Chris Dixon on crypto's policy-driven rebound, stablecoin adoption, and the convergence of AI and crypto

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It's a vacation home, but better. Our next guest is Chris Dixon from Andre and Horowitz, living legend. Welcome to the show, Chris. Great to see you again. It's been too long to have you back. Yes. Uh uh last time you were on, we got to time you up perfectly with Brian Armstrong.

Today we just missed each other by one day, but uh great to have you here and would love to get uh the update from you and how you're framing the current the current crypto era. It's so it's in many ways linked to the AI boom but somewhat disconnected.

Like how are you thinking about even just framing the conversation and setting the table? Yeah, so we just put out our state of crypto report today which I think you know had a lot of good data. Um I think the the um good news is I think things are trending very well.

Um I think it's a reflection of smart policy mainly that um that uh you know the genius bill passed which is very important which has helped the sort of stable coin growth.

Um and I think what it shows like what genius shows is is the the dual effect of smart policy which is on the one hand it provides a pathway for innovation.

And so we're seeing not only startups but big companies like Stripe and you know FinTech and Black Rockck, Fidelity and so forth um get involved in the space but it also kind of eliminates a lot of the scams and bad behavior right so um what we're really hoping for is a kind of similar result with the so-called market structure bill which is being considered by Congress which would which would provide a similar kind of policy framework for the rest of of the crypto market beyond stable coins.

So I think that this kind of momentum is reflected in the data that we shared today. Um, so for example, stablecoin volume is now in the trillions. That's adjusted. We try to we have an adjusted metric we use which tries to remove a lot of the bots and other kinds of stuff. Sure.

And very importantly, that's not correlated with trading volume. So it's uh it seems to be like sort of genuine, you know, people using for payments and treasury management and so forth. So that's a big deal.

Um we're seeing a lot of cool kind of new emerging applications at the at the intersection of areas like crypto and AI in an area called DPIN which is decentralized physical infrastructure which is a way to use kind of crypto to incentivize the build out of telecom and energy networks and so forth.

Um uh you know we're seeing a lot of there's a big movement of so-called real world assets which is to bring like stocks and bonds on chain. Um a lot of good momentum.

I mean honestly like we had a you know it was a choppy couple of years uh 2022 to 2024 and I think it's we're kind of coming out of that and I'm optimistic but still a long way to go. Yeah.

I I always wonder about the value of these like highlevel market KPIs in crypto because there it feels like as soon as we latch on to one we identify one that seems to be tracking well then it gets all thrown off by just a underlying shift in the market.

Like people were tracking like number of Bitcoin wallets for a while and and that like the idea that the next generation will even be aware if they have a wallet because they might own it through an ETF or they might have a wallet that's abstracted away and they're not even aware of it.

And I'm wondering like there's there there's this like sort of like the midw take is like oh the KPI flatlined but the community overall keeps growing and so if you were taking a victory lap in 2023 you missed out on the next wave which looked different and didn't map on to the previous era of KPIs.

And so I'm wondering like is there is there like is there some ground truth that you like zoom out to that's just like the vibes or the people or the talent or something like that? like how how do you how do you get away from uh this particular KPI is now needs to be deprecated basically.

Yeah, I mean there are some cap just just to be fair to the KPIs like and I think Darren who is our head of data science and the report is very prof you know like the stable coin volume uncorrelated to trading seems like a real kind of real metric that's more tech metric monthly active users that that's not people that hold crypto that the number of people hold crypto in the hundreds of millions what we track is people that are actually using these kind of new apps that are on chain got it that we put between 40 and 70 million there's a error bar there because we have to get rid of bots and other things But uh but it's definitely been growing and that's like monthly active users of apps.

So you know it feels like a real metric uh that's sustainable to your point. Y um yeah but it's a good point a lot of a lot of venture capital and startups is is vibe based right is qualitative. Um and uh you I think it's definitely gets definitely better.

I'm actually at prepping our annual founder summit now and like it just the mood is better. People are building people are innovating. You know it feels like offense not defense. A lot of that's the policy shift. Um, but policy shift is big.

Also, just like I feel like the the the bullcase for bare markets is that it washes out a lot of the tourists and then the technologists stay. It does. I think that's right. I think that's right. I mean, I like I've been, you know, obviously doing the internet stuff my whole career and seen many waves.

Um, including I, you know, I started my first company in the internet downturn of the 2000s and, you know, there was this kind of um, you know, what is it? Strong men create weak times meme or whatever. Yeah.

