The Bay Area loves a crisis. It’s 2022, and the Valley is abuzz with decentralization and cryptocurrency chatter. Bay Area behemoths built with centralized data, such as Twitter, Salesforce, Facebook, Google, Apple, and others, append blockchain and crypto to their existing platforms in a hurry. Big Tech and startups race to be first-to-market with a production-ready Blockchain application, which, according to Harry Stebbings from TwentyMinuteVC, can prove to be as influential as the iPhone once was, upending several industries in the process.
But not everything is rainbows and Unicorns in Silicon Valley. Big Tech continues to struggle with congressional hearings, regulation, and user apathy but experienced spectacular growth during the pandemic, welcoming 782 million new Internet users or the equivalent of twice the population of the United States. Big Tech stocks rose to the stratosphere while the pandemic decimated many other industries, but in many cases, the increase was temporary, and once the world reopened after the lockdowns, these once high-flying stocks crashed. According to SeekingAlpha, Shopify completed a 10-for-1 split on June 29. During the COVID e-commerce surge, the stock traded to a high of $169. The stock collapsed before the split, and shares are trading at $28 as of 10/7/2022.
The Leaders Of The Bitcoin Revolution
Bitcoin’s magnetic narrative attracts Heads of State, con artists, Wall Street bankers, Silicon Valley entrepreneurs, Hollywood superstars, and V.C.s. Radical thinkers such as Vitalik Buterin, Elon Musk, Jack Dorsey, and Marc Andreesen, author of the influential Software Is Eating The World essay, are some of the most visible leaders pushing Bitcoin. Why? Because crypto promises to give the power of trade and commerce back to the people while generating a healthy return on investment for Sandhill Road.
Silicon Valley could become a top player in global finance in a Crypto and Blockchain world, competing with New York City and other traditional international financial markets. By leveraging the Bitcoin lightning network and Ethereum scaling solutions, tech companies could power the new digital economy.
And as Bitcoin hits its lowest price point since 2020, Andreesen-Horowitz launches a brand new $4.5B fund to invest in startups building on a blockchain, the decentralized technology behind cryptocurrencies. Andreesen-Horowitz bets on the new digital economy, claiming that the world is entering «the golden era of Web 3». This new internet era could decentralize social media and every Web 2 service we use daily.
According to Andreesen, co-founder and general partner of the venture capital firm Andreessen-Horowitz, companies in every industry must assume that a software revolution is coming. In Satoshi Nakamoto’s seminal whitepaper, Bitcoin is «a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution.»
Crypto’s Growing Pains
Technology maximalists are common in the early days of disruptive technological change. According to CNBC, shares of MicroStrategy, considered by some as a proxy for investing in bitcoin, tumbled more than 25%, taking its year-to-date losses to over 70%. That’s even worse than bitcoin’s performance — the No. 1 digital coin has roughly halved in price since the start of 2022, the article concludes. According to The Atlantic, the anger at Web3 and Crypto carries echoes of the fury over the subprime-mortgage meltdown almost 15 years ago. The gross behavior and the government bailouts that came after helped motivate the early embrace of bitcoin, which was described as a financial system based on «proof» rather than the sort of «trust» that had just gotten the world into a huge mess, the article concludes.
Bitcoin promises to decentralize banking, asset ownership, and commerce using an immutable and distributed database called Blockchain. Forbes defines Blockchain as a Distributed Ledger Technology (D.L.T.) that stores data of any kind. In addition, an intelligent contract blockchain can record information about cryptocurrency transactions, NFT ownership, or DeFi services.
The Internet is akin to discovering fire. It’s impossible to own «fire,» but Big Tech is attempting to accomplish this. For instance, Apple acts as a gatekeeper for mobile app distribution. Google owns over 90% of search data worldwide, and Facebook owns 2.9 billion social media user accounts. And Silicon Valley is betting that the next move is to give back the power to the user with billions of dollars behind them. This could be possible with new services that could only be powered by blockchain technology. But how decentralized can technology be if the funds required to grow the users come from centralized banks with V.C.s as the conduit for distribution?
Remote work, meme stocks, social distancing, and a newly-minted class of crypto millionaires forced humanity into a «new normal» with decentralization at the epicenter of a cataclysmic cultural shift. Bitcoin and Blockchain unlocked the imagination of some of the greatest minds in Silicon Valley. Jack Dorsey’s Web 5 website explains his proposal to create a «truly, or extra decentralized Internet,” in which VCs are participants, not owners. Dorsey, the founder of Twitter and Block, rebranded himself as a fervent defender of Bitcoin and blockchain technology.
Andreesen, Dorsey, and Musk believe Bitcoin and Blockchain are a once-in-a-lifetime opportunity to leapfrog into digital currency. Silicon Valley largely agrees that entities must move away from centralized data ownership. Companies such as Filecoin and Arweave try to do this by eliminating a centralized data center and replacing it with hundreds of decentralized nodes worldwide. Andreesen is convinced that entities should not rely on central authorities and shows this position by being an investor in Filecoin, which received funding from the V.C. during the 2020 pandemic.
Andreesen’s approach is cutting-edge among V.C.s and positions Web 3 as the solution to content ownership, giving monetization and ownership opportunities to Creators. But Andreesen-Horowitz is a V.C. with fiduciary responsibilities to their L.P.s, making it difficult to extrapolate the Web 3 narrative and splintering the outcome into centralized ownership of potentially decentralized digital entities. Jack Dorsey, on the other hand, using his entrepreneurial credibility, highlights the cracks in Web 2 and 3, proposing a new form of Internet governance, aptly named Web 5. With this new approach from V.C.s and tech founders, it’s clear that the blockchain economy is no longer a fad and has established itself as «the new» disruptive technology.