VC firm Andreessen Horowitz has shared a comprehensive crypto-assets and blockchain ecosystem update / recap as we all get ready to enter “a new era of decentralization.”
According to a16z, we keep seeing over and over again that when control of a powerful system or platform is in the hands of a few (let alone a single leader), it’s “too easy to encroach on user freedoms.” Andreessen Horowitz notes in a blog post that this is why decentralization matters (even though we haven’t actually seen a good example of true decentralization in the crypto space so far).
The VC firm added in a blog post attributed to several authors that decentralization is the tool that allows us “to democratize systems by enabling credibly neutral, composable internet infrastructure; promoting competition and ecosystem diversity; and allowing users more choice, as well as more ownership.” However, no such capabilities exist in the DeFi space as of the time of writing.
However, Andreessen Horowitz acknowledged that decentralization has been “hard to achieve in practice — at scale — when pitted against the efficiency and stability of centralized systems.”
a16z’s blog post added that most web3 governance models “have involved DAOs (decentralized autonomous organizations) that use simplified yet burdensome models for governance based on direct democracy or corporate governance — which are not designed for the sociopolitical realities of decentralized governance.”
However, thanks to the “living laboratory” of web3 over the past few years, “more best practices for decentralization have been emerging.” This claim is also questionable because these initiatives are still in their early stages of development and have many problems such as their source-code being poorly written, resulting in numerous hacks and exploits.
But, Andreessen Horowitz also mentioned that these include models “for decentralization that can accommodate applications with richer features; and also include methods such as DAOs embracing Machiavellian principles to design more effective decentralized governance that holds leadership accountable. As such models evolve, we should soon see unprecedented levels of decentralized coordination, operational functionality, and innovations.”
The Andreessen Horowitz blog further noted that while it “has been much-lamented, the fundamentals of user experience in crypto haven’t actually changed much since 2016.”
Andreessen Horowitz’s blog ads that it is “still too complicated: self-custodying secret keys; connecting wallets with decentralized applications (dApps); sending signed transactions into increasingly many network endpoints; more. It’s more than we can expect users to learn in their first few minutes in a crypto app.”
Eddy Lazzarin said that developers are “actively testing and deploying new tools that could reset frontend UX (user experience) for crypto in the year ahead.”
Eddy added that one such tool “includes passkeys that simplify signing into apps and websites across a user’s devices; unlike passwords, which are more vulnerable and require manual work from users, passkeys are automatically, cryptographically generated.”
Ali Yahya, General Partner noted that monolithic architectures “have the advantage of allowing deep integration and optimization across what would otherwise be modular boundaries, leading to greater performance… at least at first. But the biggest advantage of an open-source, modular tech stack is that it unlocks permissionless innovation; allows participants to specialize; and incentivizes more competition.”
As noted in the blog post by a16z, decentralized blockchains “are a counterbalancing force to centralized AI. AI models (like in ChatGPT) can currently only be trained and operated by a handful of tech giants, since the required compute and training data are prohibitive for smaller players. But with crypto, it becomes possible to create multi-sided, global, permissionless markets where anyone can contribute — and be compensated — for contributing compute or a new dataset to the network for someone who needs it. Tapping into this long tail of resources will allow these markets to drive down the costs of AI, making it more accessible.”
Formal verification becomes less, well, formal
The blog post noted that while formal methods are popular for verifying hardware systems, they are “less common in software development.”
For most developers outside of such hard or safety-critical systems, these methods are too complex, and “could add significant costs and delays.”
However, smart contract developers “have different demands: The systems they develop handle billions of dollars; bugs would have devastating consequences, and cannot typically be hotfixed. So there’s a need for more accessible formal verification methods in software and especially smart contract development.”
The authors who contributed to this update include:
Andrew Hall, Miles Jennings, Scott Duke Kominers, Eddy Lazzarin, Daren Matsuoka, Sam Ragsdale, karma (Daniel Reynaud), Arianna Simpson, Carra Wu, Ali Yahya
You may read the complete blog post and learn more about the authors who contributed to this update as well.
