When frontiers develop

What does it look like when a new frontier develops? With Bitcoin, we often refer to the Internet as the analogous frontier by which to envision Bitcoin’s future trajectory.  This is certainly the most appropriate comparison, as these two pieces are the yin and yang of the Digital Revolution: The Internet is the digitization of information, while Bitcoin is the complementary digitization of value.

However, this comparison has its limitations, specifically because the Internet is still developing, though our contemporaneous bias is to think of it as complete.  When we limit our Bitcoin comparisons to the early days of the Internet, we miss out on the insights we might draw about the future trajectory of Bitcoin beyond the stage of development that the Internet has now reached.   

Looking back further in time, we can identify previous frontiers whose development has now reached completion.  With one of those examples as a guide, it’s possible to take a deeper look at the evolutionary stages of that former frontier’s development.  By comparison, we can take stock of where Bitcoin lies in that journey, and what that could mean for Bitcoin’s arc into the future.

This will be an extended analogy, and while the nature and specifics of the comparison may vary drastically in some respects, the broad brush strokes of history have much to teach us.

As a starting point, this is my core assertion: the Internet in 2008 was like America in 1802.

The Early Days: the American West & Bitcoin

Colonies to Country

The seed of American westward expansionism has been a part of the fabric of the American identity since European settlers first arrived in the New World in the 1620s.  When coastal footholds on the Eastern seaboard flourished enough that new settlers arrived to lay claim to their piece of the New World, they headed inland, westward.  For the next 150 years, the British colonies of America flourished like a bacteria colony in a fertile petri dish, gradually overpowering the native populations in a long series of expansionist conflicts. 

With the American Revolution cementing American self-determination, the new nation could shift its attention at last from its preoccupation with the crown to the East and unleash its appetite for growth to the West.  In 1787, the United States created the Northwest Territory, establishing the framework for the conquest and settling of the exotic land in the distant West known as Ohio.  In 1795, the United States secured “right of deposit” in New Orleans from Spain, ensuring that American merchants had rights to conduct commerce in and through the vital port at the mouth of the Mississippi that marked the western edge of the American sphere of influence.  This brings us to 1802.  What did America look like in 1802?  

From a contemporaneous vantage point, America had achieved a great deal.  The first colonies in the 1620s had flourished and developed to a point that they had declared themselves self-sovereign.  At the time, it would have been difficult to imagine how much more America would develop in the years to come.  As a result of the perpetual logical fallacy of imagining the present as the end-state of things, a citizen in 1802 would have likely imagined that America had already reached its fully formed state in its 180-year history.  And this is where the similarity to the Internet in 2008 begins.  

ARPANET, the earliest colony of what would become the Internet, launched in 1969.  By 2008, the Internet had already achieved so much.  To most casual observers 40 years into the Internet’s development, the bulk of the Internet had already been created.  Since it’s a recent enough history, we can all recall what that time felt like on the Internet - we had Google, Amazon, Facebook, iTunes, YouTube, how much more was there to create?

But for America in 1802, just like the Internet in 2008, everything was about to change.

The Louisiana Purchase

In 1803, the right of American merchants to pass through New Orleans became muddled when the Spanish ceded control of the city to the French.  In response, President Jefferson dispatched James Monroe and Robert Livingston to Paris to negotiate the purchase of New Orleans.  

Days before Monroe arrived in Paris, Napoleon happened to experience a swing of disinterest in Louisiana in its entirety.  Cut off from further guidance by the lengthy Transatlantic correspondence delay, Monroe and Livingston wrestled with the magnitude of what was on the table: “The field opened to us is infinitely larger than our instructions contemplated.”  

But Monroe already had the seed of an exceptional idea in his head, long before the term “manifest destiny” would put a name to it or the eponymous Monroe Doctrine would turn this idea into a protectionist foreign policy.  Monroe believed that the New World should be allowed to develop as a sovereign land unto its own, and that the United States was to be the natural leader of the Western Hemisphere.  It’s worth underlining just how forward-thinking Monroe’s budding vision of America’s grand destiny was for the time: “Monroe knew that the land he thought of buying did not even exist in the minds of most Americans. The fact that the land west of the great river was much more extensive than the better-known eastern part was not only unknown, but quite unthinkable.”  

Long before the average American wanted a slice of the West, before they were even aware of lands west of the Mississippi, James Monroe had vision enough to understand its value.  As a result, Monroe and Livingston boldly agreed to the Louisiana Purchase that would change the United States forever, and irreversibly set in motion the American conquest of the West.  Despite the obvious magnitude of this milestone in American history with the benefit of ample hindsight, at the time Monroe and Livingston returned home to criticism from the press for acquiring “a vast wilderness world which will… prove worse than useless to us.” 