Well, I like I like that that crypto as an industry rewards people that have an unwavering vision and are okay with with uh you have to have some appetite for failure. Like missionary. Yeah. Yeah. And uh so and and I think that's like healthy. It's like yeah, you have to actually believe in this long term.

You have to be okay with the risk. You have to be okay with like a total ban scenario in a specific category.

Um my question for you uh prediction markets are having you know massive moment right now and this was something that I'm sure you were writing about more than a decade ago in terms of its potential and a lot of and there were various kind of attempts at prediction markets that never really reached like cultural relevancy and the scale and the way that they've reached today.

Uh what kind of categories do you think people have like thought had potential but kind of rode off? maybe they were too early but we'll be talking about in like two years. Is it is it privacy zk proofs? You know thing things along those lines. No, it's a great question.

If I could just address your prior point about the whole you know sort of sticking with it first. I have an unwritten blog post that I that I would title investing is a uh emotional test disguised as an intellectual test.

Meaning one of the things I've learned over the years is just like sticking with it in venture capital whether it's crypto sort of more extreme.

I think this is true of public markets if you read like Howard Mars and Warren Buffett but it's definitely true in venture which is a lot of it the business is just sticking with stuff um same with entrepreneurship um when it when it seems you know kind of tough um so you know that's I think it makes a great point to to new emerging areas.

Yeah, look like I think privacy it's interesting like we had a lot of um privacy is a very interesting area now the stable coin bill passed a bunch of folks like in the policy side who were kind of you know kind of I don't know anti- encryption and privacy are now saying wait a second all the stable coin payments are public that's not good what if you want to do financial transaction healthare like yes we agree that's why we want it we don't want it for obviously for you know illegal activity we want it because that you know people want in normal cases they want privacy for some of the things they do and so we think that's very important we have a bunch of investments there.

Y um yeah, prediction markets, great to see them break out now. As you said, they've been the idea goes back. I wrote a tweet tweet about it about back to Hayek in the in the ' 50s and you know, DARPA started a prediction market, believe it or not, the government in 2021, I believe. Sorry, 2001. Wow.

Something like that. Um, wait. What was everything?

Was that just like you know uh uh just for in like intel purposes like yeah they wanted to predict like is there going to be a war in Iraq and then they thought okay like it's a little bit distasteful that people are betting on it but the societal benefits would outweigh it.

But then there was such controversy around it that that they um canceled it. There are now rules as there should be around so-called harmful prediction markets. Um, and you know, you can't have those.

But the kind of the core argument for prediction markets is that yes, there's sometimes on the one hand it's sort of gambling and betting. On the other hand, it has a real benefit as we saw for example in the election.

You can get really objective data and in a time in which you know trust institutions seems to be dropping like do you trust you know the newspaper anymore. Um, it's nice to have an objective source for that. So but back to your question I think privacy is very interesting.

I think um you know I'm I'm very excited by sort of the intersection of like AI and crypto as an example. My experience in tech is that often like if you think back 15 years ago people talked about mobile, social, cloud was like the three buzzwords and they and and some people saw them as kind of different categories.

In the end we actually learned they were they were all very connected. I think that tends to happen. I think a lot of these things will converge. You know robotics, AI, crypto, like these are all the kind of mega trends. Um and I think it's natural that they intersect and reinforce each other.

Um are you seeing a speed up in uh in crypto startups productivity on the actual software development side like coding agents for solidity or actually having a you know increase you you are oh yeah definitely almost all of our company I we encourage them too to they use you know cursor and so is that what you mean like the yeah yeah yeah exactly because as a consumer I mean I I see the data from like anthropic and open AI and Gemini I see that like tokens are being spent.

Uh, and but then a lot of the consumer software that I use, you know, the United app we like to pick on or like the flight booking app, it just feels like it's not it's not like become all futuristic all of a sudden. There's still bugs.

And so I'm always interested in like startups are in a unique case where they can adopt new technologies and actually new workflows and maybe gain the productivity benefit faster than legacy companies. So I'm just interested to see if if it's a unique use case. Yeah. Yeah.

And I think I think it just takes a while for these things to propagate, right? Like United app people ask them to do it 5 years from now or whatever. But the startups are all using it using like cursor. It's amazing.

I mean I saw some study out of some university that was like these these tools don't make you more productive and if you just use them for I spent a Christmas break playing with curs last Christmas playing with cursor when I build a website. I mean it's just ridiculous how great these tools are.

