a16z year-end show: Talking about industry trends - from stablecoins to AI agents

Introduction

a16z crypto recently released a special year-end program, divided into two parts. The first episode invited Sam Broner, Maggie Hsu, Daren Matsuoka, Joachim Neu and Chris Lyons to discuss stablecoins, encrypted App Stores, the current status of industry projects, the development of infrastructure and the outlook for 2025. The second episode invited Carra Wu, Eddy Lazzarin and Karma as guests to explore the current hot AI Agent related topics, including the combination of AI and encryption, how we can effectively distinguish between people and robots in the context of the increasing popularity of AI, and decentralized, truly autonomous chatbots. How to combine artificial intelligence (AI) with cryptocurrency, especially the concept of decentralized autonomous chatbots, emphasizing the autonomy and commercial freedom that AI may achieve in the future.

TechFlow has specially translated and integrated these two episodes of a16z Crypto. The following is the complete conversation.

Guests:

· Sam Broner, Partner of a16z Crypto Investment Team;

· Maggie Hsu, Partner of Andreessen Horowitz;

· Daren Matsuoka, Partner of a16z Crypto Investment Team;

· Joachim Neu, Researcher of a16z Crypto;

· Chris Lyons, President of Web3 Media of a16z Crypto;

· Carra Wu, Partner of a16z Crypto Investment Team;

· Eddy Lazzarin, CTO of a16z Crypto;

· karma (Daniel Reynaud), Research Engineering Partner at a16z Crypto

Hosts: Robert Hackett & Sonal Chokshi

Podcast source: a16zcrypto

Original title:

Talking trends 2025 (part 1): Stablecoins, app stores, UX, and more;

Talking trends 2025 (part 2): AI x crypto

Air date: December 20, 2024

Part 1

Stablecoins

Sonal: Sam, your Big Idea is about stablecoins; you’ve been writing a lot about that lately… and Robert and Daren put together the State of Crypto report, and their main conclusion is that stablecoins have found product-market fit. But what we really want to understand is, why now?

Sam:

The technology platforms for stablecoins have improved dramatically over the past year, reducing transaction costs from $5 to less than a cent per transaction. This has dramatically reduced the cost of payments — but retailers, merchants, and other businesses that would benefit most from it are still not adopting the technology en masse.

Many people assume that the earliest adopters will be technology-focused businesses… but these businesses are often very profitable and don’t have a pressing need to improve their cost structures. As a result, businesses with lower profit margins — like corner stores, restaurants, and mom-and-pop shops — may be the most eager to accept stablecoin payments.

We're talking about businesses like coffee shops - which currently have a 2% profit margin - being able to double their profits by using stablecoin payments. This would actually make a business that is barely profitable today become modestly profitable, which is a huge game changer.

Sonal: One thing that really clicked for me was when you mentioned that small businesses get nothing from credit card companies, not only are they paying high fees, but they get almost nothing in return.

Sam:

That's right! One of the great features of credit cards is that they provide fraud protection to consumers. This is very helpful in driving things like online sales...but when you're paying at a coffee shop, that protection is almost meaningless.

You pay a flat fee of $0.30 per transaction, plus an additional 2% processing fee. This means that of a $1.50 cup of coffee, nearly $0.30, or one-fifth of the money, goes to the payment provider. And they provide almost no real value in this transaction.

This 2% fee is pure profit for the payment provider and pure loss for the local coffee shop. I really look forward to these small businesses taking back this $0.30/0.35 profit and using it to grow their business. It's a rare opportunity to add 2% profit directly to the bottom line of a business.

Robert: There is a "cold start" problem here, though, right? Consumers need to have stablecoins first before they can use them to pay merchants to avoid paying intermediary fees...Do you think we will see merchants actively promote stablecoins and help users connect to the system to get these benefits? Will merchants become an important driving force for the promotion of stablecoins?

Sam:

I'm a big believer in that. People have a strong relationship with their local retail stores, coffee shops, and corner stores: they frequent those places. So I think these local brands are going to be a key force in driving people to stablecoins and be part of the early adoption curve for stablecoins.

Robert:I love that. I remember when I first started covering crypto at Fortune, the editors always asked, "When can I buy coffee with Bitcoin?" And I always said, "No, no, no, that's not what Bitcoin is for." But now it looks like, at least for stablecoins, that's exactly what it's for.

Sam:

Yeah, that's exactly what it's for. I think these small businesses are going to be some of the first adopters.

Crypto’s Own Ecosystem

Sonal:Okay, that’s interesting; let’s move on to the next topic. Maggie, your “big idea” is very interesting because it focuses on distribution channels, which is also very consistent with your role - you are responsible for market development and are the head of the team. You mentioned that cryptocurrencies finally have their own app stores and discovery mechanisms.

Can you briefly introduce why this is so important? - Because when people hear this concept, they may think it’s like “insider talk” - like, does cryptocurrencies really need their own ecosystem? Isn’t it already a closed industry?

I’d love to hear your observations and why you think this is an important trend.

Maggie:

Of course. When I joined a16z three years ago — and especially over the past few years. Many of our portfolio companies have tried to publish apps on traditional app stores like the Apple App Store and Google Play Store, but have been rejected, blocked, or delayed for various reasons.

What’s frustrating is that Apple’s review guidelines are neither clear nor complete; they don’t answer all the questions developers have. And the enforcement of these policies varies from reviewer to reviewer.

We’ve even encountered situations where some apps were approved for the same feature, while others were rejected… This opaque review mechanism is confusing. At the core of all this is “in-app purchases” (IAP) — all in-app transactions must be completed through the App Store.

