a16z Announces they are building the "DeepMind of Web 3.0"

"Web 3.0 is Eating the world" in 2022

Hey Guys,

As you might know I’m obsessed with news at it relates to Ventura Capital and the future of tech. This “Section” of Sublink is called Venture Capital Central and will cover VC, seed round, IPO and M&A stuff specifically I find interesting. It will appear as Newspaper column of its own at the top of Sublink’s home page.

So let’s get into it:

With the popularity of NFTs in the early 2020s, more money is flowing into Web 3.0 than ever before. Bitcoin is back to $40,000, that’s $50,000 if you are Canadian! Satoshi Nakamoto who? Instead I’m praying at the altar of VC skills like Chris Dixon and Ali Yahya. So what’s going on here?

On April 21st, 2022 a16z literally announced they are building an academic grade research team around Web 3.0. This is bigger news than it seems, if you understand the impact PhD firms like DeepMind, Google A.I., FAIR and Microsoft Research have had on the evolution of artificial intelligence.

The VC Brief - A Web 3.0 Lab is Being Assembled

Andreessen Horowitz is launching a new academic lab dedicated to tackling research problems facing the fast-growing digital asset industry with a focus on web3.

The new unit will be led by Tim Roughgarden, a prominent academic expert in game theory who has been a professor at both Stanford and Columbia.

Dubbed a16z Crypto Research

Roughgarden's goal is to create a university-like effort within the firm akin to Bell Labs or DeepMind, the AI research subsidiary of Google's parent company Alphabet.

The new lab will aim to pinpoint and address the fundamental research problems facing the pursuit of mainstream crypto adoption. In some instances, the group may develop new tools that can help a16z portfolio companies grow their business.

"It is clear that web3 is a new scientific breakthrough that brings together ideas from computer science, finance, economics and the humanities"

The group may not simply focus on topics within the computer science or engineering fields, and could also explore topics like how NFTs should be thought of in the context of art history or the impact of decentralized autonomous organizations on political science.

Academics Advising a16z Chosen Startups

A blog post from a16z GPs Chris Dixon and Ali Yahya notes that the research team will be tasked to “work along with the founders in our portfolio on solving some of the hardest problems in web3.”

As if investing was not enough for Andreessen Horowitz, a16z just got some new swag. On top of becoming a Media company, a16z really is taking an unusual approach to the Cathie Wood template. The firm is trying to bridge academia and the crypto industry, an unusual investment in VC.

Venture Capital groups might have even more power in the future if this momentum keeps up, ironically centralizing ownership in supposed “decentralized” ecosystems.

Who is going to be there? The organization will be led by Columbia’s Tim Roughgarden and Stanford’s Dan Boneh. Joining the founding team are Harvard’s Scott Duke Kominers, Meta’s Valeria Nikolaenko (Novi), author Joseph Bonneau and researcher Benedikt Bünz. Essentially Ivy league types with crypto, software engineering and cryptography chops with a definite skew to Stanford.

Research Labs are Just a New Trend in Venture Capital

• a16z is following the Cathie Wood formula here and it really is a legit new movement. The research team marks another maneuver from the storied venture firm to shore up its dominance in a competitive crypto investment landscape where younger funds are proving themselves increasingly formidable opponents.

• Research has become an increasingly important differentiator for venture firms in the crypto space who are working with founders pushing up against new and unfamiliar technical problems that require research that many young startups can’t always afford to tackle.

• The new lab will aim to pinpoint and address the fundamental research problems facing the pursuit of mainstream crypto adoption. In some instances, the group may develop new tools that can help a16z portfolio companies grow their business. The investment firm Paradigm has pursued a similar strategy. For instance, Paradigm recently worked with Rick and Morty co-creator Justin Roiland on a new mechanism for non-fungible token (NFT) sales. Eventually we’ll see such serious research in the implementation of Creator Economies at scale.

  

What’s truly arrogant and incredible is Chris and Ali literally in their blog say:

The best industrial research labs throughout history have played a critical role in pioneering much of modern technology. Two modern examples of successful research labs — both founded in the wake of radical advances in the field of artificial intelligence — include DeepMind and OpenAI. Both of them have since pushed the field to new heights. 

a16z comparing themselves to the DeepMind of Web 3.0, I guess I wasn’t even joking in the title. But with great arrogance comes great hacking of the business system, VC is no stranger to doing this in one way or another, just as Wall Street firms have many tricks. I guess that’s what a Stanford degree gets you.

This is not their first rodeo of course, as Ali Yahya, a general partner at Andreessen Horowitz previously worked at Google on Google Brain.

The idea of using Research as a leverage to boost startups you’ve made an investment in, makes sense. I’d call this the “Diem Mafia” if Val wasn’t alone coming from Meta, whose Libra project had many names. Facebook clearly moved fast and broke things recently in their failure to launch a stablecoin.

Building Web 3.0 from the Inside

Still the scope and magnitude of the project is enormous if you think about it, while many crypto firms have hired research teams, A16z is attempting something bigger: an entire research lab to take on crypto.

Few teams are better equipped to anticipate and mould the trends of Web 3.0 and the Creator Economy and the NFT Marketplaces of OpenSea and Coinbase, among how these companies could scale into becoming more significant.

a16z feel like a diversified army of talent at this point. The research unit aims to create a pipeline from research to industry, working with a16z’s engineering, regulatory and marketing teams.

As part of the venture firm, a16z Crypto Research will work with the firm’s portfolio companies and investors to help determine what topics to take on. The group will seek to address broad industry challenges, Yahya said. Talk about building the future of crypto from the inside. Would Satoshi approve of all of this?