Of course they add to productivity. It's just these things take time. It's like humans the the bottleneck is always humans and policy. I would say regulation and and humans um take time to change behaviors, right? But as you say, startups tend to be the first to adopt it. Yes, we see it across the portfolio.

We would be kind of surprised and and I don't know like just Yeah, like like puzzled if somebody wasn't using a lot of these data. Yeah, it' be a kind of a red flag. What does uh institutional adoption and embrace really look like? Like what what are the kind of buckets?

Like the base case is you're supporting custody and maybe trading and then stop talking trash at some point and then start saying this is amazing saying that it's a joke. Uh that's helpful.

Uh but but how quickly do you think these major institutions can actually adopt crypto rails for you know operationally right these their job is to store and move money. Crypto is you know more efficient in a lot of ways. Yeah. I mean you can kind of think like crypto is a network.

I mean it's a network technology right it's about building networks and it was the network where 99% like stable coins as an example where 99% of the potential nodes in the network felt like they couldn't join the network for regulatory reasons so now they're all I think you'll see it in stages so like the fintex the sophisticated fintex like stripe and you know Robin Hood and Revolute and things will be first um and then over time you'll see I I think eventually you'll see just like a button on your Chase bank that's like send maybe they don't call it stable coin they call it digital dollars or something but but you'll see you know it'll just integrated into all the kind of fabric of these systems and we're seeing a lot of activity.

I mean even you know Chase I think Jamie Diamond talks trash but I believe they have 1500 people on blockchain projects.

So like you know I think I think the important thing is the bit has flipped where you know like if you talk to the folks that like look we want to do this but like our legal teams won't let us like now we have legislation which is the gold standard of policy right us congress pass law so like now they feel comfort to do it and that's very very important and and I think the bit has flipped where they now see it as not a threat but an opportunity um so I think it'll be you know it'll take time it'll be different kind of uh tranches of adoption based on how advanced the companies are But I think we're on that clear path now.

Um, and you know, is there is there anything that's been interesting for you guys on the buyout side? Like looking at, you know, let's say like a midsize financial institution and realizing like, hey, this this is a great business and if we actually, you know, were toire General Catalyst with that healthcare network.

Yeah. Something to that effect or or some of these role, you know, uh, I think you'll see that. I think you'll see that. We don't actually do that. It's not really our thing. We do kind of stage venture but mostly in some later stage venture. But wouldn't it be fun to do an LBO?

One of these things that probably sounds fun. Yeah. Then you're like like those people like we get to mostly hire people in venture like LBO's you're mostly firing people and it's just like a structuring. I don't know. I mean probably a grass is greener thing. It sounds fun and then you actually go do it.

I think it's also just hard to actually change these organizations sometimes. Like there was there's a real question like do you need just new organizations started from scratch or do you change them? I don't know. It's not my it's not my area.

I'm just speculating but that mainly it's just not our thing but I think other people are doing it and I think they you know the other firms doing it will I think accelerate the adoption of new technologies like AI and crypto. Yeah.

How is the or how do you envision the role of the venture capitalist changing over the next maybe decade in crypto?

I feel like there's one world where you become half VC half hedge fund person that's trading liquids and trading liquids at the earlier stage because companies are kind of doing onchain IPOs and earlier stage but you still need to build a position and take an opinionated view of the future of the technology assess the team how how is all that evolving how do you think that that will evolve yeah it's a great question so I mean what we do we've done for a long time and that's one of the reasons we started a separate crypto fund right we we both do kind of early stage traditional venture and do things like buy tokens like Bitcoin directly in the market and then we have our own electricity and trading and we sort of built out all these these capabilities at some point you'd expect that some of those things to you know be subsumed by outside organizations and kind of commoditized and these practices I would expect would propagate um to to other firms.

Um but like I I just look at venture like through the lens of like core like the fundamentals are always just great people. Yeah. like we're ultimately in the talent business.

So there's all these other kind of mechanics and things that we've built up, but in the end we're just trying to bet on brilliant founders who have great ideas. Um and that can that could just the way I view it is that can come in many forms.

That can come at the earliest stage equity investment that can come as a token investment. You know, we're also betting of course on communities. You think about something like Bitcoin like it's really a community at that point and it's sort of this network and community. And um so I I look at it through that.

