Conference Presentation, Roundtable
a16z Podcast | Beyond Bitcoin -- The Blockchain
- Ed Felten distinguishes "Distributed Autonomous Companies" (DACs) as fundamentally equivalent to "smart contracts" or "virtual corporations," but prefers the term "mechanism" to avoid legal confusion regarding liability and governance.
- Felten proposes that software agents with fund-transacting capabilities represent a more accurate conceptual model for these blockchain extensions than legal corporate structures.
- Matthew Green notes that while individual coins (alt-coins) can be created easily, Bitcoin's early network effect creates a significant barrier, making "MeToo" coins unlikely to gain traction without offering distinct value like enhanced privacy or speed.
- Green and Felten discuss the regulatory threat posed by Bitcoin's nation-state independence, specifically the government's inability to "call and talk" to a decentralized protocol to halt undesirable transactions.
- New York State has proposed a "BitLicense" requiring disclosure and process compliance for any business engaging with virtual currencies, creating a culture clash between traditional regulation and garage-style entrepreneurs.
- Matt Green argues that while a single dominant currency is theoretically possible, multiple alt-coins could coexist if exchange inefficiencies are resolved, similar to how Google and Facebook operate simultaneously.
- Chris Dixon identifies Coinbase's 1.8 million consumer wallets and merchant partnerships (e.g., Dell) as evidence of growing network effects across consumers, merchants, developers, and miners.
- Green highlights that scalability solutions, such as off-chain internal settlements (like Coinbase's internal ledger), mitigate Bitcoin's high transaction fees and slow confirmation times for users within the same service.
- Dixon compares the future Bitcoin ecosystem to email protocols (Gmail vs. Yahoo), suggesting users may rely on corporate intermediaries while retaining the psychological security of an open, opt-out underlying protocol.
- The discussion acknowledges that regulatory rulings, such as IRS definitions, may force user dependence on trusted intermediaries (e.g., Coinbase calculating tax changes), raising barriers to entry for the open-source community.
- Ed Felten identifies transaction resolution time (approx. 20 minutes for confirmations) as a critical technical flaw, noting that some alt-coins are experimenting with "supernodes" to enable faster, semi-decentralized confirmations.
- Regarding volatility, Dixon and Green suggest that financial intermediaries (e.g., Coinbase) already mitigate merchant risk by guaranteeing fiat value upon receipt, absorbing the short-term fluctuation during the transaction window.
- Green argues that Bitcoin's adoption driving force will likely be international remittances, where traditional payment delays (months) and costs make current infrastructure obsolete, though non-speculative transaction volume has only grown linearly to date.
- Chris Dixon observes a disparity between high media hype and the low number of venture-backed Bitcoin startups, predicting that meaningful entrepreneurial application requires years of incubation similar to the early internet.
- The panel notes that corporate adoption by major players like PayPal is viewed positively as it legitimizes the technology and shifts the narrative away from illicit use cases like the original Silk Road.
- Felten clarifies that Bitcoin's 21-million coin limit is a software consensus rule, not a mathematical inevitability, and could be altered if the community reaches a strong consensus.
- Green expresses greater concern over the potential destabilization of the Bitcoin network due to mining reward halvings and the eventual shift to transaction fees, rather than theoretical macroeconomic flaws regarding inflation.
- Felten criticizes current academic and economic analysis of Bitcoin as superficial, calling for deeper study into currencies unlinked to nation-states and the implications of fixed monetary supplies.