Chris Dixon: Stablecoins, Startups, and the Crypto Stack

0:01What if crypto isn't just a speculative asset class, but the next foundational layer of the internet? Today, we have Chris Dixon, founding partner of A16Z Crypto, and one of the earliest investors in the space. He bat coinbase before crypto is cool, and he spent the last decade not just investing in, but actively shaping the future of decentralized technology. In this conversation, Chris lays out a vision for crypto that goes far beyond price charts and hype cycles. He talks about stable coins as internet native money, blockchains as global financial rails, and how programmability, not just low fees, is the real unlock.

0:36Chris also gives a candid look at the evolving regulatory landscape and why crypto still feels unexplored despite massive potential. This episode is about long -term thinking, technical optimism, and building the infrastructure for a more open internet. Let's get into it. As a reminder, the content here is for informational purposes only. Should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the company's discussed in this podcast.

1:12For more details, including a link to our investments, please see A16Z .com forward slash Disclosures.

1:23Chris, welcome to the show. How are you doing? I'm great. Good to see you guys. Congratulations on all the success with the show. Thank you. Thank you. Yeah. It's been a lot of fun. Where should we start? Obviously, extremely storied investor. Top of the Midas list. Can you give us a temperature on the crypto markets? It's been up and down. Let them take a victory. Take a victory lap. I feel like you get, I know the jobs are finished, but they They always twist your arm into doing podcasts when the market's down and saying, oh, you got to hold you accountable. And then where is Kara Swisher calling you when the market's up?

1:55That's a good point. Yeah, it's been a long journey as you guys pointed out. I think that we had a lot of challenges the last four years, regulatory challenges with the last administration, and that looks like it's trending much better now. With the new administration, it's sort of more protect, and I think we have a lot of momentum in Congress, and that's a big deal, because that created a lot of headwinds, so that's great. And then also the kind of core infrastructure. So for example, one of the things happening right now are stable coins are really taking off. So like last month, it was something like two trillion and stable coin volume, trillion with a T, which is more than visa, quite a lot of volume.

2:28And a lot of that's due to the fact that the infrastructure, so Solana, Ethereum, and so forth has gotten really good. So you can now send an arbitrary amount of money anywhere in the world for under one penny and one second. But that took years and years of work, investment, founders, technical folks doing a lot of work. So that's great. And so there's a lot of good things. I think that there's a lot of challenges too, but overall it's been fun. Do you think that the narrative around stable coins is still going to morph into micro payments for the internet? Ben Thompson was talking about this with MCP.

2:57It's not in the standard, but you can easily imagine that getting worked into the second version of the standard. At the same time, obviously just global remittances has always been a huge category. It is the one category that I used stable coins four years ago. And it felt very real in that moment, even while people were saying, oh, this is useless. It felt like, okay, this is the value. But I'm interested in the next application of stablecoins and then the one after that. Yeah, so I think just maybe briefly, the way I think about stablecoins is today, we don't really have a global payment system or global financial system.

3:26We have 195 countries. Each one has many different banking systems. When you send money to another country, like I said, you wire money. Like, actually, we've had this experience at the firm where we wire investment. And it ends up going through a bunch of humans and paperwork. It's really just a mishmash of systems. And so the way to think about stablecoins is similar to how, for those who are old enough to remember, text messaging was like this in the 2000s. You would send a text message and you'd say, you don't have a plan to send to Canada. You got to sign up. It was all these different systems.

3:53And then WhatsApp and FaceTime came along and they built this sort of, what they call over the top global network, right? So think of sort of stablecoins and blockchains as an over the top network. It's from day one, global, low fee, credibly neutral, programmable payment system that just sort of works everywhere. That's kind of the simple way to think of it. And so as you mentioned, one of the obvious benefits is just cross -border. And that's where a lot of the uses are right now. And so for example, like SpaceX has a program where they'll sell a star link and I think it's like some Southambe like Brazil or something and they'll immediately use stable coins for so -called treasury management.

