Bitcoin: Digital Land Rush
Abstract: The introduction of the bitcoin computer program by Satoshi Nakamoto was a fundamental advancement in computer science creating a new frontier, digital land i.e. blockspace, for humanity to explore and develop in the digital age. Bitcoin’s technological innovation of combining cryptography and computation over time for connecting abstract concepts like value and ownership to the physical world has created a paradigm shift in how humanity interacts in the digital space. Innovators utilizing the new digital property rights and blockspace are creating the first free and open market that is inclusive and equitable for all participants. Novel infrastructure is being built for utilizing bitcoin in order to capture value for meeting the demands of users of the bitcoin ecosystem.
The digital land rush started in 2009 when the first plot was recorded after Satoshi Nakamoto sent Hal Finney the first bitcoin transaction thereby initiating the beginning of a network on the bitcoin computer program. Initially, the usage of this new digital land has mainly been for recording transactions on the distribution. Now, a ripening of innovation is occurring with new ventures carving out plots of land in the digital world for building novel infrastructure. This new land rush is possible because Satoshi Nakamoto created digital property rights (contained in UTXOs) and the new digital element, blockspace. Bitcoin’s introduction of this new digital element and property rights are causing a paradigm shift in how humanity interacts in the digital world by standardizing and consolidating segmented digital spaces. Bitcoin combines blockspace and UTXOs (containers of rights to blockspace) to create the connection from the abstract world to the physical world in a “system for electronic transactions without relying on trust”. Trust isn’t required to verify the state of all blockspace because bitcoin is free and open source software and everyone has the ability to access the same new digital world, the bitcoin blockchain (chronological, work-proven ordering of valid blocks made up of blockspace). The continued adoption of blockspace, with all users operating under the same rules to access and utilize it, increases its density, thereby causing a gravitational pull for more users. Just like an atom has specific properties allowing it to serve as the basic unit of a chemical element, so does the digital elemental blockspace. These are: finite maximum size, an incorruptible state, and universal accessibility. The digital rights to access and utilize the blockspace, which are contained in UTXOs, are malleable, transferable, and protected through cryptographic and computational proof, which is to say the rights cannot be transferred without the digital signature of their owners. Personal and commercial endeavors will continue to create novel approaches for building utility on blockspace, resulting in disproportionate value accrual to the first movers carving out their new digital land.
Blockspace
The state of blockspace is incorruptible because each newly crystallized unit of blockspace utilizes proof-of-work for the infusion of energy to forge the digital element and bind the digital right to blockspace. Proof-of-work anchors digital space to reality. Because each new blockspace has a finite maximum size and incorruptible state anyone anywhere in space and time can interact with the same blockspace and build new blockspace for utilizing UTXOs. Similar to how bitcoin nodes validate the blockchain, all users past, present, and future making up the bitcoin network validate bitcoin by freely choosing to interact with all the products and services at the edges. This network created around the new digital element (blockspace) and associated digital rights will facilitate new utility creation in the exploration of the digital age. Utility will come from the anchoring of abstract concepts like money, ownership, contracts, community and truth by way of digital rights to blockspace. Value can be captured as abstract concepts are given form on the blockspace, and as demand for the utility increases, novel infrastructure, products, and services will be built around blockspace.
UTXOs and Digital Property Rights
The UTXOs, where digital rights are located, give the owner of the digital signature the ability to confirm the rights’ existence on blockspace. Bitcoin sets the bound on the base layer for digital rights to ~21,000,000.00000000 BTC or ~2.1 quadrillion sats. The total quantum of digital rights are fixed, but the free and open source nature of bitcoin’s software allows new applications to be built at the edges, providing a mechanism for increasing the utility of the rights and efficiency on accessing those rights. UTXOs being made up of digital rights do not necessarily have to be uniform in size. UTXOs can be easily transferred, divided, and combined; but UTXOs are immovable without the specific digital signature.
