“Web3 and Cryptocurrency” | Andreessen Horowitz’s Scott Kupor | June 21, 2022

Scott Kupor is investing partner with the venture capital firm of Andreessen Horowitz (known as “a16z”), based in Silicon Valley, California.  One of its funds is “a16z crypto” which has raised $7.6 billion to date to invest in Web3 and cryptocurrency startups.  Kupor describes Web3 as the third generation and “future of the Internet,” and like cryptocurrency, it’s based on Blockchain technology.

“It’s really a new development platform on which lots of different applications we think will be built over time,” he told the Club.  “The key distinguishing features of Web3 relative to its predecessors is that the platform is decentralized and open, meaning nobody owns it.  Anybody who wants to be a publisher to that platform is able to do so and it’s not really controlled by any central resource or big tech companies.  So that freedom and that flexibility is what we think kind of is very attractive to developers in this age.”

Likewise, the cryptocurrency component will serve as a decentralized, non-bank digital currency used for transactions on Web3 with the added benefit of being an investment in particular web applications, where users will gain appreciation from their early spending support. 

“It really creates an economic opportunity for those people who helped grow the network, who helped govern the network.  And so it really creates an economic incentive that enables the participants to feel as though they ultimately can be compensated for the value they bring to the organization,” said Kupor, whose experience in the software industry and investment banking spans the dot-com boom and bust era of the mid-1990’s and includes the sale of Loudcloud to Hewlett-Packard in 2007.

Kupor also discussed one of the more developed areas of Blockchain technology: “De-Fi” (decentralized finance), which he referred to as “an application in the Web3 environment.”  It involves enabling software on computers to intermediate transactions instead of going to central clearing houses or institutions.  “So this doesn’t yet exist at scale.  But over time, if decentralized finance is going to grow and live, it will ultimately have to replicate all of those individual functions that exist in the traditional financial system today…using decentralized platforms,” Kupor said.

He also discussed the state of cryptocurrency today, including some notable failures in the news recently, such as Luna, and whether it will spur greater regulation.  “The Enforcement Division at the SEC has done a good job, I think, actually rooting out quite frankly, bad behavior in the system.  And unfortunately, bad behavior I think, is always going to be part of a new economic model.  We as market participants do believe that an appropriate regulatory framework does make sense for these types of activities,” Kupor added.

Kupor told Club members that this is “frontier technology” with new engineers and developers migrating to the environment.  He advised viewing it as a long term venture capital investment with “10 to 20 year time horizons” in terms of monetization.  “We’re very early on in this new technology.  What’s we’re hoping it can develop into is phenomenal, world-changing applications, including protected personalized medical information that you can share with others.”