Former Coinbase CTO: “I don’t think any crypto can compete with Bitcoin” 🚨 This article is 5 years old...
Former Coinbase CTO: “I don’t think any crypto can compete with Bitcoin”
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Updated: Nov. 7, 2019 at 2:52 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Balaji Srinivasan, the former CTO of Coinbase and general partner at Andreessen Horowitz, believes that the “blockchainification” of every major web app is the obvious investment strategy for the next 10 years. Srinivasan shared his thoughts on the future of blockchain in a lengthy Twitter thread, revealing that the decentralization of everything is “inevitable.”
The disruptive power of decentralization
Srinivasan pointed out that “newer” technologies such as email, GPS, online maps, smartphones, and video streaming are no longer new and have become a new normal for everyone. As a serial investor, he often thinks about ways in which a tech product can be disrupted, and decentralization almost always seems to be the answer.
He pointed out that in a young industry, a centralized actor can radically disrupt the UX and business model of a company. However, if the feature set of an industry has already been established, decentralization becomes its biggest threat. Srinivasan used the switch from the commercial Unix operating system to Linux, its free and open-source alternative, as a prime example.
If an industry is still young, the UX and the business model can be subject to radical disruption by a centralized actor (eg Zipcar to Uber). But if the feature set has been locked for a while, a different threat arises: a decentralized competitor (eg commercial Unix to Linux).
— Balaji S. Srinivasan (@balajis) May 27, 2019
The former general partner at Andreessen Horowitz called this the “second phase” of progress. The “first phase,” as Srinivasan put it, represents centralized companies slowly creating a monopoly over a service or a product.
In the first phase, centralized companies slug it out to determine what the market actually wants. Centralization allows quick iteration on features, UX, business model, pricing. The winner(s) get windfall profits for a time. Then a backlash builds and we enter the second phase.
— Balaji S. Srinivasan (@balajis) May 27, 2019
Blockchain will disrupt everything
Srinivasan said that crypto today is what Linux and IBM clones were to computer programming 25 years ago. People have a tendency to gravitate towards free and decentralized software, but the fact has become increasingly obvious with the arrival of cryptocurrencies.
He added that, in order to succeed in the industry, one must base the service it offers on the UX of a successful, but ultimately monopolistic product. After that, companies should “blockchainify” the backend to add incentives for early adopters and improve censorship resistance.
And while the process of putting more services on a blockchain is pretty straightforward, Srinivasan pointed out that finding the first technically feasible candidate to do that is a huge problem the industry is dealing with.
This has been obvious for a few years, but the thing to do is:
1) clone the UX of a successful but monopolistic product
2) blockchainify the backend to add incentives for early adopters & (perhaps) censorship resistanceThe key is finding the 1st technically feasible candidate.
— Balaji S. Srinivasan (@balajis) May 27, 2019
It will, however, be the best and most obvious investment strategy in the next decade, he explained.
If the SaaSification of every popular piece of desktop software was the mainstay of tech investing from ~2005-2015, the blockchainification of every major web app is the obvious investment strategy for the next 10 years. This time, though, the whole world may be able to get in.
— Balaji S. Srinivasan (@balajis) May 27, 2019
Srinivasan also believes that text-based apps will be the first to decentralize. It’s easier to build “blockchain-based versions of Twitter or Craigslist in the next few years than something high bandwidth like YouTube or Snapchat,” he noted.
Again obvious, but it will likely be text-based apps that come first. It’s easier to build *partially* blockchain-based versions of Twitter or Craigslist in the next few years than something high bandwidth like YouTube or Snapchat. Don’t put it all on-chain, just the key parts.
— Balaji S. Srinivasan (@balajis) May 27, 2019
Srinivasan’s thoughts received a lot of support from the crypto community, with many praising his realistic views of the industry’s future. When Brad Mills, the host of the ‘Magic Internet Money’ podcast, asked him what would ultimately disrupt centralization, Srinivasan gave a pretty surprising answer.
Mills wanted to know whether Srinivasan thought Facebook’s GlobalCoin or another cryptocurrency competing with Bitcoin fits into this narrative, Srinivasan said that he believes no crypto can compete with Bitcoin.
I don’t think any crypto can compete with Bitcoin. I do think that public blockchains can help break the power of the new internet monopolies via peaceful, market-based, and above all effective means. https://t.co/lG2Tg2hxKO
— Balaji S. Srinivasan (@balajis) May 27, 2019
However, he added that he thinks that public blockchains have what it takes to break the power of internet monopolies that have been strengthened by regulations such as the GDPR.
In more detail, regulations like GDPR have strengthened the position of huge internet companies. This could have been predicted by public choice theory. The ostensible “punishments” only entrench incumbents. Restoring competition will require new tools. Perhaps blockchain. pic.twitter.com/axDSGI4UVn
— Balaji S. Srinivasan (@balajis) May 27, 2019
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Bitcoin
$97,983.39
Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
a16z
Andreessen Horowitz (known as “a16z”) is a venture capital firm in Silicon Valley specializing in investing in seed, start-ups, early, mid-stage, growth, and late stage.
Balaji Srinivasan is recognized for his influential roles in the tech and cryptocurrency sectors, most notably as the former Chief Technology Officer (CTO) of Coinbase.