Analysis, NFTs, Investing

Marc Andreessen's Lessons from Web1

Crypto lessons from one of the most successful internet investors
Bankless Bankless May 30, 20225 min read
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Marc Andreessen's Lessons from Web1

Dear Bankless Nation,

“Crypto…This is like the internet”

- Marc Andreessen, a16z

Guys like Andreessen were there in the early 1990s — Web 0.5 — before the internet as we knew it was even a thing. There’s so much that we take for granted now that wasn’t a certainty in those years.

Prior to 1993, it was illegal to do any business on the internet at all

As the web grew, it bifurcated into two camps: researchers and nerds on one side, and governments and corporations on the other.

There was no middle ground.

By the mid-1990s, there were two visions of the internet.

The first was the ‘information superhighway.’ Supported by corporate giants like Disney and Comcast, this cathedral was unidirectional communication from authority to consumer, akin to Web 2.0 giants like Netflix: You pay to access content, and don’t participate. You are a consumer, not a creator, of data.

The other vision was of an open, more decentralized internet with ‘read’ and ‘write’ capabilities, structured with coding languages like javascript and protocols like human-readable HTTP, and SSL encryption. In this version, users were active participants in the creation of the Web, rather than just passive consumers.

This open bazaar had to be fought for tooth and nail. Elements like identity, encryption, and even digital commerce — all givens now — were not a given then. This fight took place between VCs, startups, devs, politicians, and even law enforcement.

Sound familiar?

Andreessen recalls congress hearings where his nascent Netscape platform was labeled a security threat with the same damage potential as Tomahawk Missile due to its insistence on encryption.

For Netscape and its ilk, encryption was necessary for anyone to be able to transact on the internet — otherwise, stuff like your credit card data would be open season for anyone online — but to the crusty senators in DC, encryption was code for black markets, terrorists, and nefarious activities.

Again…Sound familiar??

Many of us came online in the mid-to-late nineties. Those that came after were digital natives who understood the internet as inevitable. But in the tech trenches in the 1990s, there was existential jeopardy on the daily. That’s one reason Andreessen and Dixon draw direct parallels from Web 1.0 to Web3 — more than mobile, more than Web2.

The lesson here: Now, we take a lot for granted and don’t operate with a wide perspective. Every time China bans crypto or a particular chain goes full Black Swan, from our hyper zoomed-in vantage point, it’s a signal for the end of the world.

That’s not the case.

Crypto, like the internet, is inevitable. There is no end to this world. Just more problems and solutions — ones that will get solved.

Solutions to Problems or Problems as Solutions?

“The reality of what you have today is not the real fight.”

The soundbite from this episode unpacks so much in just a couple of sentences. Sometimes the solutions we create are whole new problems themselves. For example:

The original internet was supposed to be a non-commercial space. A result of that foundation meant a digital experience lacking commerce, lacking money, and thus lacking trust. While a non-commercial internet may sound appealing on the surface, it caused major structural limitations.

This lack of economic incentives is a direct cause of the reason your inbox is filled with spam. It’s free to email anyone so long as you have their address, so why not bombard people? The tallest building in San Francisco, the near-dystopian Salesforce tower, was built upon this quirk in early internet logic.

The Salesforce Tower will stand for centuries, but the employees are gone
Salesforce Tower, San Francisco.

A lack of economic incentive in the early web is the reason that Web 2.0 companies built their model on advertising, siphoning out value from the internet experience through surveillance and monopolization of information.

You can draw a long and very weird line from AUP — the ‘acceptable use’ standards of the proto-internet — to ‘fake news,’ Facebook, and the election of Donald Trump.

It’s actually kinda crazy that decisions made decades ago with the best of intentions led to totally unforeseeable consequences. But when you’re dealing with the formative stages of foundational technology, this is the kind of long-game 5D chess you have to consider.

Here’s what I mean:

Sometimes those new problems you’ve created can be leveraged to provide much bigger solutions. For decades, computer networks operated in non-readable binary code to save precious bytes of space. Back in the 90s, the internet pioneers at Netscape made a design decision to make HTTP human readable. This served to open up the developer base to a wider audience. It made the internet a more approachable experience.

It made the internet platform for people to build cool stuff upon.

But this decision also slowed down the speed of the internet experience badly. The day’s limited modem capabilities became heavily congested with all this new, heavy, human-readable data. It was a controversial design decision. Many treated it as UX blasphemy.

“It doesn’t scale!” they cried.

Sound familiar???

More importantly, this decision created demand. Every day people got on the internet, fell in love with what they could do, but were incensed at the slow speeds. This got the attention of communications and cable companies. It actually behooved them to start rolling out broadband on a regional, national, and then a global scale.

No one web company could instigate major global infrastructure development like this, but a mass demand for infrastructure could.

Andreessen claims the plan at Netscape was to deliberately create a performance problem in the short term to bootstrap demand that would require a solution in the long-term that unlocked growth on a much larger scale.

We’re talking about Ethereum scaling almost verbatim — except Ethereum relies on a decentralized, global network of developers rather than communications corporations to dig out the solution.

Like Andreessen says: Critics make lists of problems, geniuses find those problems to be opportunities. Ultimately, the spoils go to those with an optimistic perspective.

What Web3 has that Web1 didn’t

As a rule: decentralized is cooler than centralized, systemic disruption is cooler than a corporate co-option. Reorganizing the entire globe’s financial wiring will not be felled in one swoop. It’s death by a thousand cuts. Aligning incentives means aligning with capital. And having the world’s most effective capital allocators and experienced tech ecosystem builders on your side is a very good thing.

With VCs like Andreessen, who have fought against incumbent institutions and antiquated government policy, we have the ‘village elders’ in our midst who can help us navigate a part of history that is rhyming strongly with an era just a few decades old.

Crypto natives can see the utopia that it can bring. Can bring, not will bring, however. During these early, formative years of Web3, everything is at stake.

In Web1, there was a fork in the road between a centralized, top-down, nanny-internet, and a decentralized, human-powered bazaar-internet. After fighting tooth and nail, we thankfully found the right path.

Web3 faces the same fork in the road, but this time we have Web1 VCs who became extremely successful on the bet that humanity would ultimately choose the right path. And these same VCs are throwing all their winnings from Web1 towards projects that are down the same path that worked for them previously— the path of human ingenuity and permissionless opportunity.

Rather than meeting it with skepticism, Marc sees the potential of things as crazy as NFTs, as a potential vehicle for producing “a level of creativity that we never even thought possible”

As the bull market fully winds down, and we reflect on our silly JPEG purchases 🤦, we can remind ourselves that although crypto moves fast, it is still a multi-decade long process of creative destruction from the old world to the new one.

But this time, we have billions of dollars of capital on our side to hasten the inevitable.

Happy Monday.

- Bankless Team

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