David Sacks: Cryptocurrency fulfills the 'original vision' we tried to build at PayPal

David Sacks is one of the best-known entrepreneurs and investors in Silicon Valley. He was the COO of PayPal more than 15 years ago, which made him a charter member of the so-called PayPal Mafia, a group of influential Silicon Valley investors and execs that also includes LinkedIn founder Reid Hoffman and early Facebook investor Peter Thiel.

Sacks started Yammer in 2008 and later sold it to Microsoft for $1.2 billion, and he was an early investor in Facebook, Palantir, Uber, SpaceX and Airbnb. Most recently, he served as CEO of HR software start-up Zenefits, and steered that company through some legal and financial pitfalls after replacing founding CEO Parker Conrad.

With bitcoin prices hitting new highs, I wanted to talk to him about how he views the rise of cryptocurrencies this year and what he thought of Howard Marks' recent comments in his investor letter that these digital assets "aren't real."

Here's an edited version of our conversation from last week:

Eric Jackson: As someone involved with PayPal at the beginning, what intrigues you most about the rise of these digital assets?

David Sacks: After PayPal I never thought I would get interested in payments again. But bitcoin is fulfilling PayPal's original vision to create "the new world currency." We actually had T-shirts printed in 1999 with that mission statement.

A payment is just a credit to one account and a debit to another. That's a database entry. We believed that, if we could get enough people to participate, money would never need to leave the system. PayPal could become the database of money.

We added features like interest and debit cards so you'd never have to withdraw funds to the legacy banking system. When we got acquired by eBay, that project kind of stopped.

But cryptocurrencies like bitcoin are now fulfilling that original vision. They are doing it in a decentralized way (with a decentralized database called the blockchain) whereas PayPal tried to do it in a centralized way.

Jackson: You recently tweeted that you thought cryptocurrencies have the chance to be Web 3.0. What did you mean by that?

Sacks: It feels like we are witnessing the birth of a new kind of web. Some people have called it the decentralized web or the internet of money.

The big development since the emergence of bitcoin itself is that the underlying enabling technology, the blockchain, has been turned into a developer platform. The leading platform is called ethereum. It's a platform for creating new kinds of decentralized apps and cryptocurrencies (or "tokens" or "coins"). It's also created a new funding source for this innovation in the form of Initial Coin Offerings (ICOs). So we have all the ingredients necessary for a whole new wave of innovation.

For those of us who lived through the dot-com era, this feels reminiscent. You have some of the same speculative excess and random enrichment. But you can also feel that something revolutionary is happening. Money is being made programmable. That's a fundamental change with implications we can still barely see.