I always try to whenever the markets kind of get strange and things are happening I always say let's go back to first principles first principles is like believe in you know positive vision of the future great entrepreneurs doing you know pursuing big ideas um you know highly technical highly product focused and then then whatever mechanics we need to do to get exposure to that would I don't know if this is possible if this has already happened uh but would you ever see yourself backing uh a project that looks like Bitcoin in the sense that the founders's anonymous, you can never meet them, but for some reason you do have the availability to make you do have the ability to make an investment like a venture capital investment.

Uh are you equipped to make that deal happen? Yeah. Yeah, we are. We are. Yeah. So, so yes, we could just buy and we can just buy tokens OTC and we have an operation. We've had that People don't seem to know they think of us more as venture. We've had that since 2018. Totally. Just record. Yeah.

And actually two3 I would say roughly two-thirds of our investing has always been that I mean that was part of the design and why like I wanted to spin this out um so we could set it up in first principles with this structure. Um so we had I want to be a crypto VC but I don't want to buy tokens that be insane for sure.

Well there's a whole I could tell you it's a longer story. There's a whole backstory where like it was just it was just very challenging the LPs. So like when we I raised the first crypto fund like I went to all the LPs and I said look we're going to do we're going to buy tokens.

we're going to do this and like you can opt out or opt in and some of them opted out and you know some opted in and just like look this is what we're going to do. So, we have a venture structure, a venture fund in the sense that our LP relationship is a long-term relationship.

They lock up their money, but on the sort of that's sort of the reverse mullet or mullet or whatever where on the back end, it's like a very traditional venture, but on the front end, we can do all we can buy tokens, we can do, you know, equity investments, whatever way that we need to get exposure to great ideas and great people, we can do.

And that was that's been our in our thing in our kind of design from the beginning. Um, and we continue to do that. Yeah. In this analogy, I feel like the venture part is the business in the front and the and the open market trading is the party in the back. But I don't know, it's a stretch analogy potentially.

But I I like a mullet analogy. It's great. Uh but yeah, thanks so much for taking the time to great to get the update. Have a great uh summit. I'm sure it's going to be a great time. It's gonna be an amazing time. Great to see you. We'll talk to you soon. Have a good one. Bye. Uh let me tell you about getbzzle. com.

Tom, your bezel concier is available now to source you any watch on the planet. Seriously, any watch. And Jordy, did you put up a better run last night on eight sleep? I did okay. I got an 88. Slept 6 hours and 50 minutes. How did you do? Did you get destroyed? 85. Wait, I beat you by one point again. No, 85.

You got an 88. I got an 88. Okay. A couple points. Uh, yesterday in the chat, people were congratulating us on our good numbers. We got to put up uh good numbers for the chat. And you got to go toleep. com and get a five TVPN.

Um, are there any other Yeah, I was I was shocked at how uh at how like viral uh I was shocked at how viral the whole like AWS uh eight sleep thing went. Oh yeah, considering that uh uh clearly a skill issue and I was not affected. Yeah, I slept right through I actually slept great. My numbers were insane. It was crazy.

Uh but yes, I mean somebody uh uh somebody, you know, I I I feel bad if if your if your eight sleep did like wind up getting too hot and you woke up and you didn't have a good night's sleep. Uh I I I'm sending my best and I hope you get back on that horse. And uh we'll close out with this post from Rune.

I knew you were going to go there. Or a farming in the Zoom waiting room. Or a farming in the Zoom waiting room. Just never join. Never join. Just Just hang in the waiting room. Oh, so people know that you're there. Is that how you do it? Yeah, that you could join.

I feel like I mean at one point to not to break the fourth wall here and give you a little bit behind the scenes, but at one point we had multiple guests when they come in they they they hit a waiting room, the reream waiting room of course.

Uh and and at one point multiple people could talk to each other and they could hear what was happening on the show and it was kind of like this funny networking event that was happening and I actually think that there's there's some value there if we could get that right.

Uh but right now we just we just let everyone uh uh sit in silence and then eventually come on, watch the show and then join. Uh so there's there's minimal aura farming in the TBPN waiting room, the reream waiting room. That's right. Um but maybe we should increase it. Well, thank you for hanging out with us today.

Very fun show. I I can't wait for tomorrow. Pains me. We have to wait uh just under 21 hours to get back here on the clock starts now. But yeah, the clock starts now. Have a wonderful evening. Leave us five stars on Apple and Spotify. Cheers. Goodbye.