a16z Partners' 2024 Outlook: Web3 Will Have Simpler User Experiences, and NFTs Will Finally Enter the Mainstream
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a16z Partners' 2024 Outlook: Web3 Will Have Simpler User Experiences, and NFTs Will Finally Enter the Mainstream
This article explores the perspectives of different a16z partners on multiple areas within Web3.
Navigating Web3 tides with focused insightsWritten by: a16z Crypto
Compiled by: TechFlow
As 2024 begins, multiple investment partners and engineers at a16z Crypto have shared new reflections on the future of Web3. This article explores perspectives from various A16Z partners across multiple areas of Web3, including decentralization, user experience, modularized tech stacks, and the convergence of AI and blockchain. TechFlow has compiled the full text.
Entering a New Era of Decentralization
Miles Jennings, legal counsel and head of decentralization at A16Z, believes we are entering a new era of decentralization. When control over a powerful system or platform rests in the hands of a few—or even a single leader—it becomes too easy to infringe on users' freedoms. This is precisely why decentralization matters: it enables us to democratize systems by building trust-minimized, composable internet infrastructure; foster competition and ecosystem diversity; and give users more choice and greater ownership.
In practice, however, decentralization is difficult to scale when it conflicts with the efficiency and stability of centralized systems. Meanwhile, most web3 governance models involve DAOs (decentralized autonomous organizations) that rely on simplified yet cumbersome governance frameworks based on direct democracy or corporate governance—models not designed for the sociopolitical realities of decentralized governance.
Yet thanks to years of progress in Web3, better decentralization practices are emerging. These include decentralized models adaptable to applications with richer functionality, as well as approaches like Machiavellian-inspired DAOs designed to create more effective decentralized governance with accountable leadership. As these models mature, we will soon see coordination, operations, and innovation in decentralized systems reach unprecedented levels.
Resetting the Future of User Experience
CTO Eddy Lazzarin believes the user experience in Web3 will improve. Despite widespread criticism, the fundamentals of UX in crypto have barely changed since 2016. It remains overly complex: self-custodying private keys; connecting wallets to dApps; signing transactions sent to an ever-growing list of network endpoints. This exceeds what we can reasonably expect users to learn within minutes of first using a crypto application.
Now, developers are actively testing and deploying new tools that could reset the front-end UX of crypto in the coming year. One such tool is the universal key, which simplifies logging into apps and websites across user devices. Unlike passwords—which are vulnerable and require manual management—these keys are automatically generated and encrypted. Other innovations include:
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Smart Accounts: Make accounts themselves programmable, thus easier to manage
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Embedded Wallets: Built directly into apps, enabling seamless login experiences
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MPC (Multi-Party Computation): Enables third-party signing support without custody of user keys
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Advanced RPC (Remote Procedure Call) Endpoints: Can infer user intent and fill in missing information
Together, these improvements will not only make Web3 more mainstream but also deliver user experiences that are superior and more secure than those in Web2.
The Rise of Modular Tech Stacks
General Partner Ali Yahya anticipates the rise of modularity. In the digital world, one force dominates all others: network effects. These effects are so powerful that only two types of modularity matter: those that enhance and strengthen network effects, and those that disrupt and weaken them. Rarely does the former make sense—especially in open-source ecosystems. Meanwhile, monolithic architectures offer advantages through deep integration and optimization across module boundaries, leading to higher performance.
But the greatest advantage of open-source, modular tech stacks lies in enabling permissionless innovation, allowing participants to specialize, and incentivizing greater competition. We need more of this.
AI + Blockchain Convergence
Stanford professor Andy Hall and data scientist Daren Matsuoka look forward to the convergence of AI and blockchain. They believe decentralized blockchains serve as a counterbalance to centralized AI. Currently, AI models (like ChatGPT) can only be trained and operated by a handful of tech giants, as the required computing power and training data are prohibitively expensive for smaller players. But with cryptography, it becomes possible to create multi-party, global, permissionless markets where anyone can contribute compute resources or new datasets—and get compensated—for those who need them. Leveraging this long-tail of resources will reduce AI costs and increase accessibility.
Moreover, as AI transforms how we produce information—reshaping society, culture, politics, and economics—it also creates a world flooded with AI-generated content, including deepfakes. Here, cryptographic techniques can open the black box, trace the provenance of online content, and ensure authenticity.
We also need to find more ways to decentralize generative AI and govern it democratically, so no single actor ends up with the power to make decisions for everyone else. Web3 is the natural home for solving this challenge. Decentralized, open-source crypto networks will democratize—not centralize—AI innovation, ultimately making it safer for consumers.
