Reading Time: 4 minutes

My book review is on Chris Dixon’s new book, Read Write Own: Building the Next Era of the InternetDixon, a general partner at Andreesen and head of its a16z crypto division, delves into blockchain technology and how it can help us realize the original vision of the internet, as an open place, not controlled by large companies.

While AI and generative AI seem to be more popular buzzwords today, I’ve been interested in building a software tool on blockchain for over five years, and written about it on my blog. At one point, I was in conversation with a Ph.D. AI researcher, who cautioned me against using blockchain and AI in the same paragraph. Really? I didn’t agree then, and I hope she has evolved in her thinking.

Dixon begins his book with a quote from John von Neumann – “I am thinking about something much more important than bombs. I am thinking about computers.”  Neumann was working to develop the first nuclear bomb and clearly understood the potential for computers to change the world.

Dixon proceeds to explain the basics of the world wide web, the internet, networks, protocol networks, and corporate networks. In doing that, he introduces the concepts of network effects, take rates, complements, and incentive conflicts. Briefly, these are:

  • Network effects — This means that value increases as more nodes exist on a network. For example, the more people that use TikTok, Uber, or Gmail, the more valuable the services.
  • Take rates — When you build on a corporate network, such as YouTube, Instagram, or Facebook, the company charges you a take rate on any money that passes through their system. A hidden cost of that take rate is the switching cost – or the effort it takes to move a contact list from one system to another.
  • Complements — These are products that are used together, such as cream and coffee. As networks get bigger, interoperability and complements become less beneficial.
  • Incentive conflicts – Complements help build a network and give it more power. But they take money from the network owner.

The analogy that he uses for discussing blockchain is that of great cities. “Great cities are built from the ground up by many different people with varying skills and interests. The public and private depend on each other.”  (p. 86). In a great city, we can find everything from City Hall to the mom and pop shops. They help each other out. “Communities, not companies, control the network effects.” (p. 87).  As such blockchain is a return to the early days of the internet – before companies proliferated and usurped power from individual users. The goal in good blockchain design is to centralize the critical functionality (such as governance) and decentralize as much as possible.

One of the benefits of blockchain is the notion of encapsulating pieces of code (hopefully, bug-free) and then making those chunks of code reusable. It’s referred to as composability and it’s like building with Legos. Tokens encapsulate these chunks of code. Tokens running on blockchain reflect the genius of this technology in how they can incentivize better behavior. In contrast to the illusion of ownership that individuals have of their internet presence, tokens actually give users ownership. No longer are we at the mercy of corporations.

Another benefit rests in the governance realm. The governance is simply encoded in the software.

Designers of token economies have learned much from the kinds of incentives that have worked in video gaming. A balance between the money that flows in and out is essential to a healthy economy. Dixon discusses this as the “sinks” and “faucets” that control the balance.  Faucets include, but are not limited to:

  • Token sales to investors
  • Community controlled awards to fund development
  • Founding team award
  • Airdrops to early users

Access fees often bundle development, security, and governance sinks.

As Dixon explains it, the blockchain world is divided into two distinct cultures. He characterizes them as casino and computer. One is interested in gambling and making money. The other is interested in building infrastructure and democratizing the internet.

The process of a blockchain tool becoming totally decentralized takes time. In the beginning, the founders are typically involved. But as the tool becomes widely used, founders step away and gradually, the tool becomes decentralized. This process impacts how tokens are regulated and the situation is murky, at best. In the case of Bitcoin, regulators seem to agree that it is a commodity, while there is no such consensus on Ethereum. Time will tell us more.

In the meantime, it’s worth knowing that tokens are an integral part of building a blockchain infrastructure. The question is how to keep it from turning into a casino. One proposal is to restrict token use temporarily until a more decentralized framework exists.

The final chapter digs into some applications that hold promise. He discusses social networks, games and the metaverse, and the music world, among others. The corporate network model is vastly different from the blockchain network model and requires a new mindset. Corporations want to control as much of the process as possible while in the blockchain world, the founders build the basic infrastructure and others come in to enhance it. Interoperability becomes a competitive advantage in the blockchain world.

There is much more to this book than I can offer in a short book review. If you are interested enough to read this far, I recommend you buy the book.