4:25This is one of the kind of growing use cases that folks like Stripe will talk about. Remittances, you're sending money back home from the US to countries where the currencies volatile and they want access to dollars or euros. And then as you mentioned, John, I encourage those who are interested to go listen to the call -assins, they were all in podcasts a few weeks ago talking about this. What they're actually, say they're really excited about is less than low fees and more of the programmability as you just described. One obvious thing is invoice fraud. So people will send these faxes type things that's a really old -fashioned where they'll say, like here's my wiring instruction.

4:55And if you've done this, you'll say, please make sure you call first, but of course calling doesn't work in an age of AI because it could be a fake voice. And so what Stripe was excited about is because blockchains are programmable, they can have a full kind of reputation system on top. So they know like this is a valid place to send money to for your invoicing system, right? So you can program it. As you mentioned, micro payments, right? Now that you can send money for one penny, that unlocks a whole bunch of use cases. So machine to machine payments every time you're doing a AI API request, as you mentioned, MCP, right?

5:24So like, MCP I would expect would have down the road, a payment standard, right? And AI agents, so you imagine a world which I think we're headed to pretty soon in a couple of years. We have all these different AI agents running around. Hey, I'm advertising. I can program. I can write your essay for you. I can do your homework, whatever. And they're all sort of advertising their services. And then you sort of imagine other agents coming along and negotiating and pennies getting transferred back and forth. And this big kind of economic kind of collection on top. So the web moved from like these kind of sign up forms to agents sending money automatically.

5:55And we think that would be powered by, most naturally powered by a global, you know, a low fee programmable system like blockchains. Yeah, yeah. I'm super curious to understand how your guys' lobbying efforts have evolved over the past six to 12 months. We went from a sort of large coalition of people trying to basically block crypto from getting real adoption and traction in the US to suddenly ETFs being approved and things like that. And I imagine that's kind of changed your guys' strategy on the Hill. So I'm interested to hear how that's evolved. Yeah. I saw Mark interesting on you guys. because I think it was a week or two ago, I watched that and he was talking a little bit.

6:33Mark and I have been very involved in this. And by necessity, originally, like four or five years ago, and then over time realized just how important it is to engage in Washington. They like to say if you are not at the table, you're on the menu. So you don't want to be on the menu. So I've been going sort of like once a month and Mark has to, and really just kind of trying to explain our perspective, because we feel like the interests of startup, so most startups don't have the resources to go to DC, right? And of course, big tech companies do, and big banks do, and also it's a big entities do.

7:04And so our logic was that we're one of the few, you know, kind of organizations that has enough scale to have a government affairs team who represents the interests of startups. And so we go and we say, look, we represent small companies and here's what they're interested in. So for example, they want to have clear guardrails and rules around blockchains. They want to have open source AI. That's another really important issue to us. Clear rules on AI and copyright. There's a series of things. Having a single federal framework and not a 50 state laws on a lot of these things and so forth, right?

7:30And so we go and we kind of advocate for that. We've taken a bipartisan approach from the beginning. We think that's very important. I mean, look, just one is we think the way you really build industries is legislation. If you think back to the internet, that was built on really on the 96 telecom act. And had things like Section 230, which you know, you may know is now a contentious issue. I like to say Section 230 had been administrative guidance instead of legislation. It would have been a political football every four years. It was built into legislation. And so you could, Section 230 is what enabled marketplaces, social networks, and so forth to build reliably on the internet.

8:00So we've always felt that both for AI and for crypto, we want legislation that provides clear rules, past for innovation, and really eliminates or mitigates or eliminates all the kind of bad use cases and bad actors. And so that's always been our approach to bin bipartisan. That's the legislation you need bipartisan. First of all, and secondly, most people will think Republicans are pro crypto, Democrats are anti. That's not really true. We just had a last week, a Senate, It was a procedural vote on the stablecoin bill, and I believe there were 17 Democrats who voted for it, which is significant.