From "Play to Earn" to "Play and Earn"
Partner Arianna Simpson believes blockchain gaming will evolve. In "Play to Earn" (P2E) games, players can typically earn real-world (not just virtual) money based on their time and effort in-game. This trend aligns with broader shifts transforming gaming and beyond—from the rise of the creator economy to changing relationships between users and platforms. Web3 allows us to break from the current norm where all revenue from gameplay and trading flows solely to game companies. Users spend immense time on these platforms and generate significant value—they deserve compensation.
But games aren’t necessarily designed to be workplaces (at least not for most players). What we really need are games that are both fun and allow players to capture more value. Thus, "Play to Earn" is gradually evolving into "Play and Earn," drawing a clear distinction between gaming and work.
When AI Becomes the Game Creator, Cryptography Provides Guarantees
Investment Partner Carra Wu looks ahead to the fusion of AI and Web3 gaming. Having spent considerable time thinking about the future of web3 games, she understands that AI agents in games must come with guarantees: they must be based on specific models, and their execution must be tamper-proof. Otherwise, game integrity collapses.
When stories, terrains, narratives, and logic are all procedurally generated—in other words, when AI becomes the game designer—we’ll want assurance that the designer is trust-minimized. We’ll want confidence that the world was built with guarantees. Cryptography provides exactly that: the ability to understand, diagnose, and penalize when AI goes wrong.
In this sense, “AI alignment” is fundamentally an incentive design problem—just like managing any human agent—and that’s exactly what cryptography excels at.
Formal Verification Becomes Less Formal
Research Engineering Partner Karma discusses formal verification. While formal methods are popular in verifying hardware systems, they are less common in software development. For most developers working outside safety-critical systems, these methods are too complex and add significant cost and delay. However, smart contract developers face different demands: they build systems handling billions of dollars, where bugs can be catastrophic and often unfixable. Thus, there's a pressing need for more accessible formal verification methods in software—especially in smart contract development.
In 2023, we saw a new wave of tools—including our own—that offer significantly better developer experience compared to traditional formal systems. These tools leverage the fact that smart contracts are architecturally simpler than conventional software—featuring atomicity and deterministic execution; no concurrency or exceptions; small memory footprint and limited loops. Combined with recent breakthroughs in SMT solver performance (which use complex algorithms to detect or confirm the absence of errors in software and hardware logic), these tools are rapidly improving in speed and usability.
As developers and security experts increasingly adopt tools inspired by formal methods, we can expect the next generation of smart contract protocols to be far more robust and resistant to costly hacks.
NFTs Become Ubiquitous Brand Assets
Research Partner Scott Duke Kominers believes NFTs will become ubiquitous brand assets. More and more major brands are introducing digital assets to mainstream consumers via NFTs. For example, Starbucks launched a gamified loyalty program where participants collect digital assets while exploring the company’s coffee offerings. Meanwhile, Nike and Reddit have developed digital collectible NFTs marketed to broad audiences.
But brands can do much more: they can use NFTs to represent and reinforce customer identity and community belonging; link physical goods with their digital counterparts; and even co-create new products and experiences with their most loyal fans. In 2022 and 2023, we saw growing trends of mass-collecting low-cost NFTs as consumer goods—often managed through custodial wallets and/or Layer 2 blockchains, reducing transaction costs.
I believe the conditions are now in place for NFTs to become pervasive digital brand assets in the year ahead.
SNARKs Go Mainstream
Investment Engineer Sam Ragsdale believes SNARKs will go mainstream.
Historically, technical experts have used several strategies to verify computational work:
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Re-executing the computation on a trusted machine
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Performing the computation on specialized machines (i.e., TEEs—Trusted Execution Environments)
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Executing the computation on publicly trusted infrastructure like blockchains.
Each of these strategies comes with limitations in cost or scalability. But now, SNARKs (Succinct Non-Interactive Arguments of Knowledge) are becoming more usable. SNARKs allow an untrusted prover to generate a cryptographic "receipt" for certain computations—one that cannot be forged. Previously, generating such receipts required 10^9 times more work than the original computation; recent advances are bringing this down toward 10^6.
Thus, SNARKs become viable when the initial computing provider can bear ~10^6 overhead and the end-user cannot re-execute or store the original data. The resulting use cases are numerous: edge devices in IoT can verify firmware updates; media editing software can embed content authenticity and transformation history; remixed memes can credit original sources; LLM inferences can carry provenance data. We could have self-verifying IRS forms, unfalsifiable bank audits, and many more consumer-beneficial applications in the future.
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