However, we’ve recently seen some alternatives: such as Solana’s Dapp Store, which is completely fee-free. With the release of the Saga Phone (2nd Generation) — reportedly with 100,000 pre-orders — this trend will continue to expand. Another example is World App - that's WorldCoin, they launched a series of small applications, and the user growth of these applications is very rapid.

Not only that, there are some blockchains that are supporting the gaming ecosystem and running their own markets; we also have infrastructure markets,

You can see that these markets are gradually taking shape. For developers, a transparent and consistent platform with consistent rules is crucial so that they can focus on product development rather than being confused or worried about complex rules.

As these alternatives emerge, we will see more and more developers choose these new platforms because they provide greater freedom and innovation space for the crypto ecosystem.

Sonal: This is really interesting, especially when you mentioned transparency and consistency. I guess it's not just about the convenience of developers, but also about how users discover these applications, right? For example, traditional app stores dominate the distribution and promotion of applications. Will the new app stores in the crypto ecosystem change this situation?

Maggie：

Yes, that's exactly the point. The discovery mechanism of traditional app stores is relatively closed, and users can only find apps within a limited framework. Decentralized app stores provide users with more choices and greater autonomy.

For example, Solana's Dapp Store not only eliminates transaction fees, but also allows developers to interact directly with users. For example, developers can reward users for participating in behaviors such as downloading, commenting, or sharing apps through a token incentive mechanism. This model not only reduces developers' costs, but also brings a richer experience to users.

Robert：It sounds like this is not just a technical improvement, but more like a reshaping of the ecosystem. What impact do you think these new app stores will have on the traditional app distribution model?

Maggie：

I think this will be a gradual change, not an overnight disruption. Traditional app stores still have their huge user base and market share, but as the crypto user base gradually expands and the advantages of decentralized app stores become more apparent, more and more developers and users may choose these new platforms.

In the end, this is not just a competition in technology, but also a competition of values ​​- decentralization, transparency and user autonomy will become the core themes of the future.

What if there are too many choices?

Sonal：Okay, let's move on to the next topic - when I heard this, I thought of a question - this may be the "meta question" in all crypto fields, that is: What if there are too many choices?

The mobile operating systems are dominated by Apple and Android, and the benefit of this duopoly is that I only need to go to one place to find everything I need. So if these apps are distributed on multiple app stores…are they proprietary? For example, WorldCoin and Solana both have their own app stores - and you mentioned that these companies not only have software, but also hardware: like World's Orb and Solana's Saga phone...it reminds me of when Apple launched the iPhone and led to the development of an entire app ecosystem.

So, will these app stores become places that only show what these companies think is important? Will they remain open? How do you see this trend developing...it's still early; but will they be compatible with each other - or should they be interconnected?

Maggie:I think the focus right now is on driving rapid growth of different app stores.

It's important that you mention the issue of "too much choice" - this applies to the blockchain space as well. I do think there will need to be some kind of bridge mechanism or integration in the future. But at least for now, it's exciting to see these alternatives emerge.

Take Worldchain as an example, it features the ability to verify the identity of real users. I just checked one of the small applications and it has about 600,000 registered users. So I think we should focus on that growth.

However, at some point in the future, we need to balance that growth with curated content. This trend has already begun to appear in some NFT communities: these communities have attracted a large number of users who are interested in exploring other Web3 applications. I think in the future we will see these communities gradually become the curated platform for applications within the ecosystem.

Robert: Yes, I was going to ask - companies like Apple often claim that because they provide a curated service, they have the right to charge fees for purchases or transactions within the app store. How does this reconcile with the "permissionless" nature of crypto?

Maggie:I think there's not a lot of curated content in crypto right now, so I might disagree with Apple's argument. But the advantage of crypto is that users can always switch to other platforms.

Similarly, games require a lot of financial support to get started. In the past few years, blockchains have not only been development platforms, but have also served as publishers, distribution channels, and discovery mechanisms. Now, many game chains have their own marketplaces that highlight core games developed on their blockchains. The advantage of this model is that it allows users to migrate freely between different games.

This is also one of the core concepts of many of our investments. I don't think users will be locked into a decentralized app store.

Robert:I love observing these innovative experiments! Like the Solana phone - it's completely out of the box, you know: people usually avoid competing with Apple's iPhone - but they said, forget it, we're just going to give it a try.

Sonal: One more thing, Maggie - you mentioned that it's not all fun and innovation; there are challenges, like if a product already has distribution channels in a messaging app, it's very difficult to migrate that distribution to the chain - this is a problem for some companies that are moving from Web2 to Web3. One example you mentioned is Telegram and the TON network. (Just to be clear, we're talking about networks, not tokens.)

Maggie:I think Telegram is an exception; but many organizations with large user bases - whether they are Web2 platforms or companies that are just starting to get involved in Web3 - face the challenge of migrating users to the chain.

Take Coinbase: It has about 100 million verified users who have transacted on its platform. If you look at active users, it's somewhere between 8 million and 10 million daily or monthly active users. And the number of users on Base, it's recently grown from about 10 million to 18 million.

But that's still only about 10% of its total users. So there's a large number of users who are "dormant." We talked about this in the State of Crypto Report as well, and it's very interesting - because it's really true: a lot of platforms are trying to figure out: we attract users, they create accounts, but then there's no further engagement. How can we get them to come back and transact on-chain?

The size of the crypto industry

Daren:When we were doing the State of Crypto Report, we tried to assess the size of the crypto industry as accurately as possible. However, measuring the number of crypto users is very difficult for a variety of reasons.

When we did a market sizing analysis, we found that only 5-10% of cryptocurrency holders are actually active users. To me, this data exposes both a huge gap and a huge opportunity in the industry - especially in the context of the continuous improvement of blockchain technology and infrastructure, and the continuous optimization of user experience (UX).

I think we are ready for mainstream users. Given the time node of technology development, I feel that next year is the best time to convert these "latent" users into active users.