8:28And I think our view has been, we wanna shift the Democratic Party back to the values of Obama and Bill Clinton when they were pro -tech, and not sort of the kind of blue sky Democrat thing that happened the last year. Yeah, I mean, the interesting thing about the lobbying is that I looked at the donation dollars that were coming from crypto align people and crypto funds, and it was split almost exactly 50 -50. Like the entire crypto community really did go Super bipartisan with the spend. And obviously the Republicans won, so it feels like a Republican issue right now, but it doesn't feel like it's gonna remain that way.

9:00On the issue of government, I'm interested to know, maybe stablecoins are a good example, but just general crypto adoption. How do you bucket, how do you think about the adoption across government B2B or just direct to consumer? Because when I think about stablecoins, for example, there's people that wanna pay people individually, but there's so many ways that you can just tuck stablecoins under some business, like with the AI thing, if you get an anthropic open AI, Google, Microsoft, using stablecoins in an agentic application, the user might never know that I'm paying a fraction of a cent to access a Wall Street Journal article.

9:34It just happens and I'm not even aware. So what are the key drivers for the different constituencies and then the different applications and how do they fit together? Now that's a great question. Like I have a broader kind of framework I'd like to talk about, which is sort of, I sort of like to distinguish technology between what I call inside out and outside in. And so inside out of things that sort of start with established institutions like AI to some extent is like that. The iPhone was like this. It came out of Apple, a very established institution, AI came out of Stanford and so forth. Whereas crypto very much, you know, Bitcoin started at the fringes, right?

10:03And sort of like open source software and just, you know, other kind of tech movements have started at the fringes. And it sort of worked its way in, right? So stablecoin started for the main use case was settling crypto trades seven years ago or something. And then over time, you started to see more and more payment providers in Argentina, for example. And, you know, sort of more kind of moving to the center. Now, Stripe, you know, I think if Stripe is very much probably, I think the smartest, while people think the smartest, one of the, if not the smartest, FinTech company is all in on it. You know, they did a billion dollar acquisition of bridge to ramp up their efforts.

10:33I think the main, the gaining factor, like I speak to a lot of, what I would love to see is a world where you have banks and asset management firms and every payment provider, as you describe John, like behind the scenes, it's just sort of, it's the substrate. It's the infrastructure, right? It's HTTP or SMTP. It's just this thing that exists. A lot of them say we just want like that final regulatory clarity piece, right? Because they want that assurance. Because they're like the risk of Earth. We just had four years of kind of law fair against the industry. So that's why I think that's really like, honestly, like I probably spend more than half my time on that now.

11:02Like that's just kind of the key thing. There's two, I just just say there's two big kind of bills that were advocating for where there's stable coins, there's one called market structure that's just coming forward in the house now, which is also to kind of clarify more broadly on tokens. But I think that's the main thing right now. I think, and I, but to your point, exactly, I don't think most people ultimately will think of it, even the word stable coin, I think it'll be like digital dollars, you know, like for the average person. Yeah, the industry term, like ERP, people interface with that, but they don't know.

11:29And like, actually, but we'll see like, we have a FinTech group of the firm that's not crypto, and if you know, folks like, I think you interviewed an Asian, yeah, all in those folks. And then, you know, they like crypto, but they're not like crypto. And they'll tell me now, like, it's become pretty standard in the stable in the FinTech stack that people will use stable. Yeah. So let's. Yeah. You're sorry. One, you're like a three person startup and like boom, you push a button and you got 190 countries. That's very different in the old days. So I want to get your point of view on the competitive forces and dynamics right now, because we have startups, which there's entire subcategories.

12:00You have hyper decentralized, you know, crypto companies. You have sort of hybrid companies like maybe bridge that are kind of sitting in between Fintech and crypto rails. And then you now have big institutional players that are coming in. Maybe they brought ETFs to market to start. And then now they're thinking about stablecoin applications as well. How do you look at the market and what kind of advice do you give to portfolio companies that are trying to figure out who they are, whether that's fully decentralized or some type of hybrid or so on? Yeah, I think that's a great question. I think that the point is not for decentralization and this new architecture of blockchains for its own sake.

