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“Bitcoin is the largest software R&D company in the world,” said venture capitalist Chris Dixon Tuesday, arguing that great innovation no longer originates in places like Bell Labs, but instead comes from distributed communities, such as the thousands of engineers around the world who are now tinkering with virtual currencies. Dixon, a partner at Andreessen Horowitz and an influential voice in the tech world, spoke in New York at WIRED BizCon, where he shared some thoughts on the current state of technology and the economy.

A long-time booster of bitcoin, Dixon defended the currency in response to interviewer Stephen Levy’s suggestion that its primary appeal is to libertarians and other political outliers.

“You almost need these political movements to sustain these things,” said Dixon, adding that many bitcoin champions share the values of the open source movement, which helped end AOL’s dominance of the consumer internet in the early 1990’s.

Dixon also explained his company’s big bet on wallet service Coinbase, which he likened to a Gmail for bitcoin, and explained the economic appeal of virtual currencies.

“In the same way the internet has been a deflationary force in media and advertising and a lot of other areas, it will be the same thing for payments,” he said, adding that services like crowd-funding and micropayments have been held back by the expense and inefficiencies of conventional payment platforms.

Bubbles and New York City

The b-word has been on a lot of lips lately, including Om’s, and so it was no surprise that Dixon was asked to opine on whether tech is in a bubble.

Dixon didn’t provide any definitive answer, but argues that bubble fears are a generational phenomenon. He also noted that he shares the cyclical theory of innovation espoused by Carlota Perez, and that Andreessen Horowitz’s investments are five-to-ten year bets, rather than short-term ones. He also questioned whether the way the market values new and old companies makes sense in the first place.

“Was Nest a bubble? You can argue that Honeywell is a bubble … they make archaic thermostats,” he said, explaining that it was not obvious why Honeywell should be worth 30 times as much as Nest, the smart home device maker acquired in January by Google.

Dixon also fielded a question now familiar at New York’s tech confabs — when (if ever) Gotham will rival Silicon Valley as in innovation hub.

“New York has always been an application city … It’s not about inventing technology, but applying it,” he said, adding that it takes 20-30 years to build up the sort of talent infrastructure found in Silicon Valley. No time soon in other words.