Sonal:This point of view is very inspiring to me. A lot of people talk about how to attract new users, but it usually sounds like skipping some stages of technology development. And your idea is like a bridge that can convert them into real active users through the existing user base.

Why do you think these people originally entered the crypto world? Why do they stop after completing one thing?

Robert：This is where the theory of the "price-innovation cycle" comes in.

Daren：This theory states that when the price of a cryptocurrency goes up, it attracts a lot of attention. And some of these people who are attracted will eventually become developers and start building new products; these products will drive the next wave of users.

We have seen this cycle many times in the history of cryptocurrency. This also shows that price is often a leading indicator of industry activity. I think we may be at the beginning of the next wave.

Sonal：If I had to guess, a lot of people may have created wallets because of the NFT craze... For example, Constitution DAO at the time - the auction of the US Constitution attracted a lot of new people into the crypto field.

Although they ultimately lost the bid, this event introduced many people to cryptocurrency for the first time. However, they may have only done this one thing and then did not participate further.

So, how can we get these people to take the next step?

Daren:Crypto has many potential use cases, but there are also different movements behind it that are driving development.

For example, in 2024, we saw progress in crypto as a political movement: some important politicians and policymakers expressed positive attitudes towards the technology.

At the same time, crypto as a financial movement has also made breakthroughs, such as the approval of exchange-traded products (ETPs) for Bitcoin and Ethereum, which expanded the scope of investor access.

But we believe that the direction with the most potential for crypto is as a computing movement. Chris Dixon mentioned in the book "Read Write Own" that the real power of this technology is that it can create a new Internet that is fairer, more open, and more transparent.

I think we are at a critical point: by 2025, as the infrastructure improves, transaction fees decrease, user experience improves, and new application categories emerge, we may usher in the birth of a "killer application" - just like ChatGPT's impact in the field of AI.

This application may really start the entire industry and deliver on the promise of encryption as a computing movement.

This is also the future that my team and I are very much looking forward to.

Robert:Yes, this is a topic we discuss frequently. Stablecoins have found product-market fit. All it takes is a large company to realize that by eliminating merchant fees on credit card transactions, they can significantly increase their profits. This could be a disruptive change for industries with lower profit margins, directly affecting their profitability.

As long as one big company takes the lead, stablecoins could see explosive growth. This is at least one potential path for stablecoins to go mainstream.

Sonal:Yes, I would like to add one point: I think your point is very interesting, especially the idea of ​​attracting "near users". When we are really ready, we can further attract more mainstream users. However, from a user experience (UX) perspective, we are not fully ready now.

If you think about the needs of mainstream users, I'm not sure if they will enter the crypto world through these paths. Their user interface may be highly abstracted, and they may not even know that they are using cryptocurrency. So when you think about different user groups gradually entering this field through various paths, it's really interesting and exciting.

Reuse of Infrastructure

Sonal:Joachim, to summarize your point briefly: you believe that developers will reuse more off-the-shelf infrastructure rather than redeveloping from scratch. Your main argument is that we often see customized validator sets and consensus protocols, but these customizations may result in slight improvements in certain specialized functions, but often lack in broader or basic functions.

You predict that this year we will see more crypto developers leveraging each other's contributions, such as using off-the-shelf infrastructure tools. This will not only save time and effort, but also allow developers to focus on improving the differentiated value of their products.

I think this is a great idea and a much-needed call to action.

So my question is: This sounds great in theory, but will it actually happen? What obstacles do you think might be encountered in achieving this goal?

Joachim: I think the key to this idea is whether the Tech Stack will continue to change in the future. If our assumption is correct that the Tech Stack has stabilized - and we see some layers of the Tech Stack becoming clearer in terms of interface definitions and how they work with each other.

Then we can expect these layers to have specialized teams, products and services to improve them. This will drive the specialization of these layers. Rather than spreading your energy across every layer of the Tech Stack at the same time, you can focus on the parts that can have the greatest impact.

So the key question is: is the Tech Stack mature enough and stable enough? If there is some unexpected technological change in the future that completely disrupts the existing Tech Stack, then this trend may not happen.

Robert: Joachim, you mentioned that people are increasingly gravitating toward using existing products, services, or components… That got me thinking: How do we know when a technology is mature enough to say, “Okay, we’re going to use what’s out there, rather than trying to build something better than what’s out there”?

Sonal: That’s a great question; you’re basically asking, as a developer, how do you know when it’s time to use existing technology?

Robert: Yeah, it is. It sounds easy to say, “Use what’s out there”… But what if someone is like, “I can do better than what’s out there,” then what do they do?

Joachim: Yeah. My advice is that developers should always focus on the larger ecosystem, the larger impact, and the larger use cases.

You’ll find that the actual use context of your product or service is often much more complex than you initially thought. You can think of it like building a car: if you’re really good at making engines, you might think, “I’m going to build a new car because I’m really good at engines.” That’s a key differentiator for your product.

But customers need more than just a great engine, right? The car also needs a nice sound system, comfortable seats, and maybe air conditioning—so do you reinvent the wheel for those parts?

Or: Is there a way for you to focus on what you do best while leveraging the best off-the-shelf products from others to complete the rest of the tech stack?

Robert:And this analogy is particularly true for you, Joachim, because you’re German; Germany has a lot of very specialized auto parts manufacturers who can make the best little parts in BMW cars that almost no one else can, so that’s really special.

Sonal:Joachim, I joked that your "big idea" reminded me of a phenomenon that I personally observed: I think people in the crypto field have a tendency to "constraints porn" - in the early stages of the development of crypto technology, many people were deeply fascinated by these technical limitations.

