26 ms·

Introducing A16Z Crypto

347 points by mdelias 8y ago

a16zcrypto 8y ago
Here's what I don't understand: if you're a crypto project, why wouldn't you raise funds through an ICO yourself? What benefit does a16z give you? One of the biggest assets of crypto is the ability to self-fund. Also, since the space is relatively new, I have my doubts about the ability of a16z to provide any useful crypto experience.
- chrisco255 8y ago
  Unfortunately ICOs are still a grey area, legally speaking, with regards to the SEC. Some tokens are securities, some are not. Really depends on the structuring of the token and what it represents. At this time, from a risk perspective, I could see going with A16Z being a safer move. Plus, you get access to A16Z resources, which are substantial.
- walrus01 8y ago
  ICOs have become a self-mocking joke, considering how many are outright scams or contain huge technical flaws, or some combination of the two. The latest season of Silicon Valley parodies it pretty well.
- TrevorAustin 8y ago
  There aren't any regulatory issues with taking investment from the a16z crypto fund, where a public ICO can bring attention from the SEC and other bodies. It lets founders and developers focus on getting their token network off the ground instead of figuring out how to do a legally kosher token sale.
- chadash 8y ago
  For one, raising money through an ICO is a legal gray area without much legal precedent. So even with a good lawyer, you are taking risk with the related securities laws. You might prefer to avoid this risk by raising money the traditional way.
- pdpi 8y ago
  One good reason is that money doesn’t buy you connections, but an a16z investment does. Another is because ICOs typically turn your currency into a security at least temporarily so you might as well play that game properly. A third one is that, rather than the reputation that comes with an ICO, you’re instead getting the reputational baggage of being a16z alumni.
  - tarr11 8y ago
    > One good reason is that money doesn’t buy you connections Time for a crypto LinkedIn?
    - shawn 8y ago
      BlockedIn Especially if it works. More seriously, it's cool that keybase solved the identity problem. It's traditionally been a very hard thing to know for a fact that you're speaking with a certain individual, unless they were compromised. They also have an encrypted github now, which functions very well. And one of the only realtime chat messaging systems where you can open private chats with whoever you want, if you know their name. Point: I think Keybase might increasingly take over the role that github currently fills. It's hard to imagine now, but people underestimate the effect of 10 years. And keybase seems to suddenly have a lot of assets that are very appealing, especially from a crypto standpoint. If I were trying to topple governments with code, most of my work would be encrypted on keybase, and my comms (what little there would be) would be via signal. But my identities would be proven via keybase. One smart move for gitlab might be to create some kind of realtime messaging system for programmers, similar to the niche that slack communities currently fill. Slack never seemed to embrace the community model -- you have to use hacks just to host a slack community, and then you don't get search for more than 10k messages, which vanish quickly. Discord has been eating Slack's lunch from a technical and user count standpoint (though perhaps not profit). Gitlab could compete by rolling out what slack should have been: an open community-oriented comms service with tools programmers love, plus a place to host your code. Discord doesn't have that, and keybase doesn't have very good support for teams yet.
- lonnyk 8y ago
  They list out the reasons on the bottom of the site.
- jdoliner 8y ago
  Well, there are certainly some non-cynical reasons. But one obvious one is that if you sell 10 Million of your token to A16z I bet you won't have much trouble selling billions of your token to the masses. I'm sure A16z is perfectly sincere about being long-term focused investors, but they're so perfectly positioned for pump-and-dump style schemes they may wind incurring their ill effects accidentally.
- lintroller 8y ago
  What benefit does a16z give you? Beyond the legitimacy of being backed by a well-known venture capital firm, the most obvious is from the article: "We provide operational support to entrepreneurs. Our crypto investments have access to the same 80+ person a16z operating teams as do our non-crypto investments. Our operating teams have deep expertise in executive and technical recruiting, regulatory affairs, communications and marketing, and general startup management. We are responsible participants in the governance of companies and the governance of networks."
- deleted 8y ago
  [deleted]
- shawn 8y ago
  It's sort of not cool to choose a16crypto as your username. HN wouldn't work if we didn't have identities, and traditionally the identity of the author is taken by the author. On the other hand, it's immediately obvious you're unrelated, so maybe it doesn't matter. To answer your question, as the world stabilizes and the crypto scene becomes less tumultuous, we'll see the rise of traditional models. It's a smart move to start that process sooner rather than later. In the old days, you won by controlling a "channel" -- whether it's a literal TV channel, or a limited asset, or anything where people had to go through you and you alone. The internet briefly disrupted that old model. But once again it's true: YC won thanks to HN, for example. It's a channel they control, and it shapes us and the way we think. Once ICO scams stop working, people will eventually realize that the fundamentals are what matter: solid networks, solid resources, and a vision with a group of people to build it. ICOs rarely get you any of those, let alone all of them.
- dang 8y ago
  You can't pick that username—it's misleading, as shawn pointed out. I've banned this account, but if you want it unbanned you're welcome to email us (hn@ycombinator.com) with a username that's both neutral and available, and we'll change it for you.
chrisco255 8y ago
I totally agree with A16Z here. Blockchain skepticism is not hard to find on HN and beyond. First, the ecosystem is vast and evolving quickly. If you've "tuned out" by dismissing blockchain, then don't be surprised when your industry gets disrupted in 5-10 years. I think we'll begin to see business logic open-sourced on the blockchain. For example, existing SaaS model incentivizes closed-source, centrally managed repositories. For example, a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol. A CRM built in this way might enable multiple "thin clients" to build and an ecosystem to develop around it. I think we're a ways off, but that sort of thing is just one of the use-cases that excites me about it.
- vorpalhex 8y ago
  > a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol Why.. would you need to put those on a blockchain across a bunch of disparate consumers? In theory isn't my business logic fairly, you know, secret sauce? Blockchain is vaguely "A spreadsheet everyone gets a copy of." There are some cases where that can be useful - usually for verification. There are also some issues with that - there are no takebacksies if somebody say, publishes illegal content. If I want to prove to everyone in Minecraft that I hold a million minecraft points, a blockchain might be a good answer. If I want to store my secret, frequently updated business rules with tons of private details about my clients... why in the world would I use a blockchain?
  - chrisco255 8y ago
    Traditionally, yes. But in the same way that Windows OS logic is Microsoft's secret sauce and yet thriving companies build products and services around Linux...so too will business-logic be open sourced and compete directly with existing SaaS players. Just because you use blockchain to power the engine and business logic of your application, does not mean you also have to use it to store data. Data can be stored anywhere else (IPFS, Sia, or even personal PostgreSQL instance). Blockchains also need not be public. They can be private sidechains that occasionally interact with the main chain. Why would you? Because it allows communities of smaller open-source contributors to effectively compete with big, established players. Also, through crypto, you could incentivize domain experts to contribute to the business logic rules.
pdpi 8y ago
If you’re an insider, there’s a somewhat big technical mistake in there that kind of undermines their credibility. > Blockchain computers are new types of computers where the unique capability is trust between users, developers, and the platform itself. Trusting somebody implies they’re in a position to hurt you, which makes it undesirable in a secure system. Unfortunately, trustless systems tend to be cumbersome and impractical. What makes Bitcoin interesting is precisely that it’s a remarkably practical system built on a trustless base.
- pedro_hab 8y ago
  I think they meant you trust that the network will compute the transactions properly. You need to trust that Bitcoin network is strong enough not to be hijacked, as Bitcoin Gold was with the 51% attack earlier this year.
- mgummelt 8y ago
  What are you saying the mistake is?
  - pdpi 8y ago
    The “unique capability” of nakamoto consensus is the exact opposite of trust between parties — it’s that it operates without trust.
    - mgummelt 8y ago
      It doesn't operate without trust. It just makes it so you no longer have to trust banks. But you still have to trust the network.
      - pdpi 8y ago
        Sort of — the trust in the network is reduced to: 1. I trust nobody has >50% of the hashing power. 2. I trust network participants to be economically rational actors This is both a much smaller, and much more explicit, set of things you need to trust than regular banking. At any rate, the bigger point is that the a16z post describes trust as a positive, whereas the correct attitude is to treat trust as a negative quality of a system. Cryptocurrencies are not designed to engender trust, they're designed to avoid it wherever possible.
norcalli 8y ago
I feel like there is some astroturfing going on with this post...
- dang 8y ago
  If you have specific concerns you are welcome to email them to hn@ycombinator.com, so we can look into it. But please don't break the site guidelines, which ask you not to post insinuations of astroturfing like this. (Such insinuations poison internet forums and most often turn out to be groundless. I've posted a ton about this if anyone wants to read more: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20astroturfing https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...). https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
TrevorAustin 8y ago
I hope for all of our sakes that it's more profitable for a16z to invest in real blockchain startups and leverage their experience to uncover exciting, legitimate applications of the technology than it is to just day-trade cypto assets.
- atomical 8y ago
