Reddit Co-Founder Alexis Ohanian Bets Big On Solana And Web 3.0
Dear Investors,
I hope that you are having a great week so far. I wanted to reach out to discuss an interesting piece of news that was just announced in Lisbon. At Solana’s tentpole conference Breakpoint, Reddit co-founder and head of venture fund Seven Seven Six Alexis Ohanian announced a joint $100 million initiative with Solana Ventures to promote Web 3.0 on the platform. This is his first investment of this type and first outlay into the Solana ecosystem. Additionally, the timing could not have been better, as SOL reached an ATH earlier this week above $260.
The session itself was relatively light on detail, but big on excitement. That said, I had the opportunity to speak with Alexis and Raj Gokal, COO of Solana Labs prior to the announcement to ask some key questions to get a sense of what this means for the future of Solana and distributed computing in general.
Here are a few of my key takeaways.
Big, But Small, At the Same Time
Given how frothy the market is right now, $100 million may not seem like a very large number. Andreessen Horowitz recently launched a $2.2 billion fund and appears to be trying to solve America’s unemployment crisis by itself with its swelling headcount. Paradigm Ventures is looking to raise a $1.5 billion fund, Multicoin Capital appears to be bringing in $250 million for its third fund, and even now Sequoia is looking to jump headfirst into the industry.
In addition, virtually every major universal blockchain platform is launching nine or ten-figure incentive programs to encourage DeFi, NFT, and all sorts of activity on its network. Binance actually put up $1 billion for its own program, the Near protocol created an $800 million grant fund, and similar programs have also been launched by Avalanche, Celo, Algorand, and more.
This collaboration falls between these two approaches. Yet at the same time it is charting a unique path because of its focus on Web 3.0 social platforms, which remain relatively immature. While DeFi has $113 billion TVL, and NFT platforms have taken the world by storm, Web 3.0 social platforms are lagging behind. There are not as many investable projects at this point, and those that are have not reached levels of maturity to require massive checks. With that perspective this is a sizable commitment.
Solana Is A Smart, But Curious Choice
When I spoke with Alexis we got right to one of the elephants in the room, which is that while Solana is purported to be a high-performance blockchain capable of handling 10’s of thousands of transactions per second, it is more centralized than other blockchains. Part of this is by design, and Raj mentioned in our discussion that Solana is becoming more decentralized by the day and the high sticker prices for equipment used to connect to the network is continuing to drop. That said, if the idea of Web 3.0 is to eliminate middlemen, Solana would not be a first choice if decentralization mattered above all else.
But that may not be the right curve to grade this initiative on. As I’ve detailed in the past, these new Web 3.0 projects will be competing against centralized citadels such as Meta (Facebook) that derive 97+% of their revenues from advertising. These projects are in some ways more centralized than authoritarian governments, even if they profess to ‘do no evil’, and therefore ANY movement towards more decentralization would be a positive step. It is difficult to optimize security, privacy, and throughput at the same time, so the secret is appropriately weighting these competing priorities to achieve the end result. Alexis and Raj are betting that Solana has done just that.
Does Stickiness = Centralization?
Of course, it is not hard to launch a Web 3.0 social media project. The code is available for anyone to use. The trick is providing delightful user experiences that incorporate personalization without compromising privacy. Given his background in founding Reddit, which has a much more individualistic streak than Facebook, SnapChat, TikTok etc, Alexis brings a unique perspective to this challenge. He knows what it takes to succeed in this industry, and he knows that it does not happen overnight. He’s also acutely aware that success means earning people’s time, their most valuable resource. Money and budgets can surge as incomes grow, but nobody has figured out a way to eliminate the need for sleep or stretch the day past 24 hours.
Personally, I think that it will be easier to solve the UI/UX challenge more than the personalization problem. Every day we are seeing beautiful mobile and web apps come to market, and the growing development of decentralized storage systems, payment channels, and oracle services will provide the throughput necessary to support millions or billions of users at scale, if not overnight. However, personalization will be a tougher nut to crack. People keep coming back to platforms because they want to see relevant content. Yes, that feeds into ad models, but this would be necessary even if there were no ads. Machine learning algorithms learn about a user’s preferences and habits, and it then populates feeds with content that the person is likely to engage with. Of course, while this may seem innocuous, we know from some of the recent Facebook files that companies have found it lucrative to guide people into echo chambers and present them with conflict likely to engender a hostile or angry response. Let’s hope that this does not happen with Web 3, but it would also be unsuccessful if users find themselves wandering aimlessly amidst a sea of random content.
Who Watches The Watchers?
Finally, there is the question of governance. As we’ve seen in recent years, while social media can bring people together, it can also lead to polarization. This has led to some very real questions regarding whether it has ultimately had a positive or negative effect on society. Some folks in crypto want to do away with governance altogether (or place it in the hands of token holders) and let these platforms be bastions of free speech despite the potential ramifications. Given his history at Reddit, Alexis had a slightly different take on this situation. He likened a social media platform to a convention hall, and suggested that these platforms have responsibility to keep out malicious actors. In fact, he iterated that allowing these groups to stay on the sites could be tantamount to acceptance or tacit approval. Of course, barring a group is not easy. They can always reconstitute themselves under a similar, something that I learned time and time again at the Defense Intelligence Agency, and it is not always easy to identify illegal content. Often, these platforms need to rely on users themselves to report such posts and groups.
These issues would likely only grow with a Web 3.0 platform, and that is something that I imagine regulators would take very seriously. Additionally, much like SEC Chairman Gary Gensler doesn’t take DeFi at face value, I suspect that Congress or the FTC would take similar claims with a grain of salt.
Regardless, this will be very exciting to follow in the coming years.
Published at Tue, 09 Nov 2021 18:54:31 +0000
