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Why I’m Excited About… The Internet Computer
The future of #web3 with Dom Williams and the Dfinity Foundation.
If you’re an early adopter of this newsletter, you’ve already learned a few things about me and my interests. You’ve learned broadly about what Warburg Serres was, and why we believed the internet of the future was going to be wildly different than the one we were familiar with. You’ve learned about my own two-stage journey into becoming a crypto convert. And you’ve learned something about Warburg Serres’s investment thesis: our theory about what excited us, to what degree, and why we allocated resources the way we did.
This post builds most directly on that last pair of posts, in which I introduced a central tenet of our thesis: that at this stage in Web3’s history, we were in something analogous to the “protocol wars” of the late 20th century, wars that were finally resolved by a collective decision to use TCP/IP, or the “Internet protocol suite.”
Wikipedia sums up this period well: The Protocol Wars were “a long-running debate in computer science… when engineers, organizations and nations became polarized over the issue of which communication protocol would result in the best and most robust computer networks.” And what is a “communication protocol,” exactly? Basically, at a high level, it’s a set of rules that people agree upon to structure communication, resolve errors, and save time. These rules need to be agreed upon by all parties before they can actually get down to the business of communicating.
To be in something like the “protocol wars” for Web3 means that we are in an era where people are still working on the foundations, the infrastructure, of Web3. And as I mentioned in a previous post, Warburg Serres had a particular interest in a handful of different “foundations.” You might think of Web3 as something like this right now: You are a pharaoh, surveying some desert land outstretched before you. Many different engineers have different ideas about how to build beautiful structures they imagine known as “pyramids.” Some engineers want to build the pyramids’ foundation with a certain material that prizes durability. Other engineers want to build the pyramids’ foundation with a different material that prizes flexibility. And so on. And because these engineers are unruly and each wants a head start, they’ve already started building these foundations. Eventually, collectively, a decision will be made about which foundations to abandon, and which ones to build upon. The final result will only be one or two or three pyramids, but dozens of foundations are currently being laid, later to be abandoned.
During my time as co-founder of Warburg Serres, we bet that an engineer — a Zurich-based computer engineer named Dominic Williams — was likely to be building one of the pyramidical foundations that we would actually wind up building a full pyramid upon. We couldn’t be certain of this, of course. That’s the nature of the game! But we had a hunch that this guy was really onto something.
Overall, this post will now just serve to introduce you to Dominic (I call him “Dom”), his vision for Web3, and what’s exciting about the foundation that he is building.
Briefly, who is Dom Williams, and what makes him tick? He’s a super brilliant computer scientist who has lived in the UK and Palo Alto, among other places. Before he got into crypto/Web3, Dom was interested in gaming, running a massively multiplayer online game. Like the best people working in crypto, I find, Dom sort of fell into it backwards. As he explains in a Medium post: “By late 2013 I was working on several ventures but was being drawn to the decentralization community [i.e. crypto/Web3/whatever we will call it next year] as though by magnetic pull… Partly, of course, it was technical attraction. I love algorithms and distributed computing... But more than that, I had never encountered a technical field that combined considerations of finance, law, politics, economics and philosophy while holding the promise of driving truly impactful changes in the world. I made a bigger life decision to rededicate my career to this field.”
In other words, Dom’s arc into crypto was fundamentally similar to mine (I have cited crypto’s being “the province of philosophers” as a major reason why I’m dedicated to it). A deep love of its technical puzzles and philosophical themes — not some blind quest for lucre — brought Dom to Web3.
I’m going to avoid getting too technical in this post, and in this newsletter as it builds its audience. There will be a time to get more technical later, and when I do write a technical post (and believe me, I will), I’ll be sure to flash a warning at the top. My goal, as I’ve said in previous posts, is to create a newsletter that is deep, but also broad, and that can appeal to non-technical folks.
However, it’s crucial to say why exactly, on just a slightly technical level, I am excited about the work of Dom’s Dfinity Foundation and the Internet Computer blockchain.
Earlier I suggested that the pharaoh’s divergent engineers prioritized different qualities of the materials of the foundations they were building. One engineer prioritized durability, while another prioritized flexibility.
Carrying this analogy forward, the different engineers building different Web3 foundations today are similarly interested in certain qualities of the networks they are building.
What, broadly, does Dom — and Dfinity — prioritize? Without getting too technical, suffice it to say that what distinguished Dom from other crypto pioneers was this: Dom jointly prioritized autonomy and affordability within the decentralized networks he was building.