You may have already realized the parallel, but in this analogy, the Louisiana Purchase on July 4th, 1803 can be considered akin to the launch of Bitcoin on January 9th, 2009.  While Satoshi’s creation of Bitcoin is far more impressive than Monroe’s lucky acquisition of a vast unknown western region for the United States, they can be thought of as similar forward-thinkers who broke the paradigm of what was possible and opened up a vast new frontier land for others to explore and develop.   

Early exploration: Lewis and Clark / the Cypherpunks

Shortly after the Louisiana Purchase was finalized, President Jefferson realized that this frontier needed to be explored, particularly with the hope of identifying viable rivers for commercial transportation (as the flatter Eastern half of the country enjoys with its broad waterways).  He charged his secretary and former Army Captain, Meriwether Lewis (who in turn recruited his friend, William Clark), with heading the expedition.  

Over the next few years, Lewis and Clark explored the American plains, Rocky Mountains, and Pacific Northwest.  In doing so, they were the first non-Natives to venture into this vast wilderness.  In effect, their expedition pierced the imposing silence of the total unknown.  Having done so, they were able to put the first lines on a previously blank map.  The American West was no longer a vast and intimidating blank spot on a map, now it had its rough contours sketched out:

In this way, we can think of the Lewis and Clark Expedition as Hal Finney and the other cypherpunks who were first to explore Bitcoin’s potential in 2009-10.  Their contributions were not focused on building infrastructure or companies, but in being the first ones to report on the merits and potential of this new creation, thereby enticing others to follow.  In effect, their contribution was to make the unknown knowable and launch the viral word-of-mouth phenomenon that drives Bitcoin’s network effect. 

First infrastructure: Mountain Men / the Earliest Exchanges & Bitcoin Companies

Next, the testimony and documentation of Lewis and Clark invited mountain men.  These intrepid souls, the mythic images of rugged individualism, explored further and laid the earliest foundations of infrastructure to make this extreme frontier a little more accessible for those who would follow.  3,000 roamed the North American Rocky Mountains from 1810 to the early 1840s. With no established infrastructure, their existence in the West was defined by unforgiving conditions and pure self-reliance.   

In Bitcoin, the earliest frontiersmen were the miners and speculators who engaged with Bitcoin before there were any marketplaces at all, and who presided over the development of the earliest exchanges, culminating in the first major exchange, Mt. Gox. Some of these early frontiersmen would go on to establish their own trading posts or fur trapping companies, akin to the Bitcoin O.G.’s who founded companies like Kraken, Grayscale, or Blockstream.

It’s worth reflecting on what types of people were mountain men, and similarly, what kind of people were drawn to Bitcoin in 2011-12, before Bitcoin broke through $10 for good.  In the fur trapper frontier days of the American West, it took a wild man to survive and thrive.  

These wild men contributed firsts.  Jedediah Smith was the first to explore the Sierra Nevada mountains, cross the Mojave, and discover the crucial South Pass, a navigable route through the Continental Divide which would enable the Oregon Trail.  In the process, he survived “three Native American massacres and one bear mauling.”  Most early Bitcoiners have survived their share of hacks and attacks, and all have been mauled by a bear or two.

These were also men of legend, whose exploits became myth and whose tales became tall.  Jim Bridger liked to tell greenhorns “of his pursuit by one hundred Cheyenne warriors. After being chased for several miles, Bridger found himself at the end of a box canyon, with the Indians bearing down on him. At this point, Bridger would go silent, prompting his listener to ask, ‘What happened then, Mr. Bridger?’ Bridger would then reply, ‘They killed me.’ ”  But often, these colorful tales were rooted in the remarkable experiences these men had as trailblazers.  John Colter was the first to explore Yellowstone, though his claims of a boiling water shooting from the ground earned his discovery the jeering name of “Colter’s Hell.”  In a similar vein, Laszlo Hanyecz was the first to spend Bitcoin for a real-world product, paying 10,000 Bitcoin for a pair of pizzas, a landmark first that has since generated plenty of jeers from a misunderstanding public.

While you could say that it took an intrepid and daring man to thrive on the frontier, you could conversely say that the kind of man who sought a living in the unforgiving West often did so because they were marginalized from or otherwise unsuited to civilized society.  As an example of the extreme personalities of many mountain men, to avenge his wife’s death, John “Liver-Eating” Johnson “killed and scalped more than 300 Crow Indians and then devoured their livers”.  Although not quite so sensationally colorful, some early Bitcoin users were similarly driven to adopt Bitcoin as a result of their personalities or life circumstances disenfranchising them from mainstream banking.  Wikileaks was forced to accept Bitcoin when its bank accounts were frozen.  And of course, one of the earliest use cases of Bitcoin was for illicit transactions outside of the purview of traditional banking infrastructure on the Dark Web.