And I think your "big idea" may make this group of people dissatisfied because they actually enjoy the process of solving these limitations. But from another perspective, your idea will actually attract more new developers to this field - I think this is a very democratizing trend.

Joachim:Yes, now is indeed a very suitable time to develop in this field. Because there are so many ready-made code bases that can be used to build products or services.

In fact, there are very few things you need to develop yourself, right? You can really focus on the parts you are good at. For other parts, there are already highly specialized components that can be used. So it's a good idea to reuse them as much as possible. And you can leverage the expertise of other teams and their achievements in other parts of the technology stack.

Views for 2025

Sonal: Now to the last topic of the day. Chris, you have played many different roles at a16z over the past decade. In your work, you have contacted many industry people and helped many executives in fashion, music, and media integrate into Web3. I think your perspective is not just representative of yourself, but also based on your experience of communicating with thousands of people. Can you share your main views on 2025?

Chris: Absolutely. My "big idea" for 2025 - actually, it's also an idea that I have been holding on to for the past few years, but I think we are finally at a stage where we can really realize it: I call it the "hidden technology line."

What does this mean? Obviously, crypto has a lot of benefits, such as the empowerment of ownership, the potential for decentralization, and how it can change the future of industries such as music, fashion, and movies. But for those who are not in the crypto industry, they are confused when we use terms like ZK Rollups, L2, Gas, or Gas Fees. I would like to make a call to the crypto industry: we don’t need to start with an opening statement like "This is an NFT project"; or "This is a Token"; or "You can connect your wallet to..."

These terms are attractive to industry insiders, but if you really want something to enter the mainstream market, we can’t start with these technical terms. Because unfortunately, most people neither understand nor care what these terms mean.

"Hide the technical line" means: it’s not about ignoring the technical foundation, but don’t let the technical terms become the main promotional point. We need to get users to focus on the actual value that technology brings, rather than being scared off by complicated terms.

Robert:I love this idea because it’s like cutting through the “noise” of terminology…like when we talk about NFTs: it doesn’t matter what a non-fungible token is, it’s a way for creators to get paid.

Or, like someone in our company recently asked, “Why do I need a stablecoin?” But if you don’t call it a “stablecoin” and tell him that it’s a way to save $50 a year on coffee, he might immediately be like, “Oh, whatever it’s called, I want it.”

Chris:Absolutely, I want it. And I can’t believe we didn’t have something like this before. I come from the music industry. When I went to conferences, no one would ever go to an “MP3 conference.” You know. Why do we have to name conferences with technical terms to attract mainstream users to this space? But we’re happy to put “NFT Conference” on billboards all the time.

A great example is the SMTP protocol (Simple Mail Transfer Protocol). It’s a very technical protocol that anyone can build an application on top of. But applications like Gmail, Superhuman, YahooMail make it very simple for people to use and enjoy the benefits of it.

When I send an email, reply quickly, and rush through my day’s work, I don’t think “Wow, this SMTP software works so well”; I just do what I need to do. And because of that, I get the benefits of the technology.

I think the same thing needs to happen in crypto - there’s so much potential here: decentralization, ownership, knowing your customer, disrupting middlemen, and the ability to communicate directly.

My hope is that next year we’ll see more businesses and companies thinking from the perspective of the average user, which will drive us to create new industries…reimagine the future for creators; reimagine the future for small and medium-sized businesses; and even redefine the future for restaurants—all of which can take advantage of crypto

Sonal:It’s interesting that the people you mentioned—creators, small businesses, etc.—are actually the ones who can benefit the most from crypto…but as you said, they don’t have direct access to those benefits yet.

Chris:Absolutely! And it’s not their fault. It’s not their job to learn how to swap tokens or use different wallets to connect to different chains. They just want to simply reap the benefits of these technologies.

That’s why we’re all working so hard in this space; that’s what I’m most excited about.

Episode 1 Summary

Sonal:So let’s start by talking about some of the themes we’ve seen across the board.

Robert:I think this year I’ve noticed that people’s big ideas have focused on three broad categories.

The first category is about AI and the intersection of AI and crypto. This is not surprising, because this has really been a landmark year for AI.

The second category, I would describe as… what we often call “digi fizzy.” It’s about the fusion of the digital world and the physical world in a practical way. This includes everything from payments, voting, to creating networks for physical infrastructure…If AI is more like software innovation, this category is more like real-life hardware innovation. Sonal: By the way, on the second theme, that’s really interesting because I’ve never categorized it that way — but now that you say that, I totally get what you mean: there are examples of tokenizing real-world things, putting bonds on blockchain… there are even examples of tokenizing biometric data from the body.

Robert:I would categorize the third category as overall improvements in technology — like incremental improvements based on what’s happened in the past year: what would happen if everything became a little bit better, a little bit easier to use, a little bit more fluid and seamless.

Sonal:On the last theme, I tend to think of it more as a significant improvement in user experience — and a sign of an industry maturing. This maturity is reflected in the fact that it’s starting to be more people-centric and less technology-centric. This is how I would categorize the last theme.

For example, Jochem mentioned that people don’t need to design everything from scratch — they can just use off-the-shelf components and adapt them. Chris Lyons, on the other hand, argues that in the future users may not even know they are using crypto. Mason suggests a mindset shift that runs through both: starting with the need to “solve a problem” and then letting technology adapt, rather than being driven by technology as it is today. This shift is made possible by the technological improvements you mentioned.

Where do you think Maggie’s mention of, for example, the theme of the app store, fits?

Robert:That’s a great example. I think it’s the intersection of the second category (digital-physical convergence) and the third category (technological improvements).

Maggie brings up some interesting points: for example, the crypto hardware we’re seeing now—like the World App Orb and Solana’s phone—is driving app store-like experiences. While I don’t want to say they’re mimicking, at least to some extent, they echo some of the patterns of past internet development.