  I'm sure it's tempting to use the discount to sell off the principal after the startup starts trading on exchanges post public ICO.
staunch 8y ago
> If there is another “crypto winter,” we’ll keep investing aggressively. This is how the good investors win. They have real definable thoughts of their own about technology. The truth is that most VCs aren't much more than bad money managers that chase other bad money managers around in circles. It's not that VCs are stupid. It's that new technology is complex and very few people at all understand it. Even very good technologists can't understand more than a few areas with any level of expertise. I really believe that decentralization will blow up the entire VC world itself but even this phenomenon will be a huge opportunity for some small number of VCs to profit from. Probably firms doing stuff like this.
crb002 8y ago
Sweet. Betting Dwolla gets a chuck of that.
legulere 8y ago
Or crypto is just another hype that will burst like the dot com bubble. However, I have to say, compared with the companies of the dot com bubble the blockchain space has very little to offer. The other day I saw an ad for an IoT ML ICO.
- fullshark 8y ago
  The dot com bubble was completely justified in retrospect imo. A lot of stupid money was lost but the opportunity was clearly and obviously there. If you think blockchain has as much potential as the dot com bubble you should put a lot of money into it.
  - endlessvoid94 8y ago
    That's an interesting take. I like it.
  - deleted 8y ago
    [deleted]
- Reedx 8y ago
  Or did it already burst like that? Bitcoin was at ~$20k, now it's ~$6k. The dot com bubble didn't have a contraction like that before it popped. That was the pop.
  - nostrademons 8y ago
    It did, actually, it's just that people only remember the big bubble and big pop. There was a fairly big bubble over the summer of 1998 that popped in the fall: NASDAQ: https://goo.gl/7ecN9J https://goo.gl/7ecN9J AMZN: https://goo.gl/tjufK8 https://goo.gl/tjufK8 This also coincided with the fall of Netscape and its eventual purchase by AOL in November 1998. The dot-com bubble that people actually remember got started when that bust hit its nadir (right around the Netscape purchase), and really kicked into high gear a year later in the fall of 1999. I think that what happened is that Netscape's purchase and the subsequent recovery of Internet stocks is what convinced entrepreneurs & VCs that the Internet was here to stay, which led to a flood of capital in and a frenzy of entrepreneurial activity, and then once all their products started hitting the market 6-12 months later the public took notice and the dot-com bubble really took off. There will likely be a similar effect with crypto as all the ICOs - the ones that are not scams, at least - actually start releasing their products for people to use. Crypto is bubblier than dot-coms because everything is bubblier now; capital markets are thoroughly globalized, and there's more capital sloshing around.
fabian2k 8y ago
> This trust emerges from the mathematical and game-theoretic properties of the system, without depending on the trustworthiness of individual network participants. I'm very uncomfortable with the idea of game theory as the base of trust. Mathematics as used in cryptography is a pretty solid base, but game theory feels like something entirely different. How do I know that there isn't a participant in the game that is willing to just smash the board? The existing blockchains like Bitcoin do have a certain amount of centralization, so this is not about a very large number of individuals where you could find some comfort in statistics. What if a state actor decides to smash the board, they could probably exert enough pressure on the large players? What if there are more subtle ways to extract short term gains that game theory didn't anticipate?
- woah 8y ago
  Do you think that the “smash the board” case isn’t considered? Not that any given game theoretic analysis isn’t flawed, but the “madman attack” is one of the main scenarios that’s been considered in blockchain from the original bitcoin paper onwards.
- DennisP 8y ago
  Protocols don't necessary assume that players are profit-seeking. Ethereum's Casper for example allows that players may wish to smash the board; however, it makes attacks very expensive, limits the damage they can do, and makes it easy for the network to recover. Subtle ways to get extra gains can be a problem; e.g. people didn't figure out selfish mining attacks until Bitcoin was several years old. Cryptoeconomics is a new field, and it advances as people discover attacks and invent solutions to them.
buddha 8y ago
Great!
endlessvoid94 8y ago
The skepticism of blockchain technology is borne out of a lack of specific problems it solves. Which happens to also be the bedrock of the conventional startup wisdom -- value derived from solving a problem or exploiting an opportunity. So much of the blockchain hype is focused purely on the technology and the valuation of the tokens / coins. Not the problem it solves. It's distributed trust. That's the problem it solves. It's incredibly cool technology. That solves a specific problem. The analogy to the early internet is not a good one. The internet solved a huge number of problems -- of distribution, of speed to deliver value to the customer, of freedom of information, of transparency, of fidelity of communication, and more. That's why it's changed society. I would love to know which societal problems can be reduced to a distributed trust problem. That would convince me that I'm wrong about blockchain technology.
- jhoechtl 8y ago
  > Which happens to also be the bedrock of the conventional startup wisdom -- value derived from solving a problem or exploiting an opportunity. It's often generating an artificial need where no need has been before.
- baxtr 8y ago
  Great points. I’d love to know what Steve would have done with Blockchain (or when). Well...
- kirbypineapple 8y ago
  I would argue there's value beyond distributed trust: smart contracts (though you could argue that this is merely an application built upon the concept of distributed trust), the tokenization of physical assets (think real estate, oil and gas exploration/drilling/royalties, etc.), and more generally the ability for money to become a "product". These are all domains that blockchain is enabling, though it remains to be seen whether these problems/opportunities are solved via blockchain or not.
  - JumpCrisscross 8y ago
    > These are all domains that blockchain is enabling It is reasonable to be sceptical when someone proposes a new domain that doesn’t solve any problems.
chvid 8y ago
“This can lead people to dismiss them, in the same way people dismissed early smartphones because they traded off computing power and screen size for portability and new sensors.” Right ...
TimTheTinker 8y ago
> Trust is a new software primitive from which other components can be constructed. This kind of talk is extremely misleading. At the end of the day, we're still people buying and selling goods and services from other people. The most blockchain can do is remove some types of middle-men (financial or otherwise), but the endpoints will always be human. Trust between humans will always be a requirement to buy and sell goods and services. Just like chatting with someone over an encrypted channel can't make you trust the person you're chatting with, only the channel itself. Perhaps blockchain's "killer app" is an automated escrow service. How exciting... :-/
- rlucas 8y ago
  It is not strictly true that endpoints and the locus of trust always have humans in the loop. (Where they do, of course, I agree that blockchain has much more limited "fit" as a solution.) However, in what I call "network-native resource transactions," namely, where the provision of the thing of value is computational and can be verified on the network (think: storage, compute, bandwidth, namespace resources like DNS), there are a large number of transactions where the performance of the counterparty can be shown with math. In those cases, of network-native resource transactions, the transaction itself can be the locus of trust, and the payment / settlement becomes the weak link. For this (admittedly somewhat narrow) set of uses, then, blockchain is really really useful because the payment / settlement trust problem can be done away with deterministically provided the resource transaction is verified.
  - TimTheTinker 8y ago
    When would this be any more useful than having a credit card on file with whoever is providing the resource? ...or am I completely misunderstanding what you mean by “payment/settlement”?
    - rlucas 8y ago
      I think "payment/settlement" here is clear, but not the link to network-native resources. Let's imagine you have an auto-scaling application. You hit a big spike (like several orders of magnitude) and have the (cryptocurrency) resources to keep it running. Traditional vendors on invoice (or on credit card) would likely be loathe to just approve your monthly spend going from $500 to $500,000. You'd probably hit an interruption in service as the vendors protect themselves and underwrite to a higher credit limit. Having non-repudiable smart contracts that get the vendors paid automatically once the resources are verifiably transacted would eliminate that friction. (Plus, chargebacks, interchange, etc.) On the extreme other end of the scale, if your resource transactions were small and highly distributed, it would get very cumbersome and costly to verify and pay $500,000 in $1 increments. (Plus chargebacks, etc.) My point here is not the traditional one about credit card fees and frictions, though. It's specifically about the locus of trust. If you sell me an electric guitar on eBay, there are two big trust gaps: one is about me actually getting the guitar as described, and the other is you getting the money. The fact that the "money" happens to be transacted as bitcoin or whatever doesn't change the need for trust at the ends of the physical transaction. But if you are transacting network-native resources, smart contracts let you connect the payment settlement to the resource itself. Factor the primes out of this number and you get BTC 1.00. Transit these packets and you get so many ETH. It's because the resources exist on the same network in approximately real-time with the payment ledger that they can be verified automatically. Doesn't work for most kinds of commerce where verifying that the transaction is settled is a non-computational operation. (Are the goods arrived, merchantable and fit, as described, etc. etc. -- always you will need to be putting your locus of trust out in the physical world with reputational ties, personal trust, escrow agents, brokers / dealers, etc.)
root_axis 8y ago
