Crypto Fund III

A16Z is correct in saying that the dot com boom had a major build-out aspect. It needed broadband deployment and intensive consumer marketing. Cryptocurrency has so far demonstrated itself to be more like a bottom-feeder on hardware resources; hardware not being used for something obviously more valuable gets repurposed into mining of some kind, and energy negative uses have so far been accommodated through various kinds of theft of either the energy itself(in industrialized mining) or the compute time(in malware). In this light, the tendency towards specialized compute is not shown to be universal, but part of a set of interlocking arms races - securing systems and energy resources better, finding proofs of work with broader applicability across different kinds of hardware, and creating demand for hardware that is more efficient at those proofs that exist.

Cryptocurrency in application is likely to be a one-note phenomenon in the same way that the internet boom became an ad boom - the same services with a little speculative cherry on top. It has a big inherent application simply by being decentralized and tradeable. It can be worse on other dimensions and still succeed by being really good at that one thing, financializing the world in greater degrees, and pushing the arms race forward.

For people with very poor understandings of economics, and have drunk deep from the sacred texts of Zerohedge, that have been standing on a wooden box on the street corner for the past decade preaching about the evils of the coming wave of inflation, as the Fed struggles mightily to be able to even get inflation up to the 2% target, much less above it for any period of time, crypto is the savior to get us away from fiat money.

- read this $blockchain_book - just wait, these things take time

I have never once heard specifics that are even close to convincing

Finance is incredibly opaque with a lot of rent-seekers taking a cut of transactions, and firms doing semi-illegal things but realizing that the chance of them getting caught is slim and the fine is generally less than the profits they'll make.

Decentralized Finance (DeFi) is almost completely transparent - all major smart contracts are open source and all transactions are made in public. Which gives people a lot more trust in the system as they can see what is going on.

> How can it enable "new kinds of governance" - unless "new" means Plutocracy?

Have a look at Decentralized Autonomous Organizations (DAO's). People hold tokens in the protocol, and then anyone can suggest changes as a Git Diff. The token holders vote on the change and if it's approved it gets merged into the protocol. Pretty cool democratic way to make changes to decentralized software without anyone getting special privileges.

> How can any economic benefits be distributed when by definition cryptocurrency holders are accountable to no one?

I assume they're talking about DeFi not caring about your nationality / sex / skin color / power. Everyone is on an equal participation playing field, and nobody is locked out from participating.

There’s actually another less obvious interpretation of this, which is that the creation of cryptocurrencies is funding the development and deployment of new technologies, some of which may be useful beyond cryptocurrencies.

There are a number of academic research labs that have been funded in part or in whole by cryptocurrencies, and which exist to pump out new cryptography, distributed systems architectures, etc.

For example, zk-SNARKS got a huge boost in use by cryptocurrencies the past decade, and there’s been an explosion of derivatives and advancements funded by the cryptocurrency industry since.

Beyond the hype and buzzwords, that’s at least one lasting and tangible benefit of this industry.

It's worth noting though, that just because there are intermediaries, that obviously doesn't mean they're all the same. It doesn't mean their attributes are the same. One intermediary can be superior (or worse) than another. All successful, large scale approaches to crypto will always require intermediaries. DeFi is a fantasy, identical to the fantasy of decentralized Internet services in general from the past 10-20 years (real DeFi will languish for exactly the same reasons; the reasons for which the evangelists never seem to understand, because their emotional buy-in clouds their judgment).

Part of that script by A16Z is entirely fake of course. They're inserting rather comical wokeness into it (communities, collectively, economic redistribution, har har), because you have to do that with all corporate PR now. Their goal is merely to establish the next banking & finance kingpins and to mint as many billions of dollars as they can in the process.

[0] - https://www.investopedia.com/terms/c/central-bank-digital-cu...

Crypto can be held and transacted in a secure and trust less way. I can store my $ in the bank which is secure but requires trust, or I can store my $ under my bed which I trust but isn't secure.

> How can it enable "new kinds of governance"

New crypto has introduced the idea of a governance token, if you hold one of these governance tokens it gives you a vote on the policies of the token. This is similar to how you have a vote in the building society if you hold funds at that building society, much more democratic than more traditional banks.

> How can any economic benefits be distributed when by definition cryptocurrency holders are accountable to no one

Holders are accountable to the economics of the token in the same way that the government is accountable to the economics of the country. If token holders do dumb stuff that devalues their token no one will buy it and their token will be worthless in the same was as a government just printing money makes the money worth less.

Unless you want to get rid of debt and credit creation, we'll need intermediaries. You can already do P2P lending and funding if that's your thing... you'll realize it's risky and a lot more expensive than using banks.

The banking system pretty much owns politicians cradle-to-grave - you need massive political donations to get elected, then lobbyists have super-access to politicians while in office, then politicians are offered lucrative revolving door jobs and board seats on leaving office.

The term "cryptocurrencies" is really misleading.

And on the other side, you had to be so freaking careful to actually use the thing yourself without losing all your money. Hardware wallets, backup passwords, whatever. It's not cool to worry about whether or not you still have your hundreds of thousands of dollars or not. It's not fun trying to figure out if you can trust Coinbase or if they're the next MtGox. And besides, if you're trusting one of these players anyway then what is the point? Wasn't this supposed to be about privacy and getting away from centralized banking in the first place?

I just don't see any upside. I made my 200x return or whatever it was and I'm out. If I start to see actual products solving real problems that honest citizens in non-sanctioned countries have, I'll revaluate my position.

These two positions aren't healthy. Even if the latter turns out to be true in the end, I would rather see a patch to the centralized financial system.