Sonal: Take the iPhone and its app store.

That’s really interesting, but I might adjust Maggie’s point a little bit because it’s a bit contradictory: on the one hand, we’re talking about crypto being very close to the mainstream market, even “adjacent to the mainstream market” as Daren said (referring to people who already have wallets but don’t use them yet); but on the other hand, Maggie mentioned that crypto may need its own independent ecosystem, such as its own app store.

However, recent discussions about debanking and other related issues have also shown that many traditional app stores are not ready for crypto and are even rejecting it. <Robert: Yes> Of course, this attitude is slowly changing - for example, Coinbase recently announced an integration with Apple Wallet - but there are enough crypto apps to support independent app stores. This is very interesting.

Robert:Yes; debanking has become a hot topic - this involves crypto businesses, startups, and even individuals being unfairly denied access to the financial system; and often without explanation or reason. Similar situations are also happening in the technology field, such as deplatforming.

You mentioned this when you mentioned app stores, such as an app not passing the review, or being inexplicably removed.

Sonal:By the way, this may be for similar reasons to some extent - as you saw in our explanation of debanking, sometimes there are legitimate reasons for this behavior, such as banks have the right to do so; and app stores sometimes reject or remove apps for security or other so-called "good" reasons. Sometimes these reasons are indeed valid, but there are also many times when people feel "well, not necessarily".

Robert:Yes. So I think that also falls into the third category, which is the gradual improvement of the technology. I think you could also describe it as crypto gradually becoming its own thing…becoming its own kind of platform.

Also, it was interesting to see a big idea that Miles brought up. He talked about a piece of legislation that was recently passed in Wyoming called DUNA (Decentralized Unincorporated Nonprofit Associations). This law for the first time recognizes these communities as legal entities that can operate protocols in a decentralized way, and can operate crypto startups.

It's a platform that didn't exist before…people were basically "building planes as they flew" in the past, and the technology was possible, but there wasn't a clear legal framework to accommodate it.

Sonal: Exactly! This is very similar to Maggie's point - just like crypto and DAOs (decentralized autonomous organizations) need a unique legal entity structure beyond just LLCs (limited liability companies)…just like we have corporations, LLCs, and now there's a version for decentralized communities.

Part 2

AI x Crypto

Sonal: What do you think are the interesting topics in the field of AI?

Robert:AI and cryptocurrency are hot topics this year. A lot of people are talking about it. What I find most interesting is that everyone is always talking about general artificial intelligence (AGI), such as: When will we achieve AGI? When will technology be smarter than humans? When will the singularity come? But these questions are actually a bit like "sideshows". Our team is more focused on some big ideas from different angles, such as looking at the development of AI from another dimension. Why not think of AI as a process that will gradually "upgrade its capabilities"? In the coming months and years, AI will gradually gain more capabilities. These capability upgrades will make AI more autonomous, more independent, and able to complete more tasks.

Sonal:One of the things that I found particularly interesting was the idea that Kara, Karma, Dejin, Dan Binay, Darren, and Eddie discussed: AI agents can work not only for us, but for other AI agents. That's really interesting. But I agree with you, I think a lot of innovation happens in that way. A lot of people are attracted to those grand conceptual visions, and those visions do inspire people. But what interests me more is the "capability upgrades" you mentioned, which often appear in unexpected ways, which is interesting.

Robert:Chris has a point that the Internet has entered a new phase - an AI-driven Internet era. In this world, you may not be able to tell whether it's a human or a robot behind you, or who is writing content, talking to you, or even providing services. We need to find ways to operate in this new environment. So he put forward some ideas about how to use cryptocurrency to help humans and users adapt to this new rule.

Sonal:One of the "big ideas" this year is: How can these AI agents complete transactions, have mobility, and perform tasks? The answer is through decentralized means, such as crypto wallets. It's almost the only way that it can work.

Robert:These ideas remind me of a saying: "The future is already here, it's just not evenly distributed yet." Some things are already happening in reality. For example, we already have some examples of chatbots that can run in trusted execution environments (TEEs). As Karma mentioned, there are also AI bots that have their own crypto wallets. These technologies are already being used in fringe areas, but they may become more popular in the next year.

Sonal:From an editorial perspective, an important principle when we curate and write these content is that we don't pursue ideas that are "out of reach". Although many ideas may have a huge impact if they are actually realized, you can even say that every idea has a sci-fi future. But more importantly, we can already see the beginnings of these trends, or they have some kind of technological accelerator that can push them to a faster realization.

One of the key points Carra brings up is that AI needs its own wallet to be truly agentic. Her argument is that as AIs gradually transition from non-player characters (NPCs) to main characters, they need to act like agents, and the key to achieving this is to have their own wallets, so cryptocurrency is needed. So, Carra, I have a question: What exactly do you mean by AI transitioning from NPCs?

Carra:I've been studying games for a long time. Game developers have long used NPCs (non-player characters) to guide the agency of players. Some people think that game developers are actually "sculptors of agency." Just like painters create with oils and sculptors create with clay, game developers' creative medium is "agency." They use various tools to shape the player's experience. If players are given too much freedom, they may get lost and not know what to do. To solve this problem, developers use NPCs to impose constraints on the game world. For example, in an RPG game, you may meet an anime-style mentor who will give you tasks, tips, tools, and even some loot. In my opinion, the future Internet experience may be similar to this model - when we interact with AI agents, they can help guide our Internet behavior, provide necessary constraints, and give us a greater sense of freedom in the digital world.

Sonal: I really like your statement that "game developers are sculptors of action capabilities." The "they" you mentioned just now refers to game developers, not NPCs themselves. Later you mentioned AI-based NPCs. The first use case I heard of NPCs was that if you and your friends are not in the same time zone and you want to play games at night, NPCs can provide company. This is a very common scenario - when there are no other players online, NPCs can allow you to continue the game experience.