Pioneering adoption: Oregon Trail / Bitcoin maximalists

Building off the scant trading post infrastructure and routes established by the frontiersmen, adventurous folk searching for opportunity began to trek westward, drawn by whispers of bountiful farmland in the new territory of Oregon.  In 1839, a group of 18 men set out from Illinois carrying a large flag with their motto “Oregon Or The Grave”; nine made it to Oregon.  It’s not hard to imagine a similar flag flying at a Bitcoin maximalist citadel.

In 1843, 1,000 migrants set out for Oregon in what would be known as “The Great Migration of 1843”.  Those who reached Oregon in 1843 were granted, free of charge, 640 acres of farmland per married couple.  This was decreased to 320 acres in 1850, and further restricted to 160 in 1862.  

These pioneers are akin to the Bitcoiners who showed up post-Mt. Gox, through to the Class of 2020.  These are the individuals who saw the promise and opportunity of Bitcoin and seized it, despite the dangers that mainstream society warned us of.  In the same way that the Oregon Trail was fraught with perils, so too is the journey from precoiner to Bitcoin maximalism.  A greenhorn in digital assets has to navigate the treacherous landscape of cryptocurrency information available online, fending off scammers like Indian braves seeking scalps, and finding the right passage through the Rocky Mountains of shitcoinery. Breaking an axle is akin to losing funds in an exchange hack, dysentery like mismanaging keys, tempting shortcuts through the mountains like leverage trading on BitMex. The journey to the promised land of financial security and a brighter future is full of dangers, but the promise of a better life beckons the adventurous and bold.  

Those who successfully navigated the journey of education and reached the promised land of Bitcoin maximalism found themselves able to convert their fiat savings into dozens or even hundreds of Bitcoin, simply because so few had thus far reached the same intellectual destination - there was ample acreage of Bitcoin land available because there was not yet much demand competing over available supply.

Most of us in this contingent did not complete the journey without difficult losses along the way - the journey demanded a pound of flesh, and left us scarred and hardened.  Our rewards are not lightly won.  In just the same way that we look back in time at the earliest to make the journey to Oregon as lucky for the large ranches they received as their reward (while discounting that they lost family members along the way), future Bitcoiners will discount the hardship and loss we early maximalists endured while finding our way to the ample bounty of stacking sats before the rest of the world arrived.

Finally, it’s illuminating to consider recent Bitcoin adoption through this lens of men and women seeking a brighter future, willing to risk what they have on a perilous journey to reach it. For whatever reason, the conventional belief in our culture is that the smartest are the first to figure out the value of something new and world-changing. But this is not the case with Bitcoin, or with the pioneers of past frontiers. It’s not intelligence that decides who is first to embrace a high-risk, high-reward opportunity. Instead, it’s the combination of drive to create a better future, willingness to risk ruin, and bold character that is necessary to stride into the unknown against the urging of friends, family, and society.

The American West’s past and Bitcoin’s future

All the history we’ve now walked through was to get to this point.  Over the previous sections, we’ve tracked the spiritually parallel arcs of the early days of the American West and the early days of Bitcoin.  But now, we have arrived at Bitcoin’s present.  

It’s here that we can draw insights about what lays ahead for Bitcoin by taking notice of the arc that the American West followed after 1845.  From this example, we can get a sense for what it looks like when a frontier is incrementally developed and integrated into the mainstream, and by extension, what lays ahead for Bitcoin. 

Early adopters: California Gold Rush / 2021 Bull Market

By 1845, the American West had developed a great deal.  To a mountain man, the fledgling infrastructure of established trails and interconnected trading posts would have been jarringly different from the entirely unknown wilderness of 1810.  And yet, it would have been very wrong to imagine that the West had finished developing, or even that its early burst of development would slow.  

With the Oregon Trail and its California Trail branch decently established by 1845, it made the news of gold very different in 1849.  Rather than some distant rumor of fortunes being made in an inaccessible foreign land, the discovery of gold in California’s foothills poured gasoline on the narrative that had already been percolating in the eastern states: there is opportunity in the West.  It wouldn’t be until 1865 that this idea was famously distilled into its essential meme: “Go West, young man.”  With the advantages of information exchange on the Internet, we already have our analogous encapsulation of the path to a brighter future: “stack sats, stay humble.”

The 1849 California Gold Rush brought a flood of 300,000 adventurous spirits seeking riches in the West.  Many of them arrived via the California Trail overland route, supported by its associated infrastructure built by the earlier Oregon pioneers and the mountain men before them.    

