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Colossus (Invest Like the Best / Business Breakdowns)Podcast13 Apr 2021Source: joincolossus.comHost: Patrick O'Shaughnessy

Chris Dixon - The Potential of Blockchain Technology - [Invest Like the Best, EP. 221]

In plain words

This interview explains why blockchain is the next computing platform, like the internet or mobile. Chris Dixon from a16z says blockchain is a 'computer that can make promises'—code enforces rules like Bitcoin's fixed supply or NFT ownership. He's bullish on DeFi (decentralized finance) and NFTs, which cut out middlemen. Key picks: Bitcoin (digital gold, 21 million cap), Ethereum (top programmable blockchain, switching to proof-of-stake), and Uniswap (decentralized exchange with near-Coinbase volume, run by 10 people).

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At a Glance Andreessen Horowitz partner Chris Dixon articulated his core investment thesis on crypto in a program: blockchain technology will reshape 21st-century business models and represents the most investable sector over the next decade. He focused on how DeFi is redefining lending (e.g., the M

~12 min full read · 8 sections
Deep Analysis

At a Glance

Chris Dixon (a16z partner) articulates his core investment thesis: blockchain is the next computing platform after PCs, the internet, and mobile, and its essence is "a computer that can make strong commitments." He argues that the most valuable startups of the next decade will be built around blockchain, just as the past decade was built around mobile—but "the next big thing will initially look like a toy."


Theme 1: The Core Capability of Blockchain — "A Computer That Can Make Commitments"

Chris Dixon argues that the fundamental characteristic distinguishing blockchain from traditional computing platforms is that code can make immutable commitments — something no previous computing architecture could achieve.

  • Commitment Mechanism: The servers of traditional internet companies (Google, Facebook, Apple) are controlled by humans, and rules can be changed at any time. Blockchain, through its distributed consensus mechanism, "hardcodes" commitments into the code — "We like to say it's not 'don't be evil,' but 'can't be evil.'"
  • Three Specific Commitments:

1. Commitment to Scarcity: The total supply of Bitcoin is capped at 21 million, guaranteed by the network architecture rather than any individual or institution.

2. Commitment to Ownership: NFT holders truly own their digital assets — "Companies cannot change royalty rates, cannot take away your items, and cannot make old items disappear because of a new season."

3. Commitment to Developers: Blockchain provides a "level playing field," where developers know the rules will not suddenly change — analogous to "Would you rather invest in the U.S. (with stable rule of law) or an authoritarian developing country (where assets could be confiscated at any time)?"

  • Code Holding Assets: Code on the blockchain can directly hold funds. Using Compound as an example, approximately $10 billion is held by the code itself — "The people who created Compound could disappear tomorrow, and the code would still run."

Dixon emphasizes that the key to understanding blockchain is not to place it in the context of "finance," but in the context of "computing" — just as the key to understanding the iPhone is not the phone, but new capabilities like GPS, touchscreens, and cameras.


Theme 2: DeFi — Modernizing Financial Infrastructure

Dixon argues that the ultimate promise of DeFi (Decentralized Finance) is "disintermediation," eliminating layers of middlemen and fees in traditional finance while delivering transparency, security, and composability.

  • Problems with Traditional Finance: Using lending as an example — "You want to open a restaurant, you go to Citibank and fill out a pile of forms; three blocks away, I want a new restaurant, but there’s no way to transmit the demand signal; I deposit my money in the bank earning 0% interest, the restaurant pays high interest rates, and the bank pockets the spread. The entire system still runs on COBOL (a 50-year-old language)."
  • DeFi’s Solutions:
  • Overcollateralized Lending: Take MakerDAO as an example — users deposit ETH as collateral and borrow DAI (a stablecoin pegged to the U.S. dollar). DAI is fully backed by crypto assets, with no fiat currency backing, and has operated stably for four years, with a circulating supply exceeding 3 billion.
  • Transparency: All transactions are publicly verifiable — "Saying blockchain is used for money laundering is absurd, because everything is public; it’s the worst way to launder money."
  • Composability ("Money Legos"): Protocols can be combined like Lego bricks. For instance, Yearn Finance automatically allocates funds across sub-protocols like Compound and Maker, similar to a traditional ETF.
  • Uniswap Case Study: Inspired by a blog post from Vitalik Buterin, Hayden Adams coded it in Solidity, with a team of only about 10 people. Its trading volume now approaches that of Coinbase and Binance — "No servers, no AWS, never down. The team could disappear, and Uniswap would run forever."
  • Token Governance: Uniswap issued the governance token UNI, allowing holders to vote on system changes. In September 2020, it airdropped 400 UNI (worth about $11,000 at the time) to all historical users — "A student in a computer science class in India used it to pay their tuition."