Carra:Absolutely right. This is also a concern for many game developers. If there are not enough players, the game experience will be greatly reduced. An important role of NPCs is to solve the "cold start" problem and ensure that players have interactive objects when they enter the game at any time. For example, EVE Online is a persistent game that has been running for more than 20 years. If you join now, other players may have accumulated a lot of resources, and you may be defeated as soon as you enter the game. Without a guide like a "Sherpa" or without joining the "company" organization in the game, you can hardly survive.

The reason I use the word "action ability" is because in AI research, there are concepts of "action ability reasoning" and "action ability workflows". Simply put, this kind of reasoning or workflow usually includes four modes: reflection, tool use (such as computers), decomposition of problems to help reasoning, and inference based on decomposition. The last one is multi-agent interaction. These are recognized action ability reasoning modes. At present, the use of AI tools is still limited to traditional Web2 workflows, but in the future I hope that agents can use more tools, such as encryption tools, to obtain and interpret data from the chain, and even manage their own wallets and keys, complete signature operations on the blockchain, etc.

Sonal: But you haven't explained why cryptocurrency is necessary. What can cryptocurrency provide that other payment systems can't do?

Carra:My view has always been that no existing financial system will treat AI agents as "first-class citizens" like cryptocurrency. In the existing legal system, AI agents are like "children". They don't have ID cards and can't sign documents. For example, systems like Truth Terminal are not fully legally capable and cannot conduct transactions, collect payments, or earn income from social platforms. They cannot participate in market transactions, reveal their preferences, or coordinate resources. And our society is driven by market transactions, exchanges of ideas, and voting with money. AI agents can't do these things right now, but cryptocurrencies can provide them with a solution.

Robert:I like this idea very much. I have a picture of the future in my mind: just like in the cantina in Star Wars, you don't know who is a robot and who is an alien, but everything is cool. Everyone has their own ability to act.

Sonal:I particularly like this perspective. This is not just a technological advancement, but also an attempt to redefine the social and economic system through technology. For example, if AI agents have their own wallets, they can become truly independent individuals in the economic system, not just auxiliary roles. This change may bring about a completely new social structure.

Robert:However, this also reminds me of a key question: If AI agents can really participate in market transactions, do we need to set up a set of special rules for them?After all, the existing market rules are designed for humans, and the decision-making logic of AI may be completely different. For example, they may make decisions based on data and algorithms, rather than being influenced by emotions or ethics like humans.

Carra:The question you raised is indeed very important. If we allow AI agents to participate in market transactions, we need to establish a set of rules that are suitable for them. This is not only a technical issue, but also involves ethical and legal aspects. For example, how to ensure that AI's behavior is transparent and controllable? How to prevent them from abusing market rules? These are important challenges we must face in the future.

Sonal: This reminds me of a point we discussed earlier: the combination of AI and cryptocurrency is not just a technological innovation, but may be a profound change in the social and economic system. We need to look at these changes with a more open and forward-looking attitude, because they may completely change our way of life.

Robert:Indeed. Perhaps in the future we will enter a society where humans and AI coexist, and everyone and every agent has their own role and responsibilities. This kind of society may be very different from our world today, but it is also full of infinite possibilities.

I want to ask, is this phenomenon a short-lived accidental phenomenon, or will it become the mainstream way of operating the Internet in the future?

Carra: I have two answers. First, Truth Terminal can be seen as a new node in the evolution of Internet virtual influencers. The concept of virtual influencers is not new. For example, the rise of Youtubers is an example. Although it is slightly different from Truth Terminal, the difference is not big in essence. Especially in Asia, virtual anchors have been popular for many years. For example, some "companion games" are currently scripted NPCs, but they are designed to be like real friends and can even become "close friends" of players. There are also many virtual influencers who have developed into highly professional projects, such as Trevor, the creator of Lil Miquela. Their attempts paved the way for projects like Truth Terminal. So, this phenomenon is not accidental. Secondly, there are already many emerging platforms and protocols for creating similar virtual influencers. For example, some platforms like Twitch allow users to create their own AI agents as virtual anchors. These anchors can have their own cryptocurrency, video models, NFT images, and even 3D virtual models. These platforms are already very mature and can help launch virtual influencers with unique characteristics, including their fan base, areas of expertise, and the ability to generate art and content. Therefore, I think this is by no means a short-lived anomaly.

Sonal: The decentralized physical infrastructure network (DePIN) you mentioned is a very interesting direction. This is not just a vision of a sci-fi future, but also very useful in many practical scenarios.

Carra:There are currently many DePIN (decentralized physical infrastructure network) projects that are gradually becoming decentralized. These projects have begun to rely on large language models (LLMs) and computer vision technology to verify physical network resources. In the medium term, we can envision a decentralized network of human validators that assess risk and resolve suspicious behavior through actionable AI workflows. In the longer term, AI agents may be equipped with their own wallets, keys, and computing resources to directly take over these verification tasks and become completely independent nodes or validators.

For example, there is a project called Daylight. This is a DePIN company focused on the energy field. They sell data about home distributed energy resources such as Tesla Powerwall energy storage devices, solar panels, and smart thermostats to large energy companies.

Imagine if we all run our own peer-to-peer Daylight network, my energy grid needs to communicate with your grid, and I need to prove that I do have a Tesla Powerwall or solar panel, and that my thermostat only uses part of the energy of the solar panel, and I also need to prove that I have excess power bandwidth. So, how to prove it? The easiest way at present is to take a photo of the energy meter. This photo will convey information to my grid, and my grid will tell your grid: "I have extra bandwidth that can be shared." But if someone falsifies the data, such as claiming that there are these resources when there are none, it will cause system failure and may even trigger penalties for nodes. Therefore, if we want to truly achieve peer-to-peer DePIN, we need a reliable way to verify the authenticity of this data.

