Dialogue with a16z partner Chris Dixon: In-depth discussion on bear markets, regulation, and real Web3 use cases

Interviewer: TechCrunch

Interviewee: Chris Dixon, Partner at a16z

Organizer: Guo Qianwen, ChainCatcher

Host: Cryptocurrency has had an interesting year, full of turmoil. It may be a good time for investors. Looking ahead to next year, regulation might be a focus, and there are many news stories about portfolio companies and tokens. If the SEC increases regulation and starts focusing on tokens, startup bonds, NFTs, etc., will this fundamentally change web3? In other words, can the mechanisms of Web3 still operate?

Chris Dixon: Yes, a lot has happened this year. I have been in this field for about ten years. Everyone knows that this field has always been like this, "winter comes and summer goes," and now it may be winter?

I think the core issue to focus on, which applies to any tech field, is what kind of products to build, what kind of infrastructure to set up, and which entrepreneurs are entering the space. I actually experienced the so-called "Web2" revolution in 2000, so this is something I have always believed in. We have always focused on this, which is why we have made progress; many entrepreneurs are dedicated to building infrastructure, which is why the facilities are getting better and better.

You mentioned the issue of regulation. We have always been advocates of "smart regulation." This is true in any field, especially when it comes to tokens and money, where there will be bad actors, and regulators must step in to stop them.

We have 80 years of case law, we have the SEC, and the famous "SEC v. Howey Co." case was ruled by the Supreme Court, which ultimately stipulated that all our projects must hire legal teams to ensure compliance.

That said, I still think it would be better if everything were clearer and more defined. Current enforcement and laws are somewhat arbitrary. So Congress has many bills right now aimed at clarifying these issues and explaining some legal situations. This is a good thing; it clearly lets founders understand the rules and then follow them to innovate.

I have been on the board of Coinbase for seven or eight years, from 2013 until its IPO. There is a strange phenomenon that Coinbase invests heavily in compliance, while many of its competitors do not. This is quite frustrating because without clear terms, in pursuit of greater profits, many people will often choose to circumvent the rules. This is quite sad for good actors who follow the rules. So for these reasons, we are more actively engaging with policymakers to advocate for regulation. In fact, some of the things that happened last year were due to unclear regulation and inadequate enforcement.

Host: If the SEC starts focusing on things like Ethereum, they seem very concerned about this, or on general token or NFT projects (people think these projects might succeed in the future). If these fundamental things are questioned, in other words, if Web3 loses these elements, what else would Web3 have to offer?

Chris Dixon: Securities law is made by Congress and adjudicated by the highest courts. There are many assets in the world that are not securities, such as real estate, commodities, and gold. Securities are actually a category of assets where there is information asymmetry. For example, Apple stock is different from ordinary assets; some holders of Apple stock may know more about the company than others, and there are a series of related laws and regulations to disclose these matters. So the SEC issued a statement a few years ago introducing the concept of "sufficient decentralization," which means a high degree of decentralization. For example, I think Ethereum and Bitcoin are highly decentralized; their essence is more like gold than Apple stock. Of course, there will be people writing code and maintaining the system, but no one knows what the price will be tomorrow. Therefore, there is no need for disclosure because no one has the privilege of obtaining specific information. This is how case law has operated for over 80 years.

We believe this is smart regulation; when there is information asymmetry, we do need regulation. The SEC has also stipulated that our projects should not have information asymmetry, and we must comply with these rules. The personnel department of the regulatory agency has been changing, and opinions vary, but fundamentally these rules are determined by Congress and case law.

Host: It feels like Web3 is more like a meme culture now. What do people in the tech circle talk about as the real use cases for Web3? I wonder if you have a specific vision for the future?

