(2021-11-08) Johnson Dixon Is The Blockchain Delivering On The Promise Of Web3

Steven Johnson asks Chris Dixon: Is The Blockchain Delivering On The Promise of Web3? One primary reason I thought of you that night is that about three years ago, I wrote a very long story for the NY Times Magazine called “Beyond The Bitcoin Bubble”... As you probably know, a significant part of the framing of that piece had been inspired by things you’d written at the time—and by some related posts from Fred Wilson and Brad Burnham—on the relationship between tokens and open protocols.

it’s been almost three years since that essay was published—how do you think it’s going?

From where I sit, it feels like that kind of everyday use hasn’t quite happened yet.

Dixon: I like to say that blockchains are computers that can make commitments.

putting the code in charge. The programming logic behind it is more complicated than we need to get into, but the end result of it is that blockchains, once established, are resilient to human interventions

you can make commitments to scarcity.... Bitcoin, which makes the commitment that there will never be more than 21 million bitcoins

In the emerging web3 model, ownership and control are decentralized

Video games are a roughly $140B industry, with about $40B of that revenue coming from the sale of virtual goods.

In Axie, the economy is peer-to-peer instead of centralized. When you buy a virtual good the company takes a 4.25% tax but the rest of the money goes to other players

Now imagine this model being applied to social networking, ride sharing, commerce, music, podcasting, marketplaces, etc.

This is all enabled by blockchains, which let these applications credibly make commitments to users like “you really own these objects and can do whatever you want with them” and “we can’t change the rules even if we want to — they are locked into the code.”

Big computing movements can take a while

For most people, until around 2010 when smartphones exploded, the internet meant a desktop computer you sat down and set aside time to use

Lastly, to the article you wrote on decentralized storage blockchains back in 2017, this is actually happening now at a pretty impressive rate. Arweave, which is an alternative to Filecoin, has been growing exponentially

The nice thing about Mirror.xyz is you know the company can’t change prices or insert ads as other blogging platforms have done, because all the data is stored on Arweave, so if Mirror messes with users they can leave without losing their data or their social graph. When switching costs are near zero, the platform is forced to behave itself.

Part2: "Let's Run The Experiment": A conversation with Chris Dixon about DAOs and the future of organizations online

Because their participants are often young and tech-savvy and blissfully unversed in all the ways the tech is “supposed” to be used, and because the pleasure in games comes in large part from making up new rules, games tend to produce far more experiments than real-world spaces do. And that’s a good thing. We need more experiments!

One of the key qualities that got me so interested in the early Web was this sense that the medium was going to enable all kinds of new experiments in how we organize ourselves into communities or collectives—or corporations

Wikipedia, for instance, is one of the most astonishing triumphs of the past twenty years

But truthfully, a lot of our attention online has gravitated to one increasingly dominant economic model: an advertiser-driven platform maintained by a venture-backed startup that eventually becomes a publicly traded company or is acquired by one.

So on some level, you have me at hello with DAOs.

But I guess I’m a little blurry on the details

Friends With Benefits has a manifesto.

One reason this is personally interesting to me is that I sense a comparable network happening here at Substack, where a huge amount of the value created is flowing to the creators

I’m all for peer-to-peer collectives, but what is preventing people from implementing these kinds of org/governance structures off the blockchain?

Dixon: I agree that Wikipedia is an astonishing triumph but of the top 20 websites it’s the only one not owned by a large corporation

There have been tens of thousands of internet companies funded over these 28 years... Many of them started off with products that were optimized for the needs of the users and community and almost all of them ended up optimized for the needs of the company.

My conclusion after observing and participating in this over roughly 20 years is that it’s not a problem with the people but a problem with the model. The core issue is there is a fundamental misalignment between the needs of a corporation and the needs of a network.

A company can try to resist this logic but it’s extremely difficult

The core issue is again the model. When you have an internet service that serves hundreds of millions or billions of people, there is a huge asymmetry of power and knowledge between the service provider and individual users. To fix this, you’d want a system that provides a way for users to organize and act collectively

We’ve run the experiment for many years without blockchains and now it’s time, I believe, to run some experiments using them.

In some loose sense open source software projects ranging from Linux to Ethereum are DAOs.

These systems use “off-chain” governance in which network participants “vote” by deciding whether and how to upgrade the software they are running.

Probably the first and most important on-chain DAO is called MakerDAO.

MakerDAO is a complex system for generating what are known as stablecoins

DAOs can also be used to fund public goods on the internet

An interesting recent example is the Ethereum Name Service (ENS), which is essentially a blockchain-based name service analogous to DNS.

Last week, ENS launched a token which they airdropped to users, which means 25% of the tokens went to people who had actively used the system in the past

50% of the tokens went to the ENS DAO treasury, which the community can use to fund products and services to grow the network. At today’s prices, the treasury has over $2.5 billion.

Compare this to how other internet public goods are funded and governed. OpenSSL is open source software that powers much of the encryption on the internet. A few years ago there was a major bug, which highlighted the fact that the organization was woefully underfunded, with only two full-time employees and a budget of under $1M per year.

So I would argue that DAOs have shown strong promise for governing and funding technical projects. An interesting question people are wrestling with now is how to extend the DAO model to less technical, more mainstream applications

The DAO structure lets these communities build treasuries, develop governing rules, and act collectively. Members can be anywhere in the world.

The other appealing thing about DAOs — and what makes them superior to the web2 model I discussed above — is they remove the misalignment between the company and the network by eliminating the company altogether and shifting the economic and governance rights to the network.

A properly constructed DAO does this by memorializing the rules around economics and governance from the very start, using smart contracts.

Overall I think web3 generally and DAOs more specifically can help course correct the internet back to its original, idealistic vision: power and money pushed to the edges, networks growing and flourishing together, a level playing field for talent anywhere in the world, a thriving creative middle class, and a generally diverse and interesting place. It’s not guaranteed, but let’s run the experiment. We ran the other experiment for 28 years and it didn’t work.