Currently, this verification method is still centralized. Users need to upload photos of energy meters regularly, and then use RAGs (Retrieval Augmented Generation) technology to verify whether these photos are authentic. RAGs is a technology that combines external facts to enhance AI models. For example, it can ensure that this picture has not appeared in the database before, or that it is not a picture found by the user from Google. There are other similar examples, such as Nash, a company we supported in the CSX incubator. They developed a decentralized version of the Doordash platform and also used RAGs technology to parse receipts and proof of delivery. Although Nash's system does not currently use a fully autonomous AI workflow, they are already using computer vision technology to parse images and compare them with vector databases.

In the future, when Daylight is fully decentralized, they will rely on a distributed network of validators to ensure that all user-submitted data is authentic. At the same time, it is conceivable that in the future, when household users sell energy resources peer-to-peer in a programmatic way, these AI agents will become the core role of maintaining the entire network, ensuring the efficiency and trustworthiness of the system.

Sonal: By the way, from a holistic perspective, the current distribution of energy has actually achieved a certain degree of distributed model, but there are still many parts that are invisible to the power grid. For example, the location of some nodes may be unknown, and they may be at the edge of the network. This is a common problem in network systems - these nodes may be offline or have some valuable information. So imagine if these AIs can operate in a consistent way, especially managing those nodes in remote areas, this prospect is actually very exciting.

Carra: Absolutely agree. This vision has been around for a long time in the crypto and cypherpunk communities. There has always been an “OG” idea that each of us would be able to run our own node. The vision is that we would have a truly peer-to-peer network where everyone could verify all the data on the chain and run their own node.

The Future of Identity: The Line Between Human and AI

Sonal: Eddy, your core point is that as more and more people use AI, we will need unique proofs of “human identity”. We’ll let you talk more about this important point, what it is, and why it’s significant.

Eddy:I find this topic interesting when it comes to AI because there’s really nothing new in the AI ​​space about issues like impersonation and deception. Let me start with what’s not new: a highly skilled adversary can indeed spend a lot of resources and time trying to deceive you. For example, imagine a fake phone call that sounds like it's from your parents. This was possible 10, 20, or even 30 years ago. You just needed a skilled voice actor who knew what your parents sounded like, rehearsed, hired a private investigator to dig up information about you, and then wrote a convincing script. This has always been possible. The difference between then and now is that the cost of doing these things is rapidly decreasing now and in the future. The cost of creating this "replica" or building an interactive experience that can convince you to make a dangerous decision or take a risky action is rapidly decreasing. And when the cost of any technology goes down, it makes it more accessible to more people. In most cases, people use it to do things that are extremely productive and beneficial, and that's where economic progress comes from. But at the same time, it also makes these tools more accessible to attackers and those who want to use technology for bad things. So this change in cost means that we need to find something that is costly for attackers as a barrier. We need to find new high-cost barriers.

Sonal: But the key question is, how do you do this without increasing the cost to the average user? Especially the really well-intentioned, real user?

Eddy: Exactly. We need to find a way to increase the cost to the attacker without increasing the cost to the average person or productive user.

One ​​of the core ideas is that if someone wants to fake a lot of fake context, fake IDs, fake voices, fake phone numbers, fake videos, etc., in the future, they need an ID system to do this. And by ID system, I mean in a broad sense. For example, spammers use the phone ID system when they call you. They need new fake numbers because every time they call a bunch of numbers and get reported, those numbers get marked as spam. That's why you don't get spam calls from the same number every day. If they were using the same number, it would be easy to solve. You'll find that the spam calls are always coming from a new number, a new email address, or a new Twitter account. This makes perfect sense, because the system learns and blocks these IDs. So the attacker needs to keep getting new IDs, and the cost of getting new IDs is a significant part of the cost structure of the attack. If the cost of new IDs is almost zero, then this behavior will surge. If the cost of new IDs is high, then this behavior will decrease. But obviously, we don't want the cost to be high for ordinary users. So we can introduce a cost by requiring users to prove that they are "human".

Why does this increase the cost? It's because it's hard for computers to pretend to be human. And it's relatively easy for humans to act like humans. Historically, we've done this with things like CAPTCHA. These are little tests that are meant to verify that a person is really operating. But as machines get smarter, the difficulty of cracking CAPTCHAs is getting lower. And in some sensitive scenarios, we've seen spammers even outsource the completion of CAPTCHAs to real people, and then pass the completed cookie credentials to robots to continue the attack.

By having some way to prove that someone is human when they get these credentials, this can make it more expensive for machines to attack. However, this is not a complete solution. The key problem is that if a person can easily get multiple IDs, like a second, third, fourth, or even a tenth, twentieth ID, then these attacks are still profitable. People can continue to get these new IDs and give them to scammers or robots to attack. So the key is not just testing "human identity", but also ensuring that each person can only have one unique ID.

Robert: That way, someone can't get IDs for all robots by answering multiple CAPTCHAs. Because they could sit there all day answering CAPTCHAs for robots, and this doesn't solve the problem of uniqueness.

Eddy: Exactly. Someone might say, "Oh, then can't I just buy an ID off the market? A unique human identity verification." Indeed, a market will form. But there are things we can do to interfere with the formation of this market. For example, would you sell your passport to someone? Of course you could, but if your passport is important to you, selling it would be a big loss for you. If there was a way for you to invalidate your old passport and get a new one, then buyers might be reluctant to buy because they don't trust you and you might undermine their use of it by obtaining a new one. Still, in addition to disrupting the formation of the market, if it's easy to get one ID but hard to get a second ID, then the total number of IDs available for purchase in the market will decrease, which will increase the cost and thus the cost to attackers.