Chris Dixon: A very obvious example is creating new monetization methods for creators. If you look at the creative networks in the Web2 world, like Instagram, artists create content, but they are not part of the company. These networks can provide creators with tools and social platforms, but the final content creation comes from the creators. The content created by these creators allows these platforms to profit through advertising, but the revenue rarely makes it into the creators' pockets, or is very minimal. Of course, YouTube may do a bit better, allowing creators to take half of the revenue. But if you look at the general situation, getting 50% is very difficult. Twitter, Instagram, and TikTok take all the revenue. So a very obvious use case is to enable creators to connect directly with their audience without intermediaries, allowing them to receive revenue directly.

Many people describe it as an emerging computer and internet movement, believing it is a way to solve problems, as simple as inventing a bottle opener or kitchen tools to solve problems. But it’s not that simple.

Did the invention of the first computer solve problems? It seems not. If we look at advertisements from the 80s, like Apple's ads, the scene is quite funny. A couple is in the kitchen with a huge computer on the table, trying to use it for recipes but not knowing how. The emergence of developers saved them. They invented spreadsheets, then word processing software, PS graphic software, etc., which is how computers solved problems.

Later, when mobile phones came out, did they solve problems? Sort of, but it was actually the emergence of apps that truly solved problems, allowing people to express creativity in new ways.

Steve Jobs compared computers to a "Bicycle for the Mind"; they can do some things that humans excel at, helping humans solve problems and making people more efficient and productive. I think this is the positive impact of computers on the world. To understand this, you must study the history of this movement, understand how it works, build and improve computers, and invest in both infrastructure and applications to solve problems.

Creators currently do not receive fair compensation on the internet, and this issue needs to be addressed.

Host: Four years ago, when we had you on stage, we talked a lot about Facebook (Meta), such as Libra and DM features, their focus on stablecoins, many elements of blockchain, and now they are starting to focus on the metaverse. Do you think Meta has room for development?

Chris Dixon: Among large tech companies, Meta is the only one still run by its founder, and I really like this company; they have done a lot of innovation. I believe tech companies should invest in the future; if you can't drive the development of the future, what’s the point of making so much money? They have invested heavily in supporting the development of VR and the metaverse. Hardware is very difficult to build and requires a lot of funding. At the same time, I see many startups achieving great success, whether in cryptocurrency or in the metaverse. I look forward to seeing the metaverse develop in a decentralized way, just like the early development of the internet.

If a metaverse emerges in the future where people spend five hours a day inside, and everything is controlled by one company, that would be a disaster. I hope it exists in a networked form, where anyone can build their own metaverse, create their own company, and do development work. That is the future we aspire to, and it is also the direction we invest in and encourage. So I think they deserve praise for this because compared to some other companies, the latter are investing more in areas like artificial intelligence. AI is certainly good, but that has long been a well-known consensus; these things are no different from what Google and Microsoft are doing.

Host: You invested a lot of money in Adam Neumann; what was the reason behind it?

Chris Dixon: My partners Mark and Jason have written blogs explaining this; if you want to know more, you can check out their blogs. From my perspective, I think he is one of the few young founders in the world who has truly built a real estate brand. There are many reports about him on the market, but we also did our own research and concluded that I think time will prove he is worth the investment.

Host: In the context of investment, when the market is booming, everyone is excited, talking about their trades, shopping like crazy, but now it seems that everyone is not so spirited. Do you think the market will recover? Especially in the past few months, the market seems to have slowed down for you.

Chris Dixon: I would put it in a larger context. I have been in the tech industry for 20 years, and I have experienced five downturns. Including the decade of cryptocurrency, there have been three crises in cryptocurrency. Before that, there was the financial crisis of 2008, and going back further, I founded a Web2 company in 2004 and experienced a downturn then, when Amazon's stock price fell to one five-hundredth of what it is now; such news was everywhere, and the overall situation was very bleak.

What I learned from this is that if you want to make a difference as an entrepreneur, you have to embrace these ups and downs. If you just blindly follow trends into hot fields, you may not create anything interesting.

In 2008, I founded a company focused on artificial intelligence and machine learning, which was later acquired by eBay. At that time, we were in a very early stage, but we believed that AI had potential. So I think experiencing cyclical changes is normal; during this process, you need to focus on products and technology, and pay attention to how to create breakthrough products that benefit users.