Dixon notes that DeFi currently has about 1 million users, but "this is the infrastructure phase — like the iPhone in 2008, you see a small screen, dropped calls, and only four apps."


Theme 3: NFTs and Social Tokens – The "1,000 True Fans" Economic Model

Dixon argues that NFTs and social tokens are extending the proven business model of the video game industry (free-to-play + virtual goods) to all creative fields—music, art, writing, and beyond—ushering in a "20-year golden age for the creative class."

  • Lessons from Video Games: Fortnite generates approximately $3 billion in annual revenue. The game is free, with income derived from virtual goods such as skins and emotes—"only 0.5% of users account for 80% of virtual goods spending."
  • The "1,000 True Fans" Theory: Kevin Kelly's insight from 15 years ago—the internet should enable creators to find 1,000 "true fans" (those willing to pay for anything they produce). However, intermediaries (large social platforms) have blocked this model. Now, Substack and NFT platforms are making it a reality.
  • The Economics of NFTs:
  • Tiered Demand Curve: Creators can set different price levels—free viewing, low-cost purchase, high-value collection. "Foundation charges only 10% fees, with creators keeping 90%, far better than traditional publishers."
  • Scale Effects: OpenSea (an NFT marketplace) has reached $1 billion in annualized revenue, while Foundation (a crypto art platform) hit hundreds of millions within months—"you don't need hundreds of millions of users; a few thousand true fans are enough."
  • Quality Flywheel: An increasing number of digital artists are quitting day jobs (e.g., "designing fonts for sugary drinks") to create full-time—"artistic quality is rapidly improving."
  • Social Tokens: Using Rally as an example, Twitch streamers can issue their own tokens for tipping, purchasing merchandise, or accessing private Discord channels—"investors can 'back' an emerging band; as the token appreciates, they inject more capital, helping musicians quit their day jobs to create full-time."

Dixon emphasizes that the NFT explosion represents "the first crypto application capable of reaching hundreds of millions of people"—"DeFi is great, but only 1 million people use it. NFTs have my relatives asking me how to use MetaMask."


Theme 4: Programmable Public Blockchains – Multi-Chain Coexistence, Not an "ETH Killer"

Dixon argues that multiple programmable public blockchains will coexist in the future, each optimized for different "workloads," rather than a single winner taking all.

  • Trade-off between performance and security: Ethereum, like Bitcoin, pursues the highest level of security (capable of withstanding nation-state attacks), but at the cost of performance (high gas fees). Other blockchains such as Polkadot, Solana, Cosmos, and Flow make different trade-offs—"just as computers have CPUs and GPUs, data centers have different systems handling different tasks."
  • Demand will always exceed supply: Even after Ethereum completes upgrades such as sharding and proof-of-stake, "demand will still exceed supply. This has always been the case in computing history—CPU, GPU, bandwidth—there is no exception."
  • Interoperability: Through "trustless bridges," NFTs and tokens can be transferred between different chains—"you get a virtual item in a game and want to 'deposit it in a bank,' so you move it to Ethereum."

Dixon lists approximately 10 "truly credible programmable public blockchains" and states, "They are not competitors, but rather collectively building the infrastructure for billions of people to use blockchain applications in the future."


Theme 5: DAO — Software-Defined Organizational Forms

Dixon argues that DAOs (Decentralized Autonomous Organizations) are the "natural successor to the limited liability company," using code to achieve collective coordination of capital and labor.