The rights to interact with blockspace are distributed when new blockspace is created and after being transferred amongst users of the network. The initial distribution of the right to access the digital land is programmatically disbursed with the creation of blockspace, and will be over 95% completed by the end of the decade. The right to access the digital land’s utility is open-ended, and the utility of the blockspace is derived from connecting the abstract world to the physical world. The digital land could be considered like a city block which can be built up and bulldozed down again to facilitate personal and commercial utility. In every city a business location can be created and monetized, and as time passes innovation yields new kinds of technology to facilitate new businesses to form and capitalize on the wants and needs of current users. Bitcoin network users encompass past, present, and future participants' wants and needs and have those needs carried forward into the future. An example of this is when someone first takes possession of bitcoin, i.e. the rights, and then reuses those rights later on to create a lightning channel. The channel today allows users to send messages back and forth between the two parties in a secure and near frictionless environment that is dependent on where the balance of rights to blockspace reside within the channel. Because the channel was created in the present and then pushed to the past as additional blocks are validated, those rights held within the channel continue to exist into the future within a near frictionless state. The environment is nearly frictionless because the cost to create the channel was paid upfront to access the blockspace at the time the channel was set up. The channel can be closed at a future date or can remain open indefinitely. A channel closure could be thought of like a business that is being closed because the usefulness or lack of economic activity creates a drag where the digital land would be better used for something else like a new technology for the owner of the land to capture value.
Commercial Opportunity
The attributes of blockspace provide a building ground for new commercial utility to be created. The initial bitcoin businesses were set up for selling digital property rights as forward leaning individuals and institutions realized there was something interesting with bitcoin, and being an early adopter to new technologies is one of the easiest ways to accrue value. This excitement fueled the digital land rush, and thereby jump started the bitcoin ecosystem. Businesses began to capture value facilitating the abstract concept of ownership being anchored to the physical world as users took custody by creating digital signatures for the UTXOs. Self-custody of the digital signature gives the user the sole ability to move the UTXO, because the key can be held where all abstract thought began (the human mind). Now, new businesses have emerged providing infrastructure for users to utilize blockspace. Advancement of new technologies paired with the most secure network will continue to pull in new users attracted to value thereby continuously increasing the demand for access to the next blockspace. As more entrants are pulled into the market, intersecting flywheels are propelled forward from the increased demand. The new commercial use cases will attract users, and those new users will demand new products and services, thus driving even more new commercial use cases, etc. More businesses will be created at the edges to fulfill the wants and needs of the continued growth of the network, resulting in the first free and open market in human history for tying abstract concepts to physical reality.
Today’s Businesses
The Ten31 portfolio is full of novel companies capturing value, and here are a few examples of increasing the utility of blockspace and digital property rights. Unchained Capital is a business providing bitcoin-native financial services. Unchained provides a model for bitcoin users to custody signatures in a risk limited way. Unchained leverages the inherent properties of multi-signature addresses to mitigate single points of failure. The bitcoin protocol permits the use of a quorum of multiple signatures (M/N) to access the blockspace. Users of multi-signature addresses can help mitigate the risk of losing access to the blockspace because the quorum does not have to be N/N. Unchained’s multi-signature approach provides the client with at least 1 signature Unchained controls. Therefore, the client utilizing a 2-of-3 multi-signature and holding two signatures can lose 1 signature and still unlock their blockspace utilizing their 1 remaining signature and Unchained’s 1 signature. This is a superior model to traditional signature or asset custody as the custodian traditionally has total control over the signature or asset while the user becomes a creditor and is forced to trust the custodian. Over the course of human history creditors have awoken to the reality of eroded trust and loss from custodial relationships. Unchained also provides financial services to their clients, including the ability to borrow USD against their bitcoin in over-collateralized loans secured in multi-signature addresses with the borrower still holding a signature which enables the borrower to confirm with absolute certainty the underlying plot of blockspace has not been changed. Unchained is helping provide security and redundancy to digital rights holders of the blockspace, and helping them extract incremental value from their blockspace by providing them financial services tied to the value of the digital rights.
Strike is a business working towards a more connected financial world. The novel approach taken by Strike is the utilization of multilayer solutions to seamlessly transfer value between users of fiat and bitcoin. The users are no longer siloed into fiat financial walled gardens like Paypal and Venmo or pigeonholed onto platforms only interacting with bitcoin users. Now, users for the first time can effectively pay with dollars over the lightning network. Jack Mallers, founder and CEO of Strike, believes this multi-asset value transfer protocol is the fifth payment rail and will supplant all other payment rails because of the near frictionless environment lightning channels create. Users can now effectively settle any bitcoin invoice using USD or sats instantaneously without the need for additional intermediaries. The introduction of the near frictionless state of lightning channels will outcompete antiquated, patched, and tech-debt-ridden closed source technologies for solo-asset value transfer, thereby creating a win-win for the consumer and merchant. By abstracting away any interaction with bitcoin in a secure and open way, Strike enables users to operate solely on the edges and still extract utility from the blockspace. The barriers to entry for new participants is lowered, thus allowing for new personal and commercial endeavors as the potential for innovating edge case utility is infinite in an open system. Significant value accretion will occur for companies like Strike who lower the cost of doing business and increase the value extracted from commerce by extending the utility of blockspace.
