Photo by Thom Holmes on Unsplash
Throughout history, segments of the human population have sought out a novel physical space that presents higher levels of risk and reward. This phenomenon drives large-scale demographic shifts and is in large part the cause of the global diaspora.
The human species is not unique in its propensity for expansion.
Similar to the process of osmosis, biological organisms naturally drift from areas of higher to lower concentration. From high competition/safety to low competition/danger.
We call species that upset the balance of pre-existing ecosystems 'invasive,' but really they are simply acting out a genetic mandate to expand and proliferate.
Human history is rife with examples of this same process. From the migration of homo sapiens across the Bering Strait to the conquest and settlement of the Americas by Spanish conquistadores, people always and will continue to seek out new territories.
Each age has different areas where the potential for asymmetric upside resides.Its own frontiers where only the bold dare venture.
While the present-day still has uncharted physical space to explore (notably deep sea and outer space), the frontier of the information age is, unsurprisingly, a digital one.
Crypto, the metaverse, Web3–whatever you call it, these informational networks are the new frontier of the present digital epoch.
Risk and Reward
Being a settler on the edge of the frontier is not without risk.
Just under one out of every ten settlers who set out on the Oregon Trail died before reaching their destination.
Why would anyone in their right mind choose to take a gamble with such potentially disastrous consequences?
Because the potential upside was sufficient enough to entice the more adventurous and industrious of the species–those with a high tolerance for risk, relatively little to lose, or some combination of both. History rewards and punishes early adopters in equal measure.
Crypto too, has its dangers.
Hacks, rug pulls, and plain old Ponzi schemes abound. If there are a million ways to part a man from his money crypto can lay claim to most of them.
Does that make the whole industry a scam?
Would you call the settlement of the Americas a scam? How about the proliferation of Burmese Pythons in Southern Florida? It doesn't make sense to use the term when describing these events. Nor does it when applied to crypto.
What crypto is, is a volatile, revolutionary, and hyper-competitive technology that evolved out of the decentralized open economy in the process of supplanting historically sheltered and flat-footed incumbents of the banking and financial industry.
It's possible there will come a time when crypto's volatility is significantly reduced. When you can gain exposure to BTC and ETH through an ETF in your 401k. It's also possible that by this time the risk/reward ratio will have reached a more stable equilibrium and the opportunity for it to create life-changing money will have already passed.
There is a lot of debate about where we are in crypto's life-cycle and how much further it stands to grow. If you compare Bitcoin's market cap to gold, then to all the money and markets in existence, I'd say there's still a pretty high ceiling left.
The Layer 2 Scaling Gold Rush
If crypto is the frontier of the information age, Layer 2 scaling solutions are burgeoning colonies being carved out of the wilderness.
It's looking more and more likely that the governor created by Ethereum's scaling dilemma may finally be close to being removed.
This is happening through a combination of Layer 2 scaling solutions: particularly roll-ups, sidechains, interoperable Layer 1's, and the merge to proof of stake.
We are at present in the midst of the Layer 2 expansion, with roll-up solutions like Arbitrum and Optimism gaining TVL (total value locked) by the day. A handful of DeFi blue chips like Synthetix, Uniswap, and Sushiswap have already been deployed.
Competing Layer 1's (so-called "Ethereum killers") only serve to solidify Ethereum's uncompromising commitment to the blockchain trilemma of decentralization, security, and scalability. Technologies like Solana may beat Ethereum on throughput, but only at the expense of the other two corners of the triangle.
It’s my belief that far from being Ethereum killers, chains like Solana and Avalanche serve as forward bases for Ethereum, providing a refuge from high gas costs for hardscrabble settlers. They also provide a working model of what a high throughput future will look and feel like on mainnet.
Competition is good. It's the force that drives innovation.
This is perhaps only more so in the new open economy, where opportunity awaits any with the imagination, technical knowledge, and chutzpah to create the future.
The early adopters of these experimental solutions to network scaling will receive the benefits of early adoption.
That is if they can survive long enough to do so.