More breathless fawning rhetoric and nebulous jargon, but I guess the target audience is blockchain enthusiasts so that makes sense. At the end of the day it's their money, so what I do I care? I find it frustrating when I hear comparisons of the blockchain to internet and cellphone communication platforms. The potential use cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value. I actually think bitcoin is pretty damn cool and a marvel of software engineering, but it's a fact that it's mostly useless for the vast majority of people and certainly not in any way comparable to the impact of cell phones or THE LITERAL INTERNET; the insinuation is absurd and intellectually lazy based on blockchain's track record. > We believe that just as the last three megatrends -- mobile, social, and cloud -- intersected and reinforced each other, so will the next three megatrends -- next-gen computing devices, AI, and crypto. This kind of rhetoric inspires derision.
- bredren 8y ago
  >The potential uses cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value. Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one. Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept. It doesn't hurt to be skeptical of rhetoric, but you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today.
  - root_axis 8y ago
    > Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one. Yes, I covered that when I said the blockchain gave us bitcoin, and that's all it's done as far as unique value. > Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept. So what? My point is that "instant remote communication" was a communication revolution that did not need to hunt for use-cases, the technology itself was inherently useful and it developed into something more because its ubiquity (a result of its near universal utility and appeal) created a market for competition between selling this device that literally everyone wanted. The blockchain is not at all comparable to this. Most people can't even understand what the blockchain is (and that includes many technical people) and those who can at least understand what the blockchain does mostly come to the conclusion that they don't really have a use case for it (including the large majority of enthusiasts who don't do more than shuffle bits around between arbitrarily delimited distributed spreadsheets). > you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today. You're incorrect. The two have nothing to do with eachother. "Smart devices" like palm-pilots existed for a long time but never took off because most people couldn't justify the purchase (since it really didn't do much for them). Fast forward to a time when everyone is already carrying around portable network computers because... and here it is again... they were clearly useful in their communication capability... it was a clever but natural opportunity to replace these "dumb phones" with computing devices that resemble computer systems that were already validated by the desktop market.
67_45 8y ago
This just strikes me as wrong. His chain of logic does not lead to distributed ledgers. Mainframes, PC's, iPhone, distributed ledgers? Before I dive in I must say that the new trend for people to use blockchain as a noun describing the underlying system of Bitcoin and other coins is highly annoying and cringey. None the less, blockchain is not a peice of technology. It's a contract backed up by probablity and the nature of the internet. The contract is a big lumbering thing that has a life of it's own -- for each implementation of this "tech" you are stuck with that beast which, if you are even able to get enough people to feed it, will fluctuate wildly in many capacities before eventually dying. It's not like a new mems accelerometer where once it's out you can now just pump out thousands of units. The nature of Bitcoin (i refuse to use the blockchain noun) lends itself much more to being a global complement to centrally managed monetary systems (or stand on it's own as the world's currency, but I don't think that would be optimal).
vthallam 8y ago
More and more traditional money will flow into Crypto, not because Crypto is the answer for everything, but people just want to bet on the something that might in some form change everything in the future. I really get surprised by the boolean arguments whether blockchain is of any use arguments on HN. I mean there's so much activity, money, talent in Crypto since last year. Goldman Sachs CEO said actually in the nicest way that Crypto is not gonna be the future [0]. I wonder why we can't have arguments like this instead of behaving like a know-it-all. [0]- https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-blankfein-says-he-s-not-worried-about-cryptocurrencies-in-systemic-way-video https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-b...
- lawnchair_larry 8y ago
  Crypto is a new proper noun?
- simias 8y ago
  I come from the other side of the argument: since there's so much money poured into cryptocurrencies, so many talents spending their days working on it, huge companies like Goldman Sachs saying that it's the future then what's taking so long? I'm not even asking for a killer app at this point, just for a compelling argument of what the future of a blockchain-powered world will look like. I don't think I'm a "know-it-all" just for asking for a tangible explanation which doesn't revolve around a bunch of hand-waving or technically, socially and economically ridiculous statements such as "imagine Facebook but it's the blockchain". Blockchain is not the magic device people make out to be, it's a cool hack but so far its practical use cases are rather limited. And if you think I'm a know-it-all for saying that I'm sure that you'll easily be able to shame me for the fraud that I am by pointing out the multiple problems that can be solved by the Blockchain more efficiently than with good old technology. So far all I have is "buying illegal stuff online" and "selling illegal stuff online". For everything else there's PostgreSQL. People compare blockchain and cryptocurrencies to the internet or cell phones but I think it's completely disingenuous. While I'm sure you could find plenty of naysayers back then who failed to understand the scope of what the internet would become and how revolutionary it was at the very least easy to see what it brought to the table. You could communicate with anybody around the world, play games, maybe even buy stuff. You can argue about how important and valuable that is, but at least the potential is clear. When you read these Blockchain pamphlets it feels like they're trying to convert them to their religion or political movement. It's about user experiences and decentralization and building blocks of trust. It's about the power of software and the encoding of human thought. And VR and AR for some reason. I say that's just bullshit.
DoubleCribble 8y ago
Have there been any attempts to use blockchain in combating a Tragedy of the Commons?
pg_bot 8y ago
As we currently stand the tradeoffs for Blockchain based companies make no sense in the business world. The author's conceit is that Blockchain based businesses trade scalability for "trust" and that new business opportunities will be unlocked due to this capability. The problem with this idea is that trust is currently not a limiting factor for most businesses. Centralized services are trustworthy enough for the majority of consumers and are far cheaper to run at scale. Every single blockchain based business idea I've heard of would be better suited as a centralized service. It is my strong belief that a16z will lose their shirt on this fund.
TrevorAustin 8y ago
Speaking as a longtime skeptic, A16Z has actually produced the single clearest answer I've seen to that question: blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate. Pure utility tokens can be like call options on the eventual value of the network if it gets off the ground. It's a novel way of solving a collective action problem. https://a16z.com/2017/12/08/summit-crypto-alex-rampell/ https://a16z.com/2017/12/08/summit-crypto-alex-rampell/ Kind of like Kickstarter or Groupon, at least in their original incarnations?
- endlessvoid94 8y ago
  Thanks for this!
- cornholio 8y ago
  Except the early adopters don't need to actually participate in the network, just acquire and hoard tokens. There's almost no connection between the profits and the actual advocacy, resources and risks required for the network to succed. So the incentive structure is quite different from, say, the stock market or even a kickstarter. It's more like a tradeable Ponzi with strong incentives to overpromise and overhype in the early phase, and to get out when the valuation approaches the claims without actually delivering anything more than yet another speculative asset.
  - foota 8y ago
    You could find a way to associate someone's activity with positive signals, like give them credits for generating positive value in the network. Detecting positive value is difficult though.
    - mlthoughts2018 8y ago
      But organizing “payment” in the form of a cryptocurrency is no different than just depositing money in their bank account. In some cases it would be: payment that evades government detection, payment that allows network participation to be anonymous, etc. The trust issue would not be part of it in these cases, from a business perspective. I guess I mean that predicating some network-effect-needing business on blockchain, for these reasons, still just seems like hype. Unless the business is fundamentally about anonymously being compensated in some way, then other existing financial institutions solve the problem (with just as much trust in 99.99999% of scenarios) in a far simpler way.
dperfect 8y ago
Trust isn't really a feature of blockchains, nor is it a byproduct (or "software primitive") of blockchains. Bitcoin was designed to avoid a need for trust, so it really just steps around the issue of trust in a distributed ledger. This is a critical misunderstanding that a lot of people are still preaching and perpetuating. You can't really build systems that rely on trust on top of a blockchain, and those who have tried are mostly just moving (human/corruptible) authorities of trust to more obscure places. You can, however, build systems that do not require trust on top of a blockchain, though there are some very serious limitations that confine those systems/applications to digital-only transactions. In other words, I can be reasonably assured that the Bitcoin you sent me is spendable by me (that it hasn't been double-spent) and that a government can't just issue 21 million more Bitcoin tomorrow, but that tells me absolutely nothing about whether or not I can (currently or in the future) "trust" your address on the blockchain, nor can it be tied to any kind of meaningful identity without reintroducing a real-world authority that requires my trust. Bitcoin has proven itself to be useful on the payment side of transactions, but I'm unconvinced that blockchain tech will ever be able to facilitate the delivery side of transactions (unless it's a digital asset being delivered) without compromising the fundamental aims of Bitcoin.
- Felz 8y ago
  Trust is inescapable. You've simply shifted yours from reputational trust to trust in the decentralization of the computing frontier of a specific hashing problem. But while reputational trust is cheap and a well-solved problem, the trust you're using _requires_ large amounts of computing value to be burned continuously, in the hopes that electricity and computation are decentralized enough in the real world that multiple non-collaborating actors will be burning it.