Andreessen Horowitz is not the only firm eyeing research labs. Paradigm, which has quickly grown to build an outsized presence in the crypto VC space, has largely built its reputation on the strength of its own research team. Cathie Wood prides herself on research and social media exposure. Though her exposure to crypto itself is of course somewhat limited.

The Founders

• Tim Roughgarden 

For twenty years, as a researcher and computer science professor at Stanford and Columbia, Tim has led the development of Algorithmic Game Theory, a field that brings together ideas from Computer Science and Economics to solve real-world computing problems. He wrote the definitive textbooks and courses on the field. 

In recent years, Tim has increasingly focused on research problems in web3. That is no surprise, given how fundamental questions about incentives are in the space. For example, prompted by discussions with Vitalik Buterin and other members of the Ethereum community, Tim published the first formal analysis of the (initially polarizing) fee mechanism that was proposed in EIP-1559. The report helped the community get comfortable with the proposal, and it was subsequently deployed to the Ethereum mainnet in August of last year.

Besides Tim’s brilliance as a researcher, he’s also a great teacher. The YouTube lectures for his crypto and blockchain course at Columbia, for example, are one of the best and most popular introductions to the space.

Getting to know Tim over the course of over a year has left us with no doubt that he’s the perfect person to lead a16z crypto research full time. We’re thrilled to announce that Tim has joined us as Head of Research.

• Dan Boneh

Dan is a professor of computer science and electrical engineering at Stanford University, where he leads the Applied Cryptography, the Stanford Center for Blockchain Research (CBR), and the Computer Security Lab. He is one of the most distinguished cryptographers and computer security researchers in the world, wrote the definitive textbook on applied cryptography, and is also a renowned educator and entrepreneur.

In recent years, Dan’s work has focused on cryptographic tools for blockchain applications. He co-developed the concept of a verifiable delay function (VDF), and has designed several other cryptographic constructions (like BLS signatures) that have since been widely adopted in web3. His cryptography MOOC, which is free and open to the public, is a popular way to get started with cryptography. 

For the past four years, Dan has worked closely with us and our portfolio as a Research Advisor. With the creation of a16z crypto research, we’re excited to promote Dan to Senior Research Advisor. His work with us will be integral to setting the direction for the team, while continuing to provide support for founders in our portfolio.

The Wing Men

The founding members of the team include:

• Joseph Bonneau wrote the (text)book on cryptocurrency technologies, and he’s also published work on social networking privacy, cryptographic protocols, side-channel attacks, software obfuscation, and reverse engineering. He has taught cryptocurrency courses at the University of Melbourne, NYU, Stanford, and Princeton, and received a PhD in computer science from the University of Cambridge and BS/MS degrees from Stanford.

• Benedikt Bünz is the Chief Scientist of Espresso Systems and is finishing up his PhD in Dan Boneh’s applied cryptography group at Stanford. His research is focused on the science of blockchains using tools from applied cryptography, game theory, and consensus, and has already had a huge impact in the industry. His work includes Bulletproofs, one of the most widely used zero-knowledge proofs today; and verifiable delay functions, which are a fundamental component of ‘green’ blockchain consensus. 

• Scott Duke Kominers is the MBA Class of 1960 Associate Professor of Business Administration in the Entrepreneurial Management Unit at Harvard Business School and a Faculty Affiliate of the Harvard Department of Economics. He’s one of the best market design scholars in the world, and also advises a number of companies on real-world marketplace and incentive design, such as building reputation-based systems. He holds a PhD in Business Economics from Harvard.

• Valeria Nikolaenko joins from Novi at Meta, where she was a research scientist and cryptographer for the Diem blockchain, started by Facebook in 2019 as Libra. She specializes in modern cryptography, computer and web security, post-quantum cryptography, and is one of the world’s experts in proof-of-stake blockchain design. She has worked extensively on Schnorr signatures — including half-aggregation, threshold deterministic signing, and study of cryptographic libraries — and long-range attacks on proof-of-stake blockchains. She received a PhD in Computer Science from Stanford University, advised by Dan Boneh.

As a16z Builds the Future

Don’t worry guys, they will even open-source some of it.

• It will aim to produce work that is open source and that the entire industry can benefit from.

• This approach is better than a university-based lab, because it is closely aligned with people working in the industry, Yahya said. “All we only, really want from all of the work that comes out of the research lab is for it to be open source,” he said.

• Like other research labs such as Bell Labs, SRI and others, the research is designed to bring academic and scientific research into eventual commercial use.

So the bro-culture of powerful VC is about to get some science behind the wheel. Web 3.0 that decentralized Utopia right? Oh yeah.

The Protocol thinks that the research will likely initially flow from team members’ interests. Kominers, who is an expert on applications, could work on issues such as the design of NFT marketplaces. Indeed that is what Coinbase and OpenSea are indeed doing. This is not random, okay.

While Meta claims to be working on Web 3.0 applications, in addition to Metaverse rulership or overlord-ship, a16z could build a pillar of the centralized Web 3.0 around its chosen companies. The other three wing people focus more on cryptography and security: Bonneau, who wrote a book on crypto; Bünz, who worked on zero-knowledge proofs and verifiable delay functions; and Nikolaenko, an expert on proof of stake. The team will grow by “many multiples,” Roughgarden said.

If you count Chris and Ali, let’s just call them the founding Fellowship of the Eight of Web 3.0. I’m getting those tingles down my back like when Libra first formed guys.

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Anyways I hope you enjoyed the topic, that’s all for today.