The Socio-Economic History of Bitcoin
How I remember the context around Bitcoin's earliest adopters.
Bitcoin has a deep history rooted in cryptography and the nascent concept of “digital” as a place people do things. My long story short is that the internet was made but copy/paste made digital scarcity (feel) impossible. So the internet didn’t natively have money.
Paypal came along and after a few decades buying things online went from “No Carlos you can’t use my debit card to buy RuneScape, they’ll steal all my money!”-Mom to Google auto-filling my credit card on any website I want.
Web 3.0 updates this by making money native to the internet and I think it’ll completely re-invent the ad based internet economy and revolutionize the concept of ownership itself. But that’s not what this newsletter is about.
I want to zoom in to what it was like to be a young adult in the early post-2008 financial collapse era and how bitcoin just kind of lurked in the background. What kind of conversations were uninvolved onlookers having? Where were those conversations happening? What social context were they being had in?
I was entering college in 2010 right as Bitcoin was breaking all time highs into the pennies. A year or so after Obama’s election in 2009 the impression was that the banks were going to get away with destroying the US economy and bursting a housing bubble that promised to make any American with a pulse a homeowner. People were mad. They felt the government was dumping cash on banks and US manufacturers in parallel to skyrocketing the national debt. A Covid-19 style stimulus check to everyday people was near unanimously mocked - earning Fed Chair Ben Bernanke the nickname “Helicopter Ben” for having dared to mention the idea of paying people directly (instead of trickling down via corporations) as early as 2002.
There may be some nuance missing, but if you grabbed a regular person off the street and asked them about the economy they’d say things like: “Iceland is jailing the bankers, why aren’t we!”
You couldn’t have a conversation in the street without hearing about the Arab Spring, and soon after that, Occupy Wall Street.
It was the closest I’ve ever felt to seeing real global finance and wealth inequality reform. Then it all just fizzled. 2010 - 2012 said everything and changed nothing.
But Bitcoin didn’t rest.
These early days were the true wild west of the internet. YouTube was barely 6 years old and people actually explored the internet. Not like today where everyone uses the same 5 websites that aggregate (read: curate/censor) the daily things worth viewing. We used tools like StumbleUpon to literally randomize what we saw online. It was the golden age of Tumblr, macro image memes (now getting their NFT reparations), and cesspools like 4chan and the worst of Reddit.
These cesspools of (too often child) pornography, death videos, violence and hate against every and any group you could imagine were, in hindsight, the proof test that absolute freedom of speech would never work with centralized corporate intermediaries (see: Reddit’s decade long collapse of their “absolute free speech” commitment).
Now, don’t get me wrong, I’m very pro-reasonable control of this stuff. Reddit’s WatchPeopleDie subreddit probably shouldn’t have been a multi-million viewer community. Literal terrorism was regularly fantasized, planned, and bragged about on 4chan and I’m glad we have government agencies web-scraping this stuff and preventing even more mass shootings from happening.
My point is not that the golden age was good, but that it was a unique cultural cross-roads that is important to understand to understand Bitcoin.
Communities on the internet are not monoliths. They’re made up of individuals who bring their own histories, biases, goals, beliefs, and efforts to the group. Bitcoin’s overlap with the absolute freedom / anarcho-libertarian crowds is important to understand.
Some of the people who loved watching people die on Reddit were egging on 4chan terrorists while buying drugs from Silk Road with Bitcoin.
It should be obvious that the Venn diagrams are not perfectly overlapping. My friends showing me funny green text stories did their best to scroll past the dead bodies and violent pornography in search of wholesome laughs.
But they didn’t “report” those images. There wasn’t anyone to report them to. The signal and the noise were blended together and that was just the natural order of the internet. The idea of controlling the information exchange & flow required trusted centralized parties to review, delete, and suppress the unsavory.
This is the foundational schism.
There’s only 2 possible beliefs here:
Some amount of delay in information spread/flow is good because lies travel faster than truth and some information (I’m saying information but “data” or “digital content” may be easier to think about) are illegal. Trusting centralized parties to regulate information flow is a worthwhile price to pay for the positives of the internet, it can also be its own good as information can do harm too.
The internet must be fundamentally free, because any censorship is an inherent slippery slope. Freedom of speech is intrinsically freedom of information flow and thus anything that attempts to regulate information flow is censoring speech. Trusting centralized parties is antithetical to freedom. It’s best to let people (and when possible, teach people to) choose what information they want to trust instead of removing their ability to trust information deemed “bad” by empowered groups with significant conflict of interests on how information flows.
Personally, I lean in camp 1. I think that because history happened the way it happened, we have baked in societal inequalities (differences in power) and unregulated information flow worsens differences in power (e.g., how Birth of a Nation caused the 2nd rise of the Ku Klux Klan leading to widespread formalization of eugenics laws).
Having said that, I think decentralization and transparency are critical frameworks for minimizing the harm of trusting centralized parties to regulate information and we should decentralize and make transparent every critical societal system including the financial system as much as possible.
Now, you don’t have to agree with me to keep reading- the point is that the financial history of 2008-2012 combined with the golden age of the unregulated internet was the perfect storm for key cultural adoption of Bitcoin.
Specifically, cultural adoption by a group of people with extreme conviction - The type of people who are firmly in camp 2 (maximize freedom no matter the costs). The 5 drivers of this conviction were:
Desire for decentralization & transparency
They experienced a global financial crisis caused by trusted centralized parties unable to self-regulate their extremely not transparent systems.
Desire for a positive future
At the same time, there is massive political upheaval including regime change largely brought by young people feeling the future doesn’t have any opportunity for them.
Community building at scale
At the same time, the internet was getting advanced enough to have communities to talk about these issues and even plan political events that can balloon to millions of people in hundreds of cities.
A common enemy
At the same time, powerful groups were trying to take control of the internet and censor these communities. The Net Neutrality battle is still going strong.
A technology that exemplified their beliefs
At the same time there is a new digital currency, controlled by no one but operated by everyone, that allows 100% freedom in transactions including buying things that are illegal but seen as “pro-freedom” (guns, drugs).
Bitcoin for them was (and for many of us later to the party is) "taking money back" at a global scale. But this isn’t just about money. Bitcoin represents a fundamental shift in how we conceptualize the power to control information flow and trying to silo it into financial conversations about “defending against inflation”, “digital gold” is missing the point.
There are enough people who don’t feel enough freedom that they are putting billions of dollars and millions of collective hours into building decentralized, transparent information flow systems and they’re not just about money. If you are someone who worries that these systems will inherent the biases and difference in power historically embedded in the old systems - then you need to get more informed and more involved. Not to argue that the old way is better- it isn’t- but to support effective, decentralized, and transparent systems to regulate the scams, crimes, and other costs of freedom.
Thanks for reading! - Carlos off the Cuff