  - dperfect 8y ago
    I agree mostly with the point you're making, but there's an important distinction between "reputational trust" and an assumption that game theory and market forces will continue to provide the necessary levels of decentralization for Bitcoin to operate as intended. I'm not sure it's fair to put those two ideas on equal ground as if all forms of trust should be embraced because it's "inescapable". Reputational trust (as you call it) often isn't even based on reputation so much as military force (sovereign governments). A lot of people - myself included - would much rather have their finances in the hands of algorithms and theoretically-sound incentives (even without a 100% guarantee of decentralization) than in the hands of central banks controlled by the whims of politicians.
sarcasmic 8y ago
There's some serious kool-aid going on here, which is unfortunate, because they at least wrote that they're focused on non-speculative use cases. Contrary to the announcement's characterization, crypto-powered platforms don't inherently fulfill the promise of equitable decentralization and immutability. Ethereum has already demonstrated that one is wise to worry if the rules of the game will change later on. And blockchains enable distributed, trustless consensus, but accomplish it with the majority (50%+1) of vested nodes in agreement, which manifests as either a tenuous truce based on human trust to avoid mutually-assured destruction, or as an anything-goes monopoly where the largest cartel wins. Hardly any different from easier, cheaper ways of accomplishing the same thing. Bitcoin's innovation was incentive in the PoW block reward, Ethereum's was embedding a VM in the client. Everything else has been minor variations on prior art, or speculative bullshit.
- leppr 8y ago
  Your conclusion is fair, but at the same time, a certain number of these "minor variations" will one day be assembled into something just as revolutionary as Bitcoin and Ethereum were. If I had to guess I'd say some technology made out of the combination of blockchain, ZK-snarks, and an homomorphic computation enabler such as SGX enclaves, will probably be very disruptive to many many fields.
LeoPanthera 8y ago
So have we completely lost the battle for the meaning of the word "crypto"? Because I clicked this link expecting to read about a new kind of cryptography.
- shawnz 8y ago
  Agreed, can't believe I am seeing this wrong usage of "crypto" to mean cryptocurrencies right here on HN. So disappointed that A16Z chose this name.
douglaswlance 8y ago
Would it be possible to build a consensus algorithm for factual information? Sort of a decentralized fact-checker system
- alehul 8y ago
  That seems like it would be very trivial to game, and additionally while facts are hard to confirm, a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway. The best similar use case I can imagine is building a system is to evaluate how much of the media is in agreement on a given topic, and use that to combat fake news. If a similar headline isn't found elsewhere, give it a low truth rating.
  - hobofan 8y ago
    > a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway That's why you build the system with an incentive scheme with the contributors having something at stake, that over time weeds out the incompetent contributors, similarly to a PoS scheme.
    - douglaswlance 8y ago
      That's what I was thinking too. If you have PoS, then the your stake is basically how trusted you have been throughout the history of your wallet.
  - douglaswlance 8y ago
    So we'd need a debate forum that is deeply integrated into the system that has a forcing function for truth.
  - douglaswlance 8y ago
    Media is a terrible metric. Their incentive is attention, not truth. The consensus of media is worse than the consensus of the public.
eblanshey 8y ago
> In an era in which the internet is increasingly controlled by a handful of large tech incumbents, it’s more important than ever to create the right economic conditions for developers, creators, and entrepreneurs. I'm happy to see that people are taking decentralization seriously. Blockchain has its place as a public ledger, but as everyone knows, scaling it has issues. Recently, MaidSafe released a new whitepaper for a new decentralized consensus mechanism, called PARSEC, which they detailed in their blog post[0]. It does not use a blockchain. I'm surprised it didn't get more attention. I'd like to see some serious peer review on the paper. Perhaps A16Z should get in touch with them? [0] https://medium.com/safenetwork/parsec-a-paradigm-shift-for-asynchronous-and-permissionless-consensus-e312d721f9d8 https://medium.com/safenetwork/parsec-a-paradigm-shift-for-a...
- strainer 8y ago
  I've not read the paper but am impressed by their presentation and the experience and community which they have already created around their 'SafeNet' browser. I'm inclined to believe their mathematical analysis of their own system is sound. They say its based on a system with proven O(n^2) messages requirement, with an elaboration reducing message requirement to a more scalable O(n log n)
granaldo 8y ago
prefer they invest in companies than tokens, tokens have been dropping so much recently https://www.coingecko.com/en https://www.coingecko.com/en
projectramo 8y ago
The problem with the blockchain is that it is distributed, so it can be inefficient and difficult to gather all of it in one place. Imagine all the data already stored in one place. This base is private, entirely yours and it can be encrypted. Only authorized users have access. This base of data -- I wish there was a better word -- is going to be the next big thing.
MrRubbish 8y ago
oh no. but the matrix was only a film. this sounds like cryptodeity.
tbodt 8y ago
You can do the same thing without blockchain.
deboboy 8y ago
The healthcare industry is a POS. If blockchain can make it even 1% better then it will be worth all the hype and gripe.
knorker 8y ago
Don't get your hopes up. This is about cryptocurrencies, not crypto.
nikolay 8y ago
I cannot think of a single a mass-market problem, which a blockchain tries to solve, which can't be implemented more elegantly and efficiently WITHOUT a blockchain!
camdenlock 8y ago
Wait, what? “Crypto” has been redefined to mean “cryptocurrency” now? Pff.
karlmcguire 8y ago
> Second, the space is developing extremely rapidly, partly because the code, data, and knowledge is largely open source, and partly because of the increasing inflow of talent. They seemed to conveniently leave out the biggest driving force behind blockchain technology: greed. I don't see how you can talk about the "rapid development" of blockchains and not mention ICOs and the type of armchair investors who gravitate towards them...
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bawana 8y ago
The problem w money is that it represents the fruit of human labor but also allows speculation. We have arrived at a point where accumulated wealth through speculation that human labor ( and therefore self worth ) are devalued. That money from financial investments (speculation) can be ploughed back into speculation removes the human effort that generated the money in the first place. To restore human value we need a simple restriction. Capital gains should only be spendable on real stuff - things, services, etc. whereas money from human work should be unrestricted. The block chain is a perfect tool to keep track of monetary transactions and would allow automatic enforcement of this regulation
ttul 8y ago
a16z is just responding to market demand. Regardless of your personal beliefs in crypto, investors have made a killing, and are convinced that more nuggets must be out there in those hills... If you can raise a $300M fund and charge 2%/yr to maintain it, that's $6M worth of headcount luxuriously plugging away up on Sand Hill Road. Keep in mind: Venture Capitalists mostly invest other people's money, and charge a great deal to take care of it in the mean time.
JohnJamesRambo 8y ago
Hacker News never gets crypto and never will until they are put out of a job by it. It’s like trying to get newspaper men to understand what the internet was going to do to their business.
xmly 8y ago
Blockchain technology itself is not that novel. All the technologies it used have already been there for a while, even the PoW. But after reading all the arguments and discussions, my opinion is that blockchain simply reflects the human's desire for a more transparent, secure and fair IT systems. Current IT systems work, just it is not transparent, so people do not know whether it is doing as it claims. Since there are strong requirements, there will be one revolution. Imagine if the government adopts such transparent and fair system, who cares whether it is centralized or not? So blockchain is simply a strong desire.
- awad 8y ago
  In real world terms...I am currently in the process of closing on a property transaction. And, while it does take some time, I haven't seen anything during the process that was immediately made better by what 'blockchain' proponents purport to be better alternatives. To be clear, there are certainly inefficiencies I have witnessed. I am just not clear as to how a blockchain solution, however you define it, helps.
  - xmly 8y ago
    It is transparent. If you make a transaction using paypal, you were told the money is transferred. But how do you know it is true? You have no way to verify it. Similar problem, facebook and google claim that they are only using the customers data for certain actions, but how do we verify? Blockchain only gives the possibility that the IT system could be transparent and verified by external parties. But Bitcoin blockchain is not the final solution. That is it.
antpls 8y ago
That submission reconnects with the initial YCombinator and Hacker News spirit
piootr 8y ago
The real value of Bitcoin and crypto currency technology (summarizing video clip): http://bitcoinproperly.org/ http://bitcoinproperly.org/ Bitcoin blockchain secured by mining power with current annually energy consumption similar to country like Czech Republic or Chile (will be going down following halving of miners rewards in future).
dnprock 8y ago
I'm a bitcoin skeptic turning to bitcoin owner. For me, it's worth to look at bitcoin from gold perspective. You can pose similar questions to gold and try to answer them. Can I transact with bitcoin/gold? Is bitcoin/gold a good value storage? What problem does bitcoin/gold solve? Is bitcoin/gold solving trust problem? Any answer for gold can be interpreted for bitcoin. Bitcoin is better than gold in many ways. Bitcoin, like gold, is real. Crypto technology is real and works. Bitcoin is limited. There's a computer network running to support it. Bitcoin is not tulip. Gold is still around. I don't think we'd ever ditch it. Why do we value bitcoin? I don't really know for sure. But I feel certain that bitcoin is real. And we need to do more work to understand it.

