the web in order to do that decentralized organizations are very powerful idea. And the idea is you can create a social network. You can create a Marketplace like Uber or Airbnb you can create a messaging app like WhatsApp, but instead of having it be controlled by a corporation. It's controlled by a decentralized.
Organization by community of people who come together and are united in this kind of cloud organization. And that means that you can do things like you can make commitments that the organization the centralized organization make commitments to users. You can tell users. Hey, if you use my social network, I'm not going to change the rules later and violate your privacy. I'm not going to try to monetize your data. It can make commitments to developers that say Hey, if you're a developer and you build on top of my social network and you build a business on top of
It I'm not going to decide to change the rules later and take all your money or change the API. And so these doubts decentralized organizations are very powerful new ways to think about the ownership and control of a next generation of Digital Services.
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