Author: a16z
Compiled by: CaptainZ
Welcome to the special Web3 edition presented by a16z. This episode focuses on the convergence of Artificial Intelligence (AI) and Cryptocurrency (Crypto), where we have invited Chris Dixon, the founding partner of a16z Crypto, and David George, a partner at a16z Growth, to join us.
They will delve into the shortcomings of the internet business model, new opportunities for creators, and the far-reaching impact of the transformation of large platforms.
This content is derived from the cross-collaboration of a16z's "AI Revolution Dialogues" series, and is particularly meaningful as it coincides with the release of the paperback edition of Chris Dixon's bestselling book "Read Write Own".
It is important to note that the content of this program does not constitute tax, business, legal, or investment advice. Please visit a16z.com/disclosures to view more important information, including our investment list.
Here is the interview transcript:
Host: Chris, thank you for joining our program, it's a pleasure to have you here. You are currently focused on the crypto space, can you share your overall thoughts on the interaction between AI and crypto?
Chris Dixon:
Of course, I'm glad to be here. I've always believed that technological waves often come in pairs or groups, just like cloud computing, mobile internet, and social networks over the past 15 years, which reinforced each other. Mobile internet brought computing devices to billions of people, social networks became killer apps for user engagement, and cloud computing provided the underlying infrastructure. I remember there was a debate about which one was more important, but it turned out they were interdependent and indispensable.
Now, I believe AI, crypto, and new hardware (such as robots, self-driving cars, and virtual reality devices) are forming the three pillars of the next technological wave, and they will likewise promote each other. Crypto - which is also the focus of my book - provides a completely new way of architecting internet services. It is not just a technology, but a new paradigm for building networks, with many features that traditional methods cannot achieve. I believe this will benefit many fields.
Many people simply equate crypto with Bitcoin or meme coins, but in my view and that of many smart people in the industry, this is far from its essence. There are various forms of interaction between AI and crypto. First, a straightforward integration is the focus of our investments: using this new architecture to build AI systems. For example, a core issue in the AI field is whether future AI will be controlled by a few large companies or a broader community? This relates to the issue of open-source. I was surprised to find that the AI field has become increasingly closed over the past decade, with companies locking up technologies in the name of "security", but I believe this is more driven by commercial interests than real security needs.
Fortunately, there are still some open-source models, such as LLaMA, Flux, and Mistral, but their openness is still a concern. Model weights are not fully disclosed, data pipelines are opaque, and the ability to truly replicate these models is doubtful. Moreover, these open-source projects often depend on a single company's support and could be shut down at any time due to strategic adjustments. Therefore, we have invested in some blockchain-based internet service stacks aimed at providing decentralized open-source infrastructure for AI. For example, the Jensen project, which builds a computation layer through crowdsourcing, similar to Airbnb's model: startups can submit computing tasks to the network, and people with idle computing resources can provide support, with the blockchain managing supply-demand matching and the economic ledger.
Another example is Story Protocol, which redefines the way intellectual property is registered. You can create an image, video, or music, and record its copyright and usage terms on the blockchain. These terms are designed based on existing copyright laws and have international applicability. You can set rules like "allow adaptations and derivative works, but pay me 10% of the revenue". This forms an open market, replacing the traditional business model that requires individual negotiations. Currently, only large companies like OpenAI can make billion-dollar deals with Shutterstock, while small creators are either plagiarized or ignored. Story Protocol provides an equal platform for everyone.
The core of this model is "composability", a common theme in the blockchain world and a concept I discuss in my book. It's similar to the success of open-source software - countless people contribute small pieces of code to eventually build a powerful system. Linux grew from 0% to 90% market share thanks to this power. Story Protocol works the same way - you can imagine someone creating a character, another adding new elements, and then others doing mashups, ultimately forming a superhero universe. As long as the revenue flows back as agreed, the creators' incentives are guaranteed. This model embraces new technology while providing an economic model for creators, which is the most exciting part of the AI-crypto convergence to me.
Host: The new economic model you mentioned is indeed thought-provoking. David, you've also mentioned that the emergence of ChatGPT may break the internet's covenant, can you elaborate on that?
Chris Dixon:
Yes, there's a chapter in my book called "New Covenant" that discusses this. The success of the internet is largely due to a clever incentive mechanism that has voluntarily brought 5 billion people on board without the need for central authority enforcement. Over the past 20 years, the internet has gradually formed an implicit economic covenant, especially between social networks, search engines, and content creators. Take Google as an example - website owners allow Google to crawl their content and display snippets, on the condition that Google will drive traffic back. Creators earn money through traffic, whether it's ads, subscriptions, or other models. This mutually beneficial relationship is the foundation of the internet's prosperity.
But occasionally this covenant is broken. For example, Google's "One Boxing" feature, which directly displays answers without redirecting to the original website, has severely impacted sites like Stack Overflow, Wikipedia, and Yelp. The user experience may be better, but creators' traffic has decreased. Now the rise of AI further challenges this covenant. Chatbots can directly generate illustrations or recipes, without users needing to click through to the original site. If all AI systems operate this way, with no traffic flowing back, the creators' survival foundation will be undermined.
These AI systems rely on data trained under the old covenant, but the new model no longer follows the old rules. I'm worried the future internet may become a closed system dominated by three to five major companies, while tens of billions of other websites wither away due to lost traffic. This makes me uneasy - is the internet going to revert to the 1970s broadcast TV model with just a few channels? How is this good for startups, innovation, and creativity? How will long-tail websites survive? How will new things break through?
I'm not saying crypto is the only solution, but we have to acknowledge that the current situation has broken the original incentive mechanism, and we need to think about whether this is a good thing. If not, how do we design a new mechanism? Story Protocol is one attempt, trying to rebuild the creators' incentive system through blockchain.
Host: You mentioned that AI, crypto, and new hardware are a trinity that reinforce each other. Can you elaborate on how they work together?
Chris Dixon:
Certainly. Take the example of mobile internet, social networks, and cloud computing - they built upon and empowered each other. Now, AI, crypto, and new hardware are doing the same. You can already see some signs, such as AR/VR glasses and self-driving cars extensively using AI technology, and companies like Tesla making forays into humanoid robots. These technologies are bringing AI into the physical world, opening up entirely new application scenarios.
Here is the English translation: In the field of cryptography, I am particularly optimistic about an area called DePIN (Decentralized Physical Infrastructure). For example, the Helium project is a community-owned crowdsourced telecommunications network that challenges the traditional models of Verizon and AT&T. Users install Helium nodes (wireless transmitters) in their homes to contribute coverage to the network. Currently, there are hundreds of thousands of nodes across the US, providing much cheaper services (USD 20 per month vs. USD 70) than traditional operators. This is feasible because it has designed an incentive mechanism using cryptographic technology, avoiding the billions of dollars in network construction costs of traditional operators. The most difficult part of network construction is the startup phase, because the early network effects are weak - just like dating websites, 10 users are useless, but 1 million users are useful. Cryptographic technology solves this problem through token incentives, where early participants are rewarded, thus driving network expansion. The DePIN concept is not limited to telecommunications, but also extends to areas such as climate modeling, map data, and electric vehicle charging. For example, a project we recently invested in is a decentralized energy monitoring network, and there are also people using similar methods for decentralized science. The early construction of such networks is naturally suitable for cryptographic technology, and AI can cooperate with it in data collection and processing.