347 points by mdelias 8y ago

Here's what I don't understand: if you're a crypto project, why wouldn't you raise funds through an ICO yourself? What benefit does a16z give you? One of the biggest assets of crypto is the ability to self-fund. Also, since the space is relatively new, I have my doubts about the ability of a16z to provide any useful crypto experience.

chrisco255 8y ago
Unfortunately ICOs are still a grey area, legally speaking, with regards to the SEC. Some tokens are securities, some are not. Really depends on the structuring of the token and what it represents. At this time, from a risk perspective, I could see going with A16Z being a safer move. Plus, you get access to A16Z resources, which are substantial.
walrus01 8y ago
ICOs have become a self-mocking joke, considering how many are outright scams or contain huge technical flaws, or some combination of the two. The latest season of Silicon Valley parodies it pretty well.
TrevorAustin 8y ago
There aren't any regulatory issues with taking investment from the a16z crypto fund, where a public ICO can bring attention from the SEC and other bodies. It lets founders and developers focus on getting their token network off the ground instead of figuring out how to do a legally kosher token sale.
chadash 8y ago
For one, raising money through an ICO is a legal gray area without much legal precedent. So even with a good lawyer, you are taking risk with the related securities laws. You might prefer to avoid this risk by raising money the traditional way.
pdpi 8y ago
One good reason is that money doesn’t buy you connections, but an a16z investment does. Another is because ICOs typically turn your currency into a security at least temporarily so you might as well play that game properly. A third one is that, rather than the reputation that comes with an ICO, you’re instead getting the reputational baggage of being a16z alumni.
- tarr11 8y ago
  > One good reason is that money doesn’t buy you connections Time for a crypto LinkedIn?
  - shawn 8y ago
    BlockedIn Especially if it works. More seriously, it's cool that keybase solved the identity problem. It's traditionally been a very hard thing to know for a fact that you're speaking with a certain individual, unless they were compromised. They also have an encrypted github now, which functions very well. And one of the only realtime chat messaging systems where you can open private chats with whoever you want, if you know their name. Point: I think Keybase might increasingly take over the role that github currently fills. It's hard to imagine now, but people underestimate the effect of 10 years. And keybase seems to suddenly have a lot of assets that are very appealing, especially from a crypto standpoint. If I were trying to topple governments with code, most of my work would be encrypted on keybase, and my comms (what little there would be) would be via signal. But my identities would be proven via keybase. One smart move for gitlab might be to create some kind of realtime messaging system for programmers, similar to the niche that slack communities currently fill. Slack never seemed to embrace the community model -- you have to use hacks just to host a slack community, and then you don't get search for more than 10k messages, which vanish quickly. Discord has been eating Slack's lunch from a technical and user count standpoint (though perhaps not profit). Gitlab could compete by rolling out what slack should have been: an open community-oriented comms service with tools programmers love, plus a place to host your code. Discord doesn't have that, and keybase doesn't have very good support for teams yet.
lonnyk 8y ago
They list out the reasons on the bottom of the site.
jdoliner 8y ago
Well, there are certainly some non-cynical reasons. But one obvious one is that if you sell 10 Million of your token to A16z I bet you won't have much trouble selling billions of your token to the masses. I'm sure A16z is perfectly sincere about being long-term focused investors, but they're so perfectly positioned for pump-and-dump style schemes they may wind incurring their ill effects accidentally.
lintroller 8y ago
What benefit does a16z give you? Beyond the legitimacy of being backed by a well-known venture capital firm, the most obvious is from the article: "We provide operational support to entrepreneurs. Our crypto investments have access to the same 80+ person a16z operating teams as do our non-crypto investments. Our operating teams have deep expertise in executive and technical recruiting, regulatory affairs, communications and marketing, and general startup management. We are responsible participants in the governance of companies and the governance of networks."
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shawn 8y ago
It's sort of not cool to choose a16crypto as your username. HN wouldn't work if we didn't have identities, and traditionally the identity of the author is taken by the author. On the other hand, it's immediately obvious you're unrelated, so maybe it doesn't matter. To answer your question, as the world stabilizes and the crypto scene becomes less tumultuous, we'll see the rise of traditional models. It's a smart move to start that process sooner rather than later. In the old days, you won by controlling a "channel" -- whether it's a literal TV channel, or a limited asset, or anything where people had to go through you and you alone. The internet briefly disrupted that old model. But once again it's true: YC won thanks to HN, for example. It's a channel they control, and it shapes us and the way we think. Once ICO scams stop working, people will eventually realize that the fundamentals are what matter: solid networks, solid resources, and a vision with a group of people to build it. ICOs rarely get you any of those, let alone all of them.
dang 8y ago
You can't pick that username—it's misleading, as shawn pointed out. I've banned this account, but if you want it unbanned you're welcome to email us (hn@ycombinator.com) with a username that's both neutral and available, and we'll change it for you.

chrisco255 8y ago

I totally agree with A16Z here. Blockchain skepticism is not hard to find on HN and beyond. First, the ecosystem is vast and evolving quickly. If you've "tuned out" by dismissing blockchain, then don't be surprised when your industry gets disrupted in 5-10 years. I think we'll begin to see business logic open-sourced on the blockchain. For example, existing SaaS model incentivizes closed-source, centrally managed repositories. For example, a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol. A CRM built in this way might enable multiple "thin clients" to build and an ecosystem to develop around it. I think we're a ways off, but that sort of thing is just one of the use-cases that excites me about it.

vorpalhex 8y ago
> a CRM-focused blockchain might place the business logic for managing customer relations and sales on-chain and enable competing clients to build on the protocol Why.. would you need to put those on a blockchain across a bunch of disparate consumers? In theory isn't my business logic fairly, you know, secret sauce? Blockchain is vaguely "A spreadsheet everyone gets a copy of." There are some cases where that can be useful - usually for verification. There are also some issues with that - there are no takebacksies if somebody say, publishes illegal content. If I want to prove to everyone in Minecraft that I hold a million minecraft points, a blockchain might be a good answer. If I want to store my secret, frequently updated business rules with tons of private details about my clients... why in the world would I use a blockchain?
- chrisco255 8y ago
  Traditionally, yes. But in the same way that Windows OS logic is Microsoft's secret sauce and yet thriving companies build products and services around Linux...so too will business-logic be open sourced and compete directly with existing SaaS players. Just because you use blockchain to power the engine and business logic of your application, does not mean you also have to use it to store data. Data can be stored anywhere else (IPFS, Sia, or even personal PostgreSQL instance). Blockchains also need not be public. They can be private sidechains that occasionally interact with the main chain. Why would you? Because it allows communities of smaller open-source contributors to effectively compete with big, established players. Also, through crypto, you could incentivize domain experts to contribute to the business logic rules.

pdpi 8y ago

If you’re an insider, there’s a somewhat big technical mistake in there that kind of undermines their credibility. > Blockchain computers are new types of computers where the unique capability is trust between users, developers, and the platform itself. Trusting somebody implies they’re in a position to hurt you, which makes it undesirable in a secure system. Unfortunately, trustless systems tend to be cumbersome and impractical. What makes Bitcoin interesting is precisely that it’s a remarkably practical system built on a trustless base.

pedro_hab 8y ago
I think they meant you trust that the network will compute the transactions properly. You need to trust that Bitcoin network is strong enough not to be hijacked, as Bitcoin Gold was with the 51% attack earlier this year.
mgummelt 8y ago
What are you saying the mistake is?
- pdpi 8y ago
  The “unique capability” of nakamoto consensus is the exact opposite of trust between parties — it’s that it operates without trust.
  - mgummelt 8y ago
    It doesn't operate without trust. It just makes it so you no longer have to trust banks. But you still have to trust the network.
    - pdpi 8y ago
      Sort of — the trust in the network is reduced to: 1. I trust nobody has >50% of the hashing power. 2. I trust network participants to be economically rational actors This is both a much smaller, and much more explicit, set of things you need to trust than regular banking. At any rate, the bigger point is that the a16z post describes trust as a positive, whereas the correct attitude is to treat trust as a negative quality of a system. Cryptocurrencies are not designed to engender trust, they're designed to avoid it wherever possible.

norcalli 8y ago

I feel like there is some astroturfing going on with this post...

dang 8y ago
If you have specific concerns you are welcome to email them to hn@ycombinator.com, so we can look into it. But please don't break the site guidelines, which ask you not to post insinuations of astroturfing like this. (Such insinuations poison internet forums and most often turn out to be groundless. I've posted a ton about this if anyone wants to read more: https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix=false&page=0&query=by:dang%20astroturfing https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...). https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

TrevorAustin 8y ago

I hope for all of our sakes that it's more profitable for a16z to invest in real blockchain startups and leverage their experience to uncover exciting, legitimate applications of the technology than it is to just day-trade cypto assets.

atomical 8y ago
I'm sure it's tempting to use the discount to sell off the principal after the startup starts trading on exchanges post public ICO.

staunch 8y ago

> If there is another “crypto winter,” we’ll keep investing aggressively. This is how the good investors win. They have real definable thoughts of their own about technology. The truth is that most VCs aren't much more than bad money managers that chase other bad money managers around in circles. It's not that VCs are stupid. It's that new technology is complex and very few people at all understand it. Even very good technologists can't understand more than a few areas with any level of expertise. I really believe that decentralization will blow up the entire VC world itself but even this phenomenon will be a huge opportunity for some small number of VCs to profit from. Probably firms doing stuff like this.

