On Thursday, venture capital firm Andressen Horowitz (a16z) announced the launch of a dedicated team that will research and build future crypto products and services.
Eager to build markets and products for its portfolio companies, a16z has sought to try and dominate financing of the industry. To this end it has backed Coinbase, OpenSea, Axie Infinity, various blockchains, DeFi protocols, crypto exchanges, and more. Right now, the venture firm has three crypto funds which it claims manage more than $3 billion. Founding partner Marc Andreesen even serves on Facebook’s board, which as part of its rebrand to Meta is now trying to edge into web3 and crypto after its own failed attempt to create a stablecoin.
Supporting the research team will be a "protocol design & engineering team" that will try to actually produce real-world applications of the research, a legal team, regulatory team, and a marketing team. A16z framed its new crypto research lab as being similar to OpenAI, a for-profit machine learning skunkworks, and DeepMind, which conducts similar research under parent company Alphabet.
In its blog post celebrating the new team, a16z writes: "The four teams will work together with companies in the a16z crypto portfolio to: (1) generate ideas for solving hard open problems; (2) write production-grade code that brings those ideas to life; (3) make sure our ideas and implementation are compliant with any applicable regulations; and (4) share our findings with the broader web3 community."
Ali Yahya, a general partner at a16z, told Protocol that the firm wants work produced by the lab to be open source, but that projects could be spun out into independent companies that a16z might fund, “which would be a success case,” Yahya said.
A16z did not respond to Motherboard’s request for comment.
The a16z crypto research team will be led by two well-established scholars: Tim Roughgarden, a computer science professor at Columbia, and Dan Boneh, a computer science and electrical engineering professor at Stanford University. Both Roughgarden and Boneh have researched cryptocurrencies and Boneh in particular has worked with a16z as a Research Advisor for the past four years. Under these two sits a team of Research Partners including a researcher who worked on Facebook's failed attempt to create its Diem stablecoin, crypto researchers, and a Harvard Business School professor.
This move has already been hailed as a deft maneuver that will help differentiate a16z from other VC crypto funds and let the well-capitalized financier help identify and solve problems new startups can’t afford to.
It remains to be seen whether a16z’s crypto lab will follow through on its lofty ideals or repeat the issues that other corporate research labs have. For example, OpenAI is name-checked as inspiration, but that lab has faced criticism for its decision not to release its full models and training data to the academic community.
Similar criticisms abound among gig economy firms. For well over a decade, app-based companies like Uber and Lyft have used academic research to produce findings that just happened to bolster their assault on labor law. A 2020 open letter by scholars of the so-called "gig economy" pointed out that gig companies have repeatedly made false claims about their data, refused to provide access to independent researchers, and ensured it cannot be reviewed or replicated.
Though the gig economy has been hard at work innovating ways to mix research and public relations, this problem is neither new nor is it unique to the gig economy. In 2018, when tobacco giant Phillip-Morris—which has tried to rebrand to Altria since 2003—launched an initiative offering $1 billion in grants (over 12 years) to tobacco researchers, it was rightfully understood to be a PR move. The fossil fuel industry has spent decades funding climate change denialism despite internal research in the 1980s that anticipated ecological catastrophe if extraction and production weren’t halted. In the field of AI ethics, Big Tech has captured most of the top research talent, then gone on to lean on researchers to “strike a positive tone” in their findings or outright fire researchers whose findings were unfavorable.
These concerns aside, there are some areas where a16z might actually do research that helps protect its portfolio. Hacks are rampant in the emerging Web3 space, with some of the largest recent ones centering on “bridge” protocols that port tokens from one blockchain to another. In some cases, for example the $320 million Wormhole bridge hack, it’s up to the VC firm backing the project to step in and cough up the cash and backstop the project.
A16z itself has had experience with this: The firm invested in Sky Mavis, the Vietnam-based studio behind play-to-earn phenomenon Axie Infinity, later participating in another funding round designed to help cover some losses from a $624 million hack that targeted the game’s Ronin Network bridge. That hack in particular came down to social engineering and human error, but a16z portfolio companies and their projects have been hacked because of code exploits time and time again.
It’s too early to anticipate all the ways this crypto research team could be deployed, but the history of gig, tobacco, oil, and tech company research endeavors doesn’t inspire much confidence.