To create good products, the most important thing is people, specifically entrepreneurs and developers. In this regard, cryptocurrency is performing very well. We did a data report tracking the number of developers on GitHub and other sites, and it looks promising.

We do venture capital, focusing more on long-term interests, starting from at least ten years. We believe that as long as you can create value and products, you will succeed. But how long it takes is indeed hard to say.

Host: Now that the market is slowing down, what are the key focuses within your organization?

Chris Dixon: Many people are currently interested in this field; they are eager for more guidance and information. What I want to announce is that two years ago we started a crypto startup school, which was originally offline but was affected by the pandemic. We have about 50 people who talk to each other, and we have many guests, such as Brian Armstrong and colleagues from our company, discussing different areas of cryptocurrency, such as law, organization, marketing, etc. These video contents will be released online for free, with over a million views, and our students have also received investments from major companies, reaching $300 million.

So we will restart this project; if you check our official website, you will see that applications are open. It will be held in March in Los Angeles, and you can also see the invited guests and mentors listed on the website. Unlike last time, this time we will provide funding to purchase equity, and it will be like an accelerator project. It is an educational project, but it will provide funding; we hope to offer some training to entrepreneurs in the crypto field to help them create real cryptocurrencies.

This is not a "master plan"; there are no specific requirements. We hope to have more communication with entrepreneurs, regardless of what industry you are in or what work you do, as long as you are interested in this field, we encourage you to apply.

Host: I spoke with Katherine Hahn last year; she previously worked at A16 crypto, then left and took some people from the company to start her own. To be honest, this is not good news for your company, right?

Chris Dixon: Let me give you an analogy. In 2008 or 2009, I co-founded a seed fund with others; at that time, there weren't many such funds, so it was considered a pioneering movement. We had about 10 to 15 such funds supporting each other and investing in each other. If this movement wants to grow, you need many such funds working together, and now we have developed to possibly 500 seed funds. It’s the same now; there aren’t many crypto funds on the market. Kath has made many contributions in this field, especially in regulation, so her desire to start a business is a good thing because we have all been entrepreneurs before, and that’s normal.

Host: You can be considered one of the best investors in the world; don’t you want your name to be remembered?

Chris Dixon: I don’t really care about that; what I care about is that our movement can succeed and that I can work with capable people. I have been with the company for ten years, and I have always had a good relationship with Mark and Ben; the company has greatly supported some of my experimental ideas—actually, I invest not only in cryptocurrency but also in AI, VR, etc. That is the spirit of the company, and that’s why I joined. Many VCs just give you money and that’s it. But our company wants to do more; our crypto team has 80 people, about 65 of whom are doing operational work to support the company’s growth.

Host: Given the current stage of the company, Mark has indeed done a lot, but it seems he is gradually letting go of daily affairs, is that right?

Chris Dixon: This is a misunderstanding in the media. I have always worked with everyone; they are very dedicated, and they work every day. In fact, everyone is actively meeting founders, understanding their ideas, starting funds, etc. For example, we have started a gaming fund. We want to provide one-stop services for entrepreneurs, and everyone has been actively doing things. So this is a misunderstanding. Mark should have tweeted to explain that his schedule is very full, and there is a lot of work to do. If anyone wanted to retire, they would have done so long ago. This is also why I find the tech field very interesting because there are new developments, new technologies, and new faces every day, and interesting things can develop every day, which is why everyone is so motivated.

Host: Let’s talk about your personal Twitter; we all know you are a staunch defender of Web3. If someone questions it, you might even push back. Why do you take such a personal stance on this matter?

Chris Dixon: I feel that Twitter has become distorted. We have invested in a decentralized social protocol called Farcaster, which I use more often. Because people can communicate and do things on it, while Twitter is now filled with attacks, malice, and rumors. This site is also heavily related to politics, but my own attitude is that whether it’s my life displayed online or my work privately, technology is the only thing I care about.