  • Essence: A DAO is a set of smart contracts on Ethereum that enforce agreements among participants — "no company, but code executes transactions."
  • Case Study: When Uniswap V3 launched, a DAO (a group of internet strangers) pooled funds to purchase an NFT by artist People Pleaser, with proceeds donated to charity — "Without a DAO, it would have been impossible to pool this money so easily."
  • Future Vision: "Maybe one day a DAO will buy a basketball team, just like the Green Bay Packers are owned by citizens."
  • Comparison with the GameStop Incident: "GameStop was a 'canary in the coal mine' — DAOs are the real way to scale collective action."

Dixon notes that DAOs solve the "collective action problem" — "Many problems in the world are collective action problems (energy consumption, tragedy of the commons), and DAOs offer a new way to coordinate."


Mentioned Positions

Position Guest Stance Key Data
Bitcoin Bullish (digital gold / store of value) Total supply 21 million, 12+ years of history
Ethereum Bullish (core programmable public chain) Launched in 2015, transitioning to proof-of-stake (within 12 months)
Coinbase Bullish (a16z investment) Led investment in 2013
MakerDAO Bullish (DeFi cornerstone) DAI issuance exceeds 3 billion, stable operation for 4 years
Compound Bullish (DeFi lending protocol) Code holds approximately $10 billion
Uniswap Bullish (AMM innovation + governance experiment) Team of about 10 people, trading volume near Coinbase/Binance levels; UNI airdrop of 400 tokens per user
Yearn Finance Neutral (DeFi meta-protocol) Automatically allocates funds among sub-protocols
OpenSea Bullish (a16z investment) Annualized revenue exceeds $1 billion
NBA Top Shot Bullish (a16z investment) Total sales of $450 million, approximately 1.3 million accounts
Foundation Bullish (crypto art platform) Reached hundreds of millions in annualized revenue within months
BitClout Neutral (social token experiment) Described as "profane"
Rally Bullish (a16z investment) Streamers can issue personal tokens
Polkadot Neutral (programmable public chain) Position not explicitly stated
Solana Neutral (programmable public chain) Position not explicitly stated
Cosmos Neutral (programmable public chain) Position not explicitly stated
Flow Bullish (a16z investment) Public chain optimized for NFTs/gaming
Dapper Labs Bullish (a16z investment) Developed Flow and NBA Top Shot

Judgments Worth Remembering

1. "It's not 'don't be evil,' but 'can't be evil'" (Chris Dixon) — The core advantage of blockchain is that rules are enforced by code, not by human promises. For the first time in history, users and developers can trust a system without having to trust its operators.

2. "The next big thing will initially look like a toy" (Chris Dixon) — A framework Dixon proposed a decade ago: early telephones could only reach one mile, early iPhones dropped calls and had only four apps. The current "toy-like" feel of NFTs and social tokens is precisely a signal of their potential.

3. "The promise of DeFi is disintermediation — just like what the internet did to retail" (Chris Dixon) — Traditional finance still runs on COBOL, while DeFi uses smart contracts to build transparent, composable, and global financial infrastructure. Key data point: Compound's code holds approximately $10 billion.

4. "The video game industry is $140 billion, the music industry is about $20 billion — not because music is unpopular, but because the business model hasn't kept up with the internet" (Chris Dixon) — Fortnite's free-to-play plus virtual goods model (0.5% of users pay for 80% of revenue) will extend to all creative fields. NFTs and social tokens are the vehicles for this trend.

5. "Saying blockchain is for money laundering is absurd — everything is public, it's the worst way to launder money" (Chris Dixon) — Blockchain's transparency is often misunderstood. Its security model is "cryptographic authentication" rather than "walls and moats."

6. "We no longer ask where the team is — that's an outdated question" (Chris Dixon) — The crypto space is global, with nearly all teams being distributed. Innovation comes from all over the world.

7. "We need more entrepreneurs — I've never seen a field with so many opportunities and so few talents" (Chris Dixon) — There is a severe shortage of crypto developers and entrepreneurs. The NFT boom is attracting a new wave of people into the space.

8. "DAOs are the natural successor to limited liability companies — using code to achieve collective action" (Chris Dixon) — From pooling funds to buy NFTs to potentially purchasing basketball teams, DAOs replace traditional corporate structures with smart contracts. The GameStop incident was a "canary in the coal mine."