12:45The point is they have specific benefits. Why would one build on a blockchain like Ethereum or Solana as opposed to a traditional AWS like a traditional architecture? And the answer is, when you build a way I like to describe it, most simply is blockchains allow you to build digital services that remove the intermediaries. So you remove, so for example, stablecoins, you have no intermediaries that are taking fees. You don't have the banks and the payment providers and the payment networks to take all the different layers of fees. So that's an important benefit. You're building these, you know, you can build social networks without fees.

13:16You can build games without fees. You can build AI systems without fees, right? Without fees, it's like very low, like sub, like a couple basis points. I actually have it for those interested. I wrote a book, read right on, and I have a chapter on take rates where I go through this in detail. So, but it's essentially you're going from like 30 % in the app store, you know, 100 % in Facebook and 50 % on YouTube to like five basis points or something, right? So, or you know, 2 .5 % for payments and so forth. So, so the first question is why would you want to build on them? The other one we mentioned before is programmability.

13:45Yeah, you can do all sorts of cool stuff on top. And so I think it's your question. I think it depends like, like, ultimately I think of startups as you want to work backwards. You want to say, what do you want to do for the world? What kind of service do you want to provide? And then you work backwards and you say, how do you want to build that? In some cases, that means you want to build something on a blockchain, like a pure service, like a protocol, we call it, with a token and so forth. Other cases, you want to build more traditional software that maybe, for example, you mentioned that bridges between a bank and an asset manager and a blockchain system.

14:13I think ultimately, we think of it through that lens as an investor. I skew towards things. I like things with, for example, network effects because it's just that they can be very... My career, I've found that network effects can be very powerful, right? that you, since something it grows, it kind of has a natural kind of defensibility and kind of gets better as more people use it. So there's just kind of different lenses you can look at. The last thing I would say is to your listeners that know you have a broad audience, I think that the crypto space right now with the real shortage we have is startup talent in that there's a lot of obvious good ideas where there just aren't many people pursuing it.

14:47So I think it's actually the opposite problem than most like then you might have an AI right now where I imagine an AI, it's an amazing technology and deservingly people are excited, as they should be excited about it. But you probably, for every idea, have, I don't know, 50 good startups pursuing it. In crypto, I think we're under -competitionally, like, so I would say to your listeners, if you're a smart person thinking about doing a startup, I think there's a lot of white space right now. Do you own AI pivot to crypto? We heard it for the first time. I think of the old people who love AI. Yeah, how are you?

15:20I'm sure you're perpetually going to be unsatisfied with the technological progress because you understand the full potential, right? Where are you at right now? We had Bolognian earlier. He was very bullish on CK proofs and what's coming down the pipeline there. There's obviously prediction markets feel like. During the election, it was like, wow, this is a completely... No one was talking about this during the Bitcoin white paper and yet crypto has created something that everyone gets value out of in one way or another. Yeah. Yeah, I think we are still, you know, I think if these technology things always go in S -curves, we're clearly still at the, you know, somewhere in the bottom of the S -curve.

15:59Like I think there's just a lot more growth and just like user base, there's something on the order. There's tens, most of these applications I'm describing have, you know, up to 50, at the highest end, probably 50 million users, which is 1 % of the internet. So it's still very early in polymarket is doing incredibly well, but I assume it's still in that kind of sub 1 % of the internet. It's not, the internet has 5 billion people now, right? So we have a long way to go. I think a lot of the core infrastructure is now as of a year and a half ago kind of good enough. A lot of these technologies have that characteristic where you have kind of, whether like neural networks only got good enough, I don't know, whatever circa, let's call it, something in 2010s because of the Moore's Law and GPUs, right?