It’s interesting to note the cultural shift that the California Gold Rush represents with regard to the mainstream concept of what the West was or could mean for them.  When Monroe secured the Louisiana Purchase, most Americans didn’t know about or care about anything West of the Mississippi - the entire concept was far outside of the paradigm they lived in, and therefore was summarily dismissed in the collective social consciousness.  

A few decades later, in 1849, the news of gold in California serves as a flashpoint that ignites a growing cultural unconscious recognition that there is opportunity in the West.  Suddenly, everyone wanted a slice of the American West, though their preoccupation was with unearthing riches to take home to create a better life for themselves in the East. It’s worth noting that the allure of the Gold Rush was not confined to America, either.  People from all over the world were drawn to California, seeking economic opportunity in the gold fields, or as the Chinese called it, “Gold Mountain.”  

It’s quite possible that the Bitcoin Bull Market of 2021 will set off a similar flashpoint, igniting the unconscious cultural recognition that has been growing under the surface that Bitcoin is here to stay, and something that everyone wants a piece of (after ignoring it for the last decade). This gold rush will also not be confined to Internet natives and digital companies, but will draw in “foreign” demand from legacy markets and physical store-of-value asset classes, bringing these analog businesses and investment types to the Internet’s shores, into the fold of the digitization of everything.   

Access reaches the mainstream: Transcontinental Railroads / Retail Banking goes Bitcoin

The further we extrapolate from Bitcoin’s present and the American West’s state in 1845, the less clear the portents become.  That being said, the late 1800s in the American West involved a prevailing theme: increasing access to the masses.  With everyone wanting a slice of the American West, there was business to be had by making it easier for people to access the West.  Covered wagons bumping along in earthen ruts was grossly mismatched to the broad demand for transportation to the West.  Among titans of industry, the race was on: whoever could complete a Transcontinental Railroad line first would receive booming business.  

Because of the considerable capital expenditures and land requirements involved in creating a Transcontinental Railroad, coalitions formed to lobby Congress for their plans’ selection.  Disagreements on whether the route should originate in the North or the South became unstuck when the South seceded, and the route from Omaha to Sacramento was selected.

This project, a collaboration of the three railroad companies (run by executives with soon-to-be “old money” names like Stanford and Huntington), was completed in 1869 when Leland Stanford drove the final spike that connected the railroad segments.  

This new generation of infrastructure helped open the West to commerce and tourism on a scale that would have seemed impossible to the mountain men a few decades earlier.  This phase of frontier development involved the alignment of big business and regulatory bodies, in response to the overwhelming demand from the public for access to the West.  

It’s not too difficult to imagine that a similar phase of development might be on the horizon for Bitcoin.  If public demand continues growing for access to Bitcoin as a store of value, large corporate interests like banks will build the infrastructure necessary for them to profit from this demand.  Indeed, the early stages of just such a push are already in motion, with the OCC issuing guidance allowing for national banks to provide cryptocurrency custody services to their customers.  With Cynthia Lummis voted in as the first proudly pro-Bitcoin U.S. Senator, and a growing number of Bitcoiners in Congress, it’s not too hard to imagine these trends continuing and the mutual collaboration of big business and legislators allowing for increasing approval of Bitcoin and integration of the asset into traditional banking business models.

Integration into the mainstream: Statehood and Highways / The Bitcoin Standard

While the industrial railroad infrastructure opened the West to economic pursuit and broader settlement, the following decades would be characterized by the fleshing out of this early scaffold of development.  

Towns popped up along the railroad artery, themselves becoming ports of trade for a branching network of smaller outpost towns further out in the hills or prairies.  Eventually, these constituent regions sought to organize themselves into legislative bodies and apply for statehood.  Trails were broadened into dirt roads which were eventually paved.  The automobile industrialized personal transportation and eventually begot highways.

By the middle of the 20th century, the West was just about as developed as the East, despite its 200 year head start.  

Today, it’s nearly impossible to imagine America as anything short of “sea to shining sea.”  Perhaps it was America’s manifest destiny from the start, but perhaps it was made so by the bold step of a visionary like James Monroe, who set in motion an inevitable and self-reinforcing chain reaction of individualistic decisions to seek economic opportunity in the West.  At first, gradually, then suddenly.  

Similarly, it is only natural to imagine Bitcoin’s current state as its terminal stage of development.  However, by recognizing just how early it is in its adoption and ecosystem development, we gain perspective about how much more development remains.  Hopefully, through the analogy of the American West, it’s a little easier to conceive of the flywheel of network effects driving increasing adoption and eventually culminating in the Internet’s manifest destiny: The Bitcoin Standard.