Let’s unpack this just a bit.
The rest of this post will need to assume you have a basic understanding of how blockchain technology works. (Matt Levine is always a good place to start this journey of understanding.) For now, I’ll just recapitulate one really basic tenet of blockchain networks: that they are fundamentally networks of computers that collectively maintain “persistent state” across the network.
With Bitcoin, the computers form a network that maintains a ledger of transactions related to a single simple application — the movement of BTC tokens. I send you half a Bitcoin? The Bitcoin network updates to reflect this transaction in the ledger. A “0.5” moves from my wallet to yours, plain and simple.
But in other networks, what exactly is being tracked and maintained can be much more complicated than money. It can be bits of code, the so-called “smart contract” that first came to be associated with Ethereum. And in theory at least, it can be other things entirely: image files, for instance.
The problem is that to encode an image file, for instance, in certain networks, is very computationally expensive. Each of us has an intuitive sense of the fact that an image file is “larger” and involves more code than, say, a simple numerical value that says, “Charlie has 2 bitcoin.”
Some crypto networks skirt this issue by saying, “Well, we won’t encode the image file into the blockchain itself. Rather, we’ll store the image on the Web 2.0 cloud somewhere — basically, on Amazon Web Services — and then we’ll sort of ‘link’ that Web 2.0 image, or at least a certificate of its ownership, on our secure blockchain.”
Dom said no to this issue-skirting. For Dom, the whole point of Web3 was to avoid relying on Amazon Web Services, to move away — as entirely as possibly — from the Web 2.0 infrastructure and its weaknesses (like “platform risk,” which is basically the risk that Jeff Bezos could go crazy and decide to nuke Amazon Web Services, for instance). This was a firm ideological point for Dom and his team on the Internet Computer.
Now, once you make this ideological commitment, you face an engineering problem. You’re committed not just to “linking out” to the image from your blockchain; you’re committed to somehow encoding the image itself INTO your blockchain. But once you make that commitment, you face those computational costs described.
Dom — and Dfinity — relentlessly dedicated themselves to the task of building an architecture that was both committed to encoding the image on the blockchain (for example), while also bringing down costs by orders of magnitude. How exactly they did this is far too technical to explain in this forum. (Though you are welcome to peruse the scholarship on the Dfinity Foundation site). The only thing that matters, for our purposes, is that they did it: it worked.
Here’s Dom, in his own words, explaining to me that his network was not the only one where you could stash an image file away from Big Tech’s cloud, but it sure did do it cheaper. He told me: “On Ethereum you can have a smart contract that can implement anything. The problem is, it just gets expensive. To give you an idea, if you upload a phone photo onto the [Ethereum] blockchain, as of September 2022 it would cost you 11,000 dollars, and in practice it would take weeks to upload. On Solana, it would cost 400 dollars a year. But on the Internet Computer [i.e. Dfinity’s product], you can store that phone photo for 1.6 cents a year.”
Here is how Dfinity summed up its project: “Today, Web3 really runs on Big Tech's cloud. Blockchains can host tokens, but only tiny amounts of data and compute, and no web.
Tomorrow, blockchains will host it all, and fully decentralize everything, from simple dApps, to billion-user social networks, the metaverse, streaming, games, orderbook exchanges, and enterprise systems.” Dfinity went so far as to brand this vision “the Internet Computer,” a moniker I’ll unpack in a future post.
This was the vision of the Internet Computer: a fully independent blockchain that didn’t rely on Big Tech to host stuff, but that hosted that stuff itself. And then, crucially, a technical architecture that was built to commit to that project, while lowering costs.
In a word, this is why I was excited by The Dfinity Foundation, Dom Williams, and the Internet Computer Protocol (ICP).
It should be noted, though, that just because I was long ICP didn’t mean I was short some of the other foundational networks Dom described. During my time at Warburg Serres, we held investments in Ethereum, which was one of the networks Dom cited as too expensive to build his vision of the internet on. Like any early-stage investor — like any pharaoh surveying a desert full of foundations — I was diversified, holding not only ICP but also ETH, DOT, BTC, NEAR, FLOW, and LYX (the tokens of other “Layer 1’s” we thought had a shot). When multiple geniuses were competing, you bet on all of them, and then monitored your bets.
Still, Dom’s vision was truly inspiring, which is why I wanted to make it a focus of an early post. And I was excited to be an enthusiastic partner of the Dfinity Foundation.