crb002 8y ago

Sweet. Betting Dwolla gets a chuck of that.

legulere 8y ago

Or crypto is just another hype that will burst like the dot com bubble. However, I have to say, compared with the companies of the dot com bubble the blockchain space has very little to offer. The other day I saw an ad for an IoT ML ICO.

fullshark 8y ago
The dot com bubble was completely justified in retrospect imo. A lot of stupid money was lost but the opportunity was clearly and obviously there. If you think blockchain has as much potential as the dot com bubble you should put a lot of money into it.
- endlessvoid94 8y ago
  That's an interesting take. I like it.
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Reedx 8y ago
Or did it already burst like that? Bitcoin was at ~$20k, now it's ~$6k. The dot com bubble didn't have a contraction like that before it popped. That was the pop.
- nostrademons 8y ago
  It did, actually, it's just that people only remember the big bubble and big pop. There was a fairly big bubble over the summer of 1998 that popped in the fall: NASDAQ: https://goo.gl/7ecN9J https://goo.gl/7ecN9J AMZN: https://goo.gl/tjufK8 https://goo.gl/tjufK8 This also coincided with the fall of Netscape and its eventual purchase by AOL in November 1998. The dot-com bubble that people actually remember got started when that bust hit its nadir (right around the Netscape purchase), and really kicked into high gear a year later in the fall of 1999. I think that what happened is that Netscape's purchase and the subsequent recovery of Internet stocks is what convinced entrepreneurs & VCs that the Internet was here to stay, which led to a flood of capital in and a frenzy of entrepreneurial activity, and then once all their products started hitting the market 6-12 months later the public took notice and the dot-com bubble really took off. There will likely be a similar effect with crypto as all the ICOs - the ones that are not scams, at least - actually start releasing their products for people to use. Crypto is bubblier than dot-coms because everything is bubblier now; capital markets are thoroughly globalized, and there's more capital sloshing around.

fabian2k 8y ago

> This trust emerges from the mathematical and game-theoretic properties of the system, without depending on the trustworthiness of individual network participants. I'm very uncomfortable with the idea of game theory as the base of trust. Mathematics as used in cryptography is a pretty solid base, but game theory feels like something entirely different. How do I know that there isn't a participant in the game that is willing to just smash the board? The existing blockchains like Bitcoin do have a certain amount of centralization, so this is not about a very large number of individuals where you could find some comfort in statistics. What if a state actor decides to smash the board, they could probably exert enough pressure on the large players? What if there are more subtle ways to extract short term gains that game theory didn't anticipate?

woah 8y ago
Do you think that the “smash the board” case isn’t considered? Not that any given game theoretic analysis isn’t flawed, but the “madman attack” is one of the main scenarios that’s been considered in blockchain from the original bitcoin paper onwards.
DennisP 8y ago
Protocols don't necessary assume that players are profit-seeking. Ethereum's Casper for example allows that players may wish to smash the board; however, it makes attacks very expensive, limits the damage they can do, and makes it easy for the network to recover. Subtle ways to get extra gains can be a problem; e.g. people didn't figure out selfish mining attacks until Bitcoin was several years old. Cryptoeconomics is a new field, and it advances as people discover attacks and invent solutions to them.

buddha 8y ago

Great!

endlessvoid94 8y ago

The skepticism of blockchain technology is borne out of a lack of specific problems it solves. Which happens to also be the bedrock of the conventional startup wisdom -- value derived from solving a problem or exploiting an opportunity. So much of the blockchain hype is focused purely on the technology and the valuation of the tokens / coins. Not the problem it solves. It's distributed trust. That's the problem it solves. It's incredibly cool technology. That solves a specific problem. The analogy to the early internet is not a good one. The internet solved a huge number of problems -- of distribution, of speed to deliver value to the customer, of freedom of information, of transparency, of fidelity of communication, and more. That's why it's changed society. I would love to know which societal problems can be reduced to a distributed trust problem. That would convince me that I'm wrong about blockchain technology.

jhoechtl 8y ago
> Which happens to also be the bedrock of the conventional startup wisdom -- value derived from solving a problem or exploiting an opportunity. It's often generating an artificial need where no need has been before.
baxtr 8y ago
Great points. I’d love to know what Steve would have done with Blockchain (or when). Well...
kirbypineapple 8y ago
I would argue there's value beyond distributed trust: smart contracts (though you could argue that this is merely an application built upon the concept of distributed trust), the tokenization of physical assets (think real estate, oil and gas exploration/drilling/royalties, etc.), and more generally the ability for money to become a "product". These are all domains that blockchain is enabling, though it remains to be seen whether these problems/opportunities are solved via blockchain or not.
- JumpCrisscross 8y ago
  > These are all domains that blockchain is enabling It is reasonable to be sceptical when someone proposes a new domain that doesn’t solve any problems.

chvid 8y ago

“This can lead people to dismiss them, in the same way people dismissed early smartphones because they traded off computing power and screen size for portability and new sensors.” Right ...

TimTheTinker 8y ago

> Trust is a new software primitive from which other components can be constructed. This kind of talk is extremely misleading. At the end of the day, we're still people buying and selling goods and services from other people. The most blockchain can do is remove some types of middle-men (financial or otherwise), but the endpoints will always be human. Trust between humans will always be a requirement to buy and sell goods and services. Just like chatting with someone over an encrypted channel can't make you trust the person you're chatting with, only the channel itself. Perhaps blockchain's "killer app" is an automated escrow service. How exciting... :-/

rlucas 8y ago
It is not strictly true that endpoints and the locus of trust always have humans in the loop. (Where they do, of course, I agree that blockchain has much more limited "fit" as a solution.) However, in what I call "network-native resource transactions," namely, where the provision of the thing of value is computational and can be verified on the network (think: storage, compute, bandwidth, namespace resources like DNS), there are a large number of transactions where the performance of the counterparty can be shown with math. In those cases, of network-native resource transactions, the transaction itself can be the locus of trust, and the payment / settlement becomes the weak link. For this (admittedly somewhat narrow) set of uses, then, blockchain is really really useful because the payment / settlement trust problem can be done away with deterministically provided the resource transaction is verified.
- TimTheTinker 8y ago
  When would this be any more useful than having a credit card on file with whoever is providing the resource? ...or am I completely misunderstanding what you mean by “payment/settlement”?
  - rlucas 8y ago
    I think "payment/settlement" here is clear, but not the link to network-native resources. Let's imagine you have an auto-scaling application. You hit a big spike (like several orders of magnitude) and have the (cryptocurrency) resources to keep it running. Traditional vendors on invoice (or on credit card) would likely be loathe to just approve your monthly spend going from $500 to $500,000. You'd probably hit an interruption in service as the vendors protect themselves and underwrite to a higher credit limit. Having non-repudiable smart contracts that get the vendors paid automatically once the resources are verifiably transacted would eliminate that friction. (Plus, chargebacks, interchange, etc.) On the extreme other end of the scale, if your resource transactions were small and highly distributed, it would get very cumbersome and costly to verify and pay $500,000 in $1 increments. (Plus chargebacks, etc.) My point here is not the traditional one about credit card fees and frictions, though. It's specifically about the locus of trust. If you sell me an electric guitar on eBay, there are two big trust gaps: one is about me actually getting the guitar as described, and the other is you getting the money. The fact that the "money" happens to be transacted as bitcoin or whatever doesn't change the need for trust at the ends of the physical transaction. But if you are transacting network-native resources, smart contracts let you connect the payment settlement to the resource itself. Factor the primes out of this number and you get BTC 1.00. Transit these packets and you get so many ETH. It's because the resources exist on the same network in approximately real-time with the payment ledger that they can be verified automatically. Doesn't work for most kinds of commerce where verifying that the transaction is settled is a non-computational operation. (Are the goods arrived, merchantable and fit, as described, etc. etc. -- always you will need to be putting your locus of trust out in the physical world with reputational ties, personal trust, escrow agents, brokers / dealers, etc.)

root_axis 8y ago

More breathless fawning rhetoric and nebulous jargon, but I guess the target audience is blockchain enthusiasts so that makes sense. At the end of the day it's their money, so what I do I care? I find it frustrating when I hear comparisons of the blockchain to internet and cellphone communication platforms. The potential use cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value. I actually think bitcoin is pretty damn cool and a marvel of software engineering, but it's a fact that it's mostly useless for the vast majority of people and certainly not in any way comparable to the impact of cell phones or THE LITERAL INTERNET; the insinuation is absurd and intellectually lazy based on blockchain's track record. > We believe that just as the last three megatrends -- mobile, social, and cloud -- intersected and reinforced each other, so will the next three megatrends -- next-gen computing devices, AI, and crypto. This kind of rhetoric inspires derision.