Mempool.Space is another business innovating around the interaction with blockspace. Mempool.Space provides a visualization of the blockspace, offering detailed insights into its mempool (pending digital rights transfers), lightning analytics and mining dashboards. The blockspace explorer allows users to verify transactions and evaluate if the blockspace has changed. The mempool explorer allows users to see how many transactions are in queue to be added to the coming blocks, how the block is being constructed and the fees users are paying to include their transaction in the next blockspace. Mempool’s lightning explorer allows users to graphically visualize the lightning network layer and easily navigate through lightning nodes and statistics to better optimize lightning channels. Other bitcoin companies are able to access Mempool APIs to provide fee estimation insights and evaluate blockspace transactions. As the user growth of bitcoin continues at an exponential pace the blockspace will become ever more desirable. Tools like Mempool enabling the more efficient and effective exploration and use of the blockspace will capture a premium value.
Tomorrow’s Opportunities
As humanity continues its march into the future the adoption of bitcoin depends only on the imagination of new innovators and entrepreneurs building novel technologies and sought-after products and services for blockspace. Abstract concepts like contracts, community and truth will be able to be anchored in some fashion to the blockspace in an incorruptible way with easy verification for all.
Information can be embedded in a Merkle tree connected to digital signatures tied to blockspace, such as contractual spending conditions. This type of information can be easily and selectively verified to a counterparty enabling a contractual relationship. This type of innovation is a step function upgrade from the difficulties in centuries old processes of human data manipulations and drag from a non-standardized way for categorizing and cataloging contractual verification.
Additional layers tied to blockspace can help offer people greater access to their favorite authors, musicians, performers or other like minded or alternative groups in building digital communities. Consumers of content would be able to demonstrate long-term, continuous, or intermittent consumption of the arts because of the permanency of blockspace. Artists and brands would be able to reward loyalty and create communities with exclusive benefits to members who are able to provably demonstrate the requirements.
A marketplace for truth could be created allowing users to stake their rights to blockspace on how events actually happened. A proposed truth connected in some manner to the blockspace could be subject to a binary true or false statement. Individuals could wager on if the event was true or false and after a quorum of signatures signed to the affirmative or negative winners on the correct side would collect from the losers instantly with the rights to blockspace being transferred.
The digital land rush is here, and everyone has a chance to be part of the exploration of the digital age through the use of blockspace. As the reality of this paradigm shift diffuses outward an acceleration of adoption will occur. There will be a myriad of ways new entrepreneurs and companies utilize blockspace and leverage the capabilities of its digital rights. We cannot imagine all of them right now, and there are likely to be new ones that could prove incredibly significant that no one has yet to devise. Therefore, there is likely tremendous upside to carving out a piece of this digital real estate based on the expected increase in its value, driven by the increasing demand for the utility of binding abstract concepts to the physical world for everyone everywhere to access. There is also incredible asymmetric upside from investing in the companies paving the way with new ideas for maximizing the utility, and hence value, of the blockspace, as those are the companies we expect to benefit disproportionately as the value of the blockspace increases (in response to their efforts in giving it more utility).
“It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy.” -Satoshi Nakamoto
Glossary
Abstract Concept: Having no physical or spatial constraints because they have no direct relationship in the physical world
Bitcoin: the computer program running bitcoin
Bitcoin Blockchain: Valid blocks connected in chronological order
Bitcoin Network: The total of all bitcoin users past, present, and future
Blockspace: Digital space located within each block
Bitcoin Transaction: The act of transferring rights on blockspace
BTC: 100 million sats
Digital Element: Basic unit of digital space
Digital Rights: The rights to access the digital space known as blockspace
Free and Open Source Software: A program where the code is viewable, changeable, and free to run
Proof-of-work: A crystallizing process where energy is required to forge the digital element blockspace and bind the digital rights to blockspace
Sat(s): Smallest unit of expression of the bound total of digital rights
UTXOs: Unspent Transaction Outputs, containers for digital rights.