Ben Horowitz is a large and colorful figure in the venture capital world. The soft-spoken terminal hip-hop aficionado with the face of a Hollywood movie villain is one half of leading venture firm Andreesen Horowitz, and has been involved with many of the largest successes of the last decade, including Facebook, Github, Pinterest, and Twitter. He’s also been one of the most outspoken advocates of Bitcoin and cryptocurrency technology in the VC world.
Recently, while giving a talk at Stanford, Horowitz was asked:
For an asset or money that has fluctuated so crazily in value over the last couple of years, what really makes you so enthusiastic about cryptocurrency in general?
Here’s what he said:
For those who don’t want to watch the video, Horowitz gives, in my opinion, a damn good answer. He starts by talking about the degree to which Bitcoin is a genuinely novel solution to a technical problem, specifically the Byzantine Generals problems of cooperation under conditions of mutual distrust – specifically, how do you keep track of how much money everybody has when everyone has an incentive to lie? Of previous solutions to the problem, Horowitz says:
“The way that’s been solved throughout history is like with Visa or something, where they run a ledger that keeps track of all the money that is kind of transferred from one person to another. But the problem with Visa is several fold. […] It’s a proprietary system, and it’s a reversible system, so there’s a large fee associated with it.”
He then talks about the advantages of not having that centralized system, as in the case of Bitcoin.
“For the first time, there is a ledger that everybody can use, that nobody owns. So, the reason that’s important is that if you think about what was really powerful in my youth about the internet was it was a network that everybody could use but nobody owned. And what that ends up meaning was that […] the reason that everybody underestimated the internet when they first saw it, was that “It’s got no functionality, […] it’ll never be secured, blah blah blah.” — But it was a network that nobody owned. So even though, like the IBM networks and AT&T’s network and Deutsche Telekom’s network, were radically more functional, every new entrepreneur developed on the Internet, because whatever they built, they got all the value for it, because nobody owned the network.”
This element of the network, he suggests, is Bitcoin’s greatest strength.
“We have a very strong belief in the form that the ledger that nobody owns will be the thing that draws all of the developers and the best payment functionality, wire transfer, foreign currency exchange, and all kinds of functionality that you can’t even imagine now, just like when people first thought of the internet, like, ‘oh, it’s the electronic post office’ — well, it’s not just the post office, Right? The metaphor it too weak.
Well, money is too weak a metaphor for Bitcoin.”
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