bredren 8y ago
>The potential uses cases for the internet and cellphones were immediately obvious (instant remote communication) and available on day one, compared with blockchains which has given us bitcoin and nothing else of unique value. Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one. Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept. It doesn't hurt to be skeptical of rhetoric, but you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today.
- root_axis 8y ago
  > Bitcoin has unquestionably provided folks looking to work outside traditional financial systems (and governance) value. You can see it in the black market use and its use in ransoming everything from Game of Thrones to hospital records. It was used this way almost from day one. Yes, I covered that when I said the blockchain gave us bitcoin, and that's all it's done as far as unique value. > Also, the use of smartphones as this "instant remote communication" doesn't begin to describe where the technology led, which was to the smartphone which is some type of multimedia device capable of far more than its initial concept. So what? My point is that "instant remote communication" was a communication revolution that did not need to hunt for use-cases, the technology itself was inherently useful and it developed into something more because its ubiquity (a result of its near universal utility and appeal) created a market for competition between selling this device that literally everyone wanted. The blockchain is not at all comparable to this. Most people can't even understand what the blockchain is (and that includes many technical people) and those who can at least understand what the blockchain does mostly come to the conclusion that they don't really have a use case for it (including the large majority of enthusiasts who don't do more than shuffle bits around between arbitrarily delimited distributed spreadsheets). > you don't make a stronger point by downplaying the difference in value between when cellphone launched and what cell phone technology offers today. You're incorrect. The two have nothing to do with eachother. "Smart devices" like palm-pilots existed for a long time but never took off because most people couldn't justify the purchase (since it really didn't do much for them). Fast forward to a time when everyone is already carrying around portable network computers because... and here it is again... they were clearly useful in their communication capability... it was a clever but natural opportunity to replace these "dumb phones" with computing devices that resemble computer systems that were already validated by the desktop market.

67_45 8y ago

This just strikes me as wrong. His chain of logic does not lead to distributed ledgers. Mainframes, PC's, iPhone, distributed ledgers? Before I dive in I must say that the new trend for people to use blockchain as a noun describing the underlying system of Bitcoin and other coins is highly annoying and cringey. None the less, blockchain is not a peice of technology. It's a contract backed up by probablity and the nature of the internet. The contract is a big lumbering thing that has a life of it's own -- for each implementation of this "tech" you are stuck with that beast which, if you are even able to get enough people to feed it, will fluctuate wildly in many capacities before eventually dying. It's not like a new mems accelerometer where once it's out you can now just pump out thousands of units. The nature of Bitcoin (i refuse to use the blockchain noun) lends itself much more to being a global complement to centrally managed monetary systems (or stand on it's own as the world's currency, but I don't think that would be optimal).

vthallam 8y ago

More and more traditional money will flow into Crypto, not because Crypto is the answer for everything, but people just want to bet on the something that might in some form change everything in the future. I really get surprised by the boolean arguments whether blockchain is of any use arguments on HN. I mean there's so much activity, money, talent in Crypto since last year. Goldman Sachs CEO said actually in the nicest way that Crypto is not gonna be the future [0]. I wonder why we can't have arguments like this instead of behaving like a know-it-all. [0]- https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-blankfein-says-he-s-not-worried-about-cryptocurrencies-in-systemic-way-video https://www.bloomberg.com/news/videos/2018-06-19/goldman-s-b...

lawnchair_larry 8y ago
Crypto is a new proper noun?
simias 8y ago
I come from the other side of the argument: since there's so much money poured into cryptocurrencies, so many talents spending their days working on it, huge companies like Goldman Sachs saying that it's the future then what's taking so long? I'm not even asking for a killer app at this point, just for a compelling argument of what the future of a blockchain-powered world will look like. I don't think I'm a "know-it-all" just for asking for a tangible explanation which doesn't revolve around a bunch of hand-waving or technically, socially and economically ridiculous statements such as "imagine Facebook but it's the blockchain". Blockchain is not the magic device people make out to be, it's a cool hack but so far its practical use cases are rather limited. And if you think I'm a know-it-all for saying that I'm sure that you'll easily be able to shame me for the fraud that I am by pointing out the multiple problems that can be solved by the Blockchain more efficiently than with good old technology. So far all I have is "buying illegal stuff online" and "selling illegal stuff online". For everything else there's PostgreSQL. People compare blockchain and cryptocurrencies to the internet or cell phones but I think it's completely disingenuous. While I'm sure you could find plenty of naysayers back then who failed to understand the scope of what the internet would become and how revolutionary it was at the very least easy to see what it brought to the table. You could communicate with anybody around the world, play games, maybe even buy stuff. You can argue about how important and valuable that is, but at least the potential is clear. When you read these Blockchain pamphlets it feels like they're trying to convert them to their religion or political movement. It's about user experiences and decentralization and building blocks of trust. It's about the power of software and the encoding of human thought. And VR and AR for some reason. I say that's just bullshit.

DoubleCribble 8y ago

Have there been any attempts to use blockchain in combating a Tragedy of the Commons?

pg_bot 8y ago

As we currently stand the tradeoffs for Blockchain based companies make no sense in the business world. The author's conceit is that Blockchain based businesses trade scalability for "trust" and that new business opportunities will be unlocked due to this capability. The problem with this idea is that trust is currently not a limiting factor for most businesses. Centralized services are trustworthy enough for the majority of consumers and are far cheaper to run at scale. Every single blockchain based business idea I've heard of would be better suited as a centralized service. It is my strong belief that a16z will lose their shirt on this fund.

TrevorAustin 8y ago

Speaking as a longtime skeptic, A16Z has actually produced the single clearest answer I've seen to that question: blockchains may be good for bootstrapping new network effects by giving early participants in a network (in a Metcalfe's Law sense of network) an incentive to participate. Pure utility tokens can be like call options on the eventual value of the network if it gets off the ground. It's a novel way of solving a collective action problem. https://a16z.com/2017/12/08/summit-crypto-alex-rampell/ https://a16z.com/2017/12/08/summit-crypto-alex-rampell/ Kind of like Kickstarter or Groupon, at least in their original incarnations?

endlessvoid94 8y ago
Thanks for this!
cornholio 8y ago
Except the early adopters don't need to actually participate in the network, just acquire and hoard tokens. There's almost no connection between the profits and the actual advocacy, resources and risks required for the network to succed. So the incentive structure is quite different from, say, the stock market or even a kickstarter. It's more like a tradeable Ponzi with strong incentives to overpromise and overhype in the early phase, and to get out when the valuation approaches the claims without actually delivering anything more than yet another speculative asset.
- foota 8y ago
  You could find a way to associate someone's activity with positive signals, like give them credits for generating positive value in the network. Detecting positive value is difficult though.
  - mlthoughts2018 8y ago
    But organizing “payment” in the form of a cryptocurrency is no different than just depositing money in their bank account. In some cases it would be: payment that evades government detection, payment that allows network participation to be anonymous, etc. The trust issue would not be part of it in these cases, from a business perspective. I guess I mean that predicating some network-effect-needing business on blockchain, for these reasons, still just seems like hype. Unless the business is fundamentally about anonymously being compensated in some way, then other existing financial institutions solve the problem (with just as much trust in 99.99999% of scenarios) in a far simpler way.

dperfect 8y ago

Trust isn't really a feature of blockchains, nor is it a byproduct (or "software primitive") of blockchains. Bitcoin was designed to avoid a need for trust, so it really just steps around the issue of trust in a distributed ledger. This is a critical misunderstanding that a lot of people are still preaching and perpetuating. You can't really build systems that rely on trust on top of a blockchain, and those who have tried are mostly just moving (human/corruptible) authorities of trust to more obscure places. You can, however, build systems that do not require trust on top of a blockchain, though there are some very serious limitations that confine those systems/applications to digital-only transactions. In other words, I can be reasonably assured that the Bitcoin you sent me is spendable by me (that it hasn't been double-spent) and that a government can't just issue 21 million more Bitcoin tomorrow, but that tells me absolutely nothing about whether or not I can (currently or in the future) "trust" your address on the blockchain, nor can it be tied to any kind of meaningful identity without reintroducing a real-world authority that requires my trust. Bitcoin has proven itself to be useful on the payment side of transactions, but I'm unconvinced that blockchain tech will ever be able to facilitate the delivery side of transactions (unless it's a digital asset being delivered) without compromising the fundamental aims of Bitcoin.