16:39And so, you know, iPhones, once you had capacitive screens and something, whatever, processors and so forth, I think blockchains, I think we no longer have infrastructures and excuse anymore. Like now it's about building applications, about getting regulatory clarity. And I think we're pretty far along there. I think we have a long way to go, fully exploring kind of the IDMAs and all the different cool things you can do. And, you know, and then bringing it to billions of people is the goal. How have you been advising crypto emerging managers? One of my favorite, I'm gonna kind of butcher the stat, but apparently the sort of median crypto fund massively outperformed like the median venture fund for most of the last decade.

17:19And so I thought that that was this beautiful narrative violation because people traditional venture would love to poke fun at crypto VCs yet they were sort of like systemically outperformed Yeah, yeah, the other party. But what kind of general guidance are you giving to somebody that maybe was an active trader and wants to get more into the actual kind of venture side of the game? I've been investing in venture funds and crypto funds for a long time. After I sold my first company, in fact, Mark and Jason, I have done it together for a long time and have been doing crypto funds since gosh by 10 years and just consistently.

18:01And I'm still very bullish. And to your point, I think that's probably correct like on the data, like they've just, they've done. And I think it's just traditional finance in the sense of you have to, you know, non -consensus right, right? Like as much as we hear about crypto, it's still very non -consensus. A lot of venture funds, just simply maybe they'll have a little bit of Bitcoin, but they'll otherwise they'll rule it out if there's tokens and things. You talk to funda funds. They, a lot of them will say we have no crypto rule, you know, sovereign wealth funds. So all the kind of giant pools of capital that fund the venture world.

18:32And so it's still kind of this considered this kind of weird side show. Like obviously the past doesn't predict the future and so forth. We don't know how things will play out, but it's still very non -consensus. I think from a financial investing point of view, the broader crypto world. So I believe that's where the opportunities are in venture investing. Obviously, you have to also be right. And so, and time will tell, but it's I think it's still much more not. It's surprisingly non -consensus in the investing world. I think to this day, despite the performance. Can I explain a little bit of the dynamic of how venture fits into the life cycle of a new crypto company these days because there's liquidity available from retail in some cases.

19:16There's some companies that are going to be profitable very early because of their, you know, insane product market. We had a lawn from pump on earlier and that's classic examples. It's like a very profitable. It's able to be very efficient. And I think we've seen on the other side, you have companies like Hyper Liquid that got out and have a token very early. So I'm curious, yeah, how you think of the capital lifecycle? Yeah. Yeah, so we, let's see if I can answer that. So like one reason we started a separate crypto fund originally, like I guess 2018, was so that we could, before that, I was doing crypto investing, but it would always get these questions from the LPs.

19:55And what is this? Is it equity? Is it tokens? And so, create a separate crypto phone. With the basic idea, we have maximum flexibility. And we went to the LPs and we said, look, this is going to be different. And here's the idea. And a lot of them opted out, some of them opted in. But we were very clear up front what it was. And so what we think of it is we can do everything from, we can buy Bitcoin or something, just directly, which we do. People see our funds and assume it's all of interest. We also do a lot of, we can do equity investments like a coin base, which is a classic equity investment.

20:22We have a bunch of those that the goal would be to someday IPO. And then the third one, which is actually one of our core ones, is you'll do an equity, a project will start as an equity investment, but then over time we'll launch a token. And the equity investors get sort of per -rata rights to those tokens. And that actually, that's kind of, that was sort of the new thing that we really wanted to lean into back when we started the crypto fund, that was a new idea, we helped kind of pioneer that, I think. And that was like the warrant structure. You guys, you know that? Yeah, well it's basically, yeah, it's very similar to terms sheet with two extra things that has essentially token rights.

20:58Yeah, it can be a warrant and it's a different way to structure it. And what's nice about that is it, you know, one of the reasons startups works it well is that their max, like when they work is that the investors and the founders are fully aligned. So before that structure existed, I don't know how deep you guys wanna go on this, they were these things called sats and like these kinds of things where you do token purchases. And the problem is it created all these weird incentives where the founder would try to create a token just to do something. Well, we believe very strongly as alignment between the investors and the founders.