Sonal: Great! So how do you do this at scale? As you mentioned earlier, it's not easy to distinguish between humans and machines on the Internet. As the classic saying goes, "On the Internet, you don't know if the other person is a dog or a human." So how do you determine that a person is an individual?

Eddy:That's a good question. I think this theoretical framework does not require a commitment to a particular method to achieve this. There are some very promising approaches, such as using biometrics, or relying on national IDs and government IDs, which often also include biometric information. One approach that I'm not sure is going to work, although it's very popular, is the so-called web of trust model. In simple terms, this model verifies identity through the attestation of others, such as "I know Robert is a human," "I know Sonal is a human," and so on. But the problem is that this model can only ensure that a certain ID in the network corresponds to a person, but it cannot ensure that this person has only one ID. For example, I can go to your Twitter account and say, "I know this is Sonal's account." But I can't confirm that this is her only account.

So we usually need additional layers and technical means. I also want to emphasize that this is often overlooked in discussions about this topic, that there are many technical means that we can use to ensure that this "unique human identity verification" is private. I think ensuring privacy is a key point that cannot be compromised when building such an ID system. If everyone has only one ID, this will deprive them of their anonymity in many cases and will also affect their reasonable privacy rights. I think this is neither realistic nor acceptable in the future of the Internet. So an ideal system would be one that ensures privacy, uniqueness, and can only be accessed by one person. Such a system would even allow users to use multiple pseudonyms on different websites, but they would need to be constrained within certain limits and visible to the network. This way, the network could identify if a certain ID is creating a lot of spam accounts and restrict it, such as rate limiting and spam protection.

Sonal: By the way, I have a question about the role of crypto in this. When you mentioned using biometrics, I immediately thought of one of the most common examples we use today, such as the Clear ID system, which enables retinal scanning when passing through airports. Why do we still need crypto? Why can't we just use such a system?

Eddy:It's true that you don't need crypto. For example, Clear, I don't know exactly how it works, but I'm sure they have some kind of database to store the information they need. The reason why cryptography is needed is that the representation of the ID namespace we are talking about needs to be censorship-resistant, that is, we want anyone to be able to modify, edit, and update this space. In addition, we want these updates to be published in a completely neutral place, a place where no specific individual or organization can manipulate or use the system for their own or others' benefit. Basically, this can be achieved through a public blockchain. Think of it as a "golden bulletin board" that is extremely neutral, which is a space suitable for this purpose.

However, I would say that the topic of "unique human identity verification" and related research is not a field specific to cryptography. Many researchers are studying this problem from many angles. But I think that implementing such a system on a blockchain can bring many important benefits, such as censorship resistance, timestamping records, and trusted neutrality, which make such a system work at a large scale. Whenever an AI agent works for a person, we need to know who it is working for.

When a person interacts with you, think about it, you make judgments about that person based on your model of the world, like why that person is approaching you, the environment they are in, who introduced them, etc. That contextual information helps you understand that person. And that faking context that I mentioned earlier is exactly how impersonators use to deceive others. If an AI agent approaches you, or more sci-fi, an AI agent approaches your AI agent, and you want them to be able to interact in some beneficial way, then they need to know information about each other. That requires some kind of authentication mechanism to make sure they know who authorized them to perform certain tasks. So I think we need this kind of "human authentication" system, supplemented by accountability mechanisms, etc., so that we know who is interacting with whom.

Sonal: Eddy, quick question, what do governments think about this system? You mentioned that this can be done in a decentralized way, and there are multiple ways to do this, and governments can participate in it. I like what you said about censorship resistance, but this is good for good governments, not necessarily for bad governments. So I'm curious, what do you think about how governments think about these identity systems?

Eddy:I think governments will want to adopt some of the cryptographic tools that I mentioned, for example, which makes a lot of sense for them. Of course, governments will want to have complete control over the databases that register and store all the data. They may also like the accountability mechanisms that I mentioned. For example, I think governments do try to ensure that passports are issued uniquely. I don't think they would accept that one person gets two passports from the same country with different information. That's something they would resist. But it's not something that's explicitly guaranteed in the design of their systems. If you look at the specifications and descriptions of national ID systems, they don't usually highlight this as a key feature. But I think it's implicit in the design. A very interesting question is, if we rely on national ID systems to enable this kind of verification, at some point in time, when it becomes extremely valuable for an ID to reflect a person's identity, will small governments be willing to forge or subvert their own ID systems in order to provide privileges to machines that work on their behalf? We really need to think about at what point this identity becomes so valuable that it can be abused. I think it's going to be very important to have a human ID in the future.

Sonal：I think this can be viewed from a very positive perspective. For example, governments might be very willing to adopt this system. As you mentioned at the beginning of your answer, there are many reasons why governments would want this system. For example, there are a lot of cumbersome processes involved in getting a passport or a driver's license, which is inefficient and frictional. If this system is based on a decentralized blockchain owned and operated by the public, it will be more resilient and more secure, and it will also bring many derivative tools to help governments improve efficiency.

Eddy：I completely agree with this view. The reason I am a little hesitant is that we can design a programmable and useful database system even without a blockchain. My intuition is that governments might prefer to have tighter control over such a system. But it is indeed conceivable that in some extreme cases, governments might be more willing to trust other governments with information stored on the same system, in which case they might choose to use a blockchain.

Decentralized Autonomous Chatbots

Sonal: Karma, the concept you proposed is "Decentralized Autonomous Chatbots". This sounds like a step further than just giving AI a wallet, such as running in a Trusted Execution Environment (TEE). Can you introduce the role of TEE?