Felz 8y ago
Trust is inescapable. You've simply shifted yours from reputational trust to trust in the decentralization of the computing frontier of a specific hashing problem. But while reputational trust is cheap and a well-solved problem, the trust you're using _requires_ large amounts of computing value to be burned continuously, in the hopes that electricity and computation are decentralized enough in the real world that multiple non-collaborating actors will be burning it.
- dperfect 8y ago
  I agree mostly with the point you're making, but there's an important distinction between "reputational trust" and an assumption that game theory and market forces will continue to provide the necessary levels of decentralization for Bitcoin to operate as intended. I'm not sure it's fair to put those two ideas on equal ground as if all forms of trust should be embraced because it's "inescapable". Reputational trust (as you call it) often isn't even based on reputation so much as military force (sovereign governments). A lot of people - myself included - would much rather have their finances in the hands of algorithms and theoretically-sound incentives (even without a 100% guarantee of decentralization) than in the hands of central banks controlled by the whims of politicians.

sarcasmic 8y ago

There's some serious kool-aid going on here, which is unfortunate, because they at least wrote that they're focused on non-speculative use cases. Contrary to the announcement's characterization, crypto-powered platforms don't inherently fulfill the promise of equitable decentralization and immutability. Ethereum has already demonstrated that one is wise to worry if the rules of the game will change later on. And blockchains enable distributed, trustless consensus, but accomplish it with the majority (50%+1) of vested nodes in agreement, which manifests as either a tenuous truce based on human trust to avoid mutually-assured destruction, or as an anything-goes monopoly where the largest cartel wins. Hardly any different from easier, cheaper ways of accomplishing the same thing. Bitcoin's innovation was incentive in the PoW block reward, Ethereum's was embedding a VM in the client. Everything else has been minor variations on prior art, or speculative bullshit.

leppr 8y ago
Your conclusion is fair, but at the same time, a certain number of these "minor variations" will one day be assembled into something just as revolutionary as Bitcoin and Ethereum were. If I had to guess I'd say some technology made out of the combination of blockchain, ZK-snarks, and an homomorphic computation enabler such as SGX enclaves, will probably be very disruptive to many many fields.

LeoPanthera 8y ago

So have we completely lost the battle for the meaning of the word "crypto"? Because I clicked this link expecting to read about a new kind of cryptography.

shawnz 8y ago
Agreed, can't believe I am seeing this wrong usage of "crypto" to mean cryptocurrencies right here on HN. So disappointed that A16Z chose this name.

douglaswlance 8y ago

Would it be possible to build a consensus algorithm for factual information? Sort of a decentralized fact-checker system

alehul 8y ago
That seems like it would be very trivial to game, and additionally while facts are hard to confirm, a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway. The best similar use case I can imagine is building a system is to evaluate how much of the media is in agreement on a given topic, and use that to combat fake news. If a similar headline isn't found elsewhere, give it a low truth rating.
- hobofan 8y ago
  > a consensus of users who are biased and relatively uneducated on the topic would do a particularly bad job anyway That's why you build the system with an incentive scheme with the contributors having something at stake, that over time weeds out the incompetent contributors, similarly to a PoS scheme.
  - douglaswlance 8y ago
    That's what I was thinking too. If you have PoS, then the your stake is basically how trusted you have been throughout the history of your wallet.
- douglaswlance 8y ago
  So we'd need a debate forum that is deeply integrated into the system that has a forcing function for truth.
- douglaswlance 8y ago
  Media is a terrible metric. Their incentive is attention, not truth. The consensus of media is worse than the consensus of the public.

eblanshey 8y ago

> In an era in which the internet is increasingly controlled by a handful of large tech incumbents, it’s more important than ever to create the right economic conditions for developers, creators, and entrepreneurs. I'm happy to see that people are taking decentralization seriously. Blockchain has its place as a public ledger, but as everyone knows, scaling it has issues. Recently, MaidSafe released a new whitepaper for a new decentralized consensus mechanism, called PARSEC, which they detailed in their blog post[0]. It does not use a blockchain. I'm surprised it didn't get more attention. I'd like to see some serious peer review on the paper. Perhaps A16Z should get in touch with them? [0] https://medium.com/safenetwork/parsec-a-paradigm-shift-for-asynchronous-and-permissionless-consensus-e312d721f9d8 https://medium.com/safenetwork/parsec-a-paradigm-shift-for-a...

strainer 8y ago
I've not read the paper but am impressed by their presentation and the experience and community which they have already created around their 'SafeNet' browser. I'm inclined to believe their mathematical analysis of their own system is sound. They say its based on a system with proven O(n^2) messages requirement, with an elaboration reducing message requirement to a more scalable O(n log n)

granaldo 8y ago

prefer they invest in companies than tokens, tokens have been dropping so much recently https://www.coingecko.com/en https://www.coingecko.com/en

projectramo 8y ago

The problem with the blockchain is that it is distributed, so it can be inefficient and difficult to gather all of it in one place. Imagine all the data already stored in one place. This base is private, entirely yours and it can be encrypted. Only authorized users have access. This base of data -- I wish there was a better word -- is going to be the next big thing.

MrRubbish 8y ago

oh no. but the matrix was only a film. this sounds like cryptodeity.

tbodt 8y ago

You can do the same thing without blockchain.

deboboy 8y ago

The healthcare industry is a POS. If blockchain can make it even 1% better then it will be worth all the hype and gripe.

knorker 8y ago

Don't get your hopes up. This is about cryptocurrencies, not crypto.

nikolay 8y ago

I cannot think of a single a mass-market problem, which a blockchain tries to solve, which can't be implemented more elegantly and efficiently WITHOUT a blockchain!

camdenlock 8y ago

Wait, what? “Crypto” has been redefined to mean “cryptocurrency” now? Pff.

karlmcguire 8y ago

> Second, the space is developing extremely rapidly, partly because the code, data, and knowledge is largely open source, and partly because of the increasing inflow of talent. They seemed to conveniently leave out the biggest driving force behind blockchain technology: greed. I don't see how you can talk about the "rapid development" of blockchains and not mention ICOs and the type of armchair investors who gravitate towards them...

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bawana 8y ago

The problem w money is that it represents the fruit of human labor but also allows speculation. We have arrived at a point where accumulated wealth through speculation that human labor ( and therefore self worth ) are devalued. That money from financial investments (speculation) can be ploughed back into speculation removes the human effort that generated the money in the first place. To restore human value we need a simple restriction. Capital gains should only be spendable on real stuff - things, services, etc. whereas money from human work should be unrestricted. The block chain is a perfect tool to keep track of monetary transactions and would allow automatic enforcement of this regulation

ttul 8y ago

a16z is just responding to market demand. Regardless of your personal beliefs in crypto, investors have made a killing, and are convinced that more nuggets must be out there in those hills... If you can raise a $300M fund and charge 2%/yr to maintain it, that's $6M worth of headcount luxuriously plugging away up on Sand Hill Road. Keep in mind: Venture Capitalists mostly invest other people's money, and charge a great deal to take care of it in the mean time.

JohnJamesRambo 8y ago

Hacker News never gets crypto and never will until they are put out of a job by it. It’s like trying to get newspaper men to understand what the internet was going to do to their business.

xmly 8y ago

Blockchain technology itself is not that novel. All the technologies it used have already been there for a while, even the PoW. But after reading all the arguments and discussions, my opinion is that blockchain simply reflects the human's desire for a more transparent, secure and fair IT systems. Current IT systems work, just it is not transparent, so people do not know whether it is doing as it claims. Since there are strong requirements, there will be one revolution. Imagine if the government adopts such transparent and fair system, who cares whether it is centralized or not? So blockchain is simply a strong desire.

awad 8y ago
In real world terms...I am currently in the process of closing on a property transaction. And, while it does take some time, I haven't seen anything during the process that was immediately made better by what 'blockchain' proponents purport to be better alternatives. To be clear, there are certainly inefficiencies I have witnessed. I am just not clear as to how a blockchain solution, however you define it, helps.
- xmly 8y ago
  It is transparent. If you make a transaction using paypal, you were told the money is transferred. But how do you know it is true? You have no way to verify it. Similar problem, facebook and google claim that they are only using the customers data for certain actions, but how do we verify? Blockchain only gives the possibility that the IT system could be transparent and verified by external parties. But Bitcoin blockchain is not the final solution. That is it.

antpls 8y ago

That submission reconnects with the initial YCombinator and Hacker News spirit

piootr 8y ago

The real value of Bitcoin and crypto currency technology (summarizing video clip): http://bitcoinproperly.org/ http://bitcoinproperly.org/ Bitcoin blockchain secured by mining power with current annually energy consumption similar to country like Czech Republic or Chile (will be going down following halving of miners rewards in future).

dnprock 8y ago

I'm a bitcoin skeptic turning to bitcoin owner. For me, it's worth to look at bitcoin from gold perspective. You can pose similar questions to gold and try to answer them. Can I transact with bitcoin/gold? Is bitcoin/gold a good value storage? What problem does bitcoin/gold solve? Is bitcoin/gold solving trust problem? Any answer for gold can be interpreted for bitcoin. Bitcoin is better than gold in many ways. Bitcoin, like gold, is real. Crypto technology is real and works. Bitcoin is limited. There's a computer network running to support it. Bitcoin is not tulip. Gold is still around. I don't think we'd ever ditch it. Why do we value bitcoin? I don't really know for sure. But I feel certain that bitcoin is real. And we need to do more work to understand it.