The Move to a Decentralized Internet
Reddit co-founder Alexis Ohanian on why he’s investing in technologies that will give users more control over their data
ALEXIS OHANIAN | ‘We’re thinking about how to apply what we learned to a decentralized world.’
PHOTO: NIKKI RITCHER FOR THE WALL STREET JOURNALMarch 13, 2018 10:04 p.m. ET
The internet was founded on the notion of openness and universal access. That is now being rethought and redefined as startups increasingly focus on building a new wave of apps that will run on decentralized networks, giving users more control over their data and privacy.
Alexis Ohanian, the co-founder of the venture-capital firm Initialized Capital and Reddit Inc., sat down with Steven Rosenbush, the editor of CIO Journal, to discuss what companies need to know about how the internet is changing. Edited excerpts follow.
MR. ROSENBUSH: You’ve been talking for a while about the new internet. What is wrong with the old internet?
MR. OHANIAN: Don’t get me wrong. I like the old internet. It has been very good for my career. But we’re learning the lessons of this one version of the internet that started before there was global connectivity, smartphones in everyone’s hand and high-speed bandwidth. We’re thinking about how to apply what we learned to a decentralized world, where individuals will have more control over their data, over their privacy, more security and potentially a more fluid transfer of things because they can be digitally encrypted.
MR. ROSENBUSH: Why didn’t we do this the first time around?
MR. OHANIAN: The potential for a decentralized internet wasn’t viable until you had millions and millions of computers with quality connections all connected and networked. Only now is it possible. And I want to be clear that this isn’t some magic wand. As an early-stage investor at Initialized, we’re going to see tons of pitches this year that are going to have blockchain in the deck, and most of them will be worthless. In fact, the first question we ask is does this really need the blockchain? Does this really need a distributed ledger to make it work, or can a regular centralized database do the job?
MR. ROSENBUSH: But you think that some of it is worth investing in it?
MR. OHANIAN: I really do. We were the first seed investor in Coinbase back in 2011, which is a centralized exchange that hopefully many of you have used to get your first bitcoin. And we actually want to announce that we’ve now invested in our first decentralized exchange, DDEX, [which lets buyers and sellers of cryptocurrencies trade without having to deposit any assets into an exchange].
MR. ROSENBUSH: How much are you investing?
MR. OHANIAN: I don’t know if it’s fully public, but we’ve led the round. This is a seed-stage investment, and what was really important to us was that we’re now at a point where a decentralized exchange makes sense. The problem with a centralized exchange is you are trusting the exchange to basically manage your money. By having it decentralized, you control the transaction entirely from your browser.
MR. ROSENBUSH: So I’m not depositing money?
MR. OHANIAN: You aren’t risking your money being held by a third party and thus being hacked.
MR. ROSENBUSH: And there’s nothing to steal.
MR. OHANIAN: Precisely. There’s nothing to steal. So it’s an added level of security.
MR. ROSENBUSH: What are the other technologies, the other foundational tools that you find really essential?
MR. OHANIAN: We’re still early. And I’ll be the first to admit, we’re still waiting for that first Netscape to kind of help all of us get online in an easy, frictionless way. It’s still a pain to buy your first CryptoKitty [digital cats that can be collected and traded as part of a blockchain game]. And I know it seems absurd, but that will actually be a milestone.
MR. ROSENBUSH: The CryptoKitty is a milestone?
MR. OHANIAN: Yes. It sounds silly. But that browser for this decentralized world, with these decentralized apps, something is going to solve that friction point so that it will become really easy for you to take out your phone, load up a browser, search an app store and participate in this new internet. These are the foundational tools in which we want to invest.
MR. ROSENBUSH: What does all this mean for corporations, for CIOs? How do they extract value from these tools?
MR. OHANIAN: We’re still years out from a lot of this technology really changing the way you might be doing business.
In the short term the best thing you can do is start to play around. Buy your first bitcoin.
Appeared in the March 14, 2018, print edition as ‘The Old Internet Vs. The New Internet.’