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The United States of Ethereum: A Brief History

A Map of Crypto - Part 4

For Part 3, see The General, The Banker, and The Fool

The crypto territory which would eventually become the United States of Ethereum was first explored in 2013 by one Vitalik Buterin. After surveying the territory, he enlisted the support of several others, including engineers, land investors, and public planners to develop the region into a habitable settlement.

Under the guidance of these founding fathers, the digital nation of Ethereum was formally established in 2015 on the frontier of the new crypto landscape with the launch of its governing protocol. Following the vision of Buterin, the new nation's constitution and governing protocol was written to emphasize and enforce ideals of decentralized power, freedom of speech, and permissionless innovation. In the time leading up to and shortly following its establishment, the new fledging nation of Ethereum served as a destination for crypto emigrants who left the old world of bitcoin due to a lack of opportunity and stifled prospects for innovation for the new world of Turing complete blockchains.

The new nation established a currency called "ether" or ETH, which it used to pay a mercenary army of Miners for defense against external enemy attack. Within the safe digital boundaries of Ethereum maintained by this mercenary army, citizens with an established Ethereum residency and address could pay with ETH to move goods and develop new services within the Ethereum economy.

Although it strove to maintain the ideals upon which it was established, the young fledging nation was not without troubles. In 2016, a civil war broke out over a theft of funds from "The DAO", a funding collective within the Ethereum nation. The fundamental issue which led to the war was that the "theft" was fully "legal" under the young nation's constitution. On one side of the war were those who wished for the funds to be returned even if the return violated the letter-of-the-law in the governing protocol and on the other side were those who wished for the governing protocol to remain unmodified even if this resulted in a permanent loss of funds for those who had participated in The Dao (at the time a significant portion of Ethereum's settler population). The resulting rift spilt the nation in two: Ethereum (where the affected parties were reimbursed with an alteration of the constitution and governing protocol) and Ethereum Classic (where the funds were allowed to remain stolen in agreement with the original governing protocol).

In the aftermath of its civil war, Ethereum recovered and began to develop a vibrant local economy. Due to its flexible governance protocol and the establishment of token standards for the identification of ownership and funding, Ethereum became a central economic hub for trading and speculation on the crypto frontier. In particular, among the various crypto nation-states Ethereum merchants dominated in the trade of ownership tokens and digital commodities. Alongside the newfound economic wealth and power, Ethereum also developed as a cultural center with a digital goods and digital gaming economy. This lead to Ethereum's first speculative economic bubble period in 2017, where a flood of speculative investment schemes entered the Ethereum economy.

As with all speculative manias, the good times eventually did come to an end for Ethereum when many of the speculative investments advertised during this period were eventually found to be without economic merit. Ethereum then entered it's great depression period of 2018-2020. During this time Ethereum experienced significant economic contraction, inflation of its native currency, and a loss of purchasing power for its local residents. However, all was not lost, from the ashes of the speculative mania sprouted a new generation of entrepreneurs and engineers. This new generation conceived of a number of novel and robust economic protocols.

It was during this period that the Uniswap exchange, a simple yet powerful token marketplace, was established. This period also saw the rise of decentralized lenders like MakerDao, Compound, and Aave which allowed borrowers to stake collateral in exchange for a loan of comparably stable non-native currencies like USDC. The easier access to credit and lax monetary policy of Ethereum governance resulted in an economic boom (the Defi Boom) and Ethereum's second speculative bubble mania in the 2021-2022 period.

During this economic boom period Ethereum also underwent significant governmental changes and reform. The high inflation rates of the nation's early history were deemed excessive and a plan was put in place to put the monetary policy of Ethereum on a more sustainable path. In 2021 Ethereum instituted its first sales tax (nicknamed the burn) on all transaction which occurred within the Ethereum economy. Although initially very controversial, the sales tax was eventually widely praised for its efficient and programmatic implementation which tightened economic conditions (raised taxes) during periods of mania and loosened economic conditions (lowered taxes) during periods of sluggish economic activity. In addition, shortly after the implementation of its national sales taxes, Ethereum reformed its military from an expensive mercenary Miner security model to a more efficient one based on a home-grown and nation aligned military made up of Validators paid for with government bonds. This transition results in a short-lived Miner rebellion in 2022 resulting in the temporary nation of EthereumPOW when military activities was formally transitioned from Miners to Validators.

The economic boom period of 2021-2022 also attracted a large number of new settlers to Ethereum. Although the new population added to Ethereum's economic growth and power, the net migration also led to significant overpopulation, city congestion, and demand based inflation. During this time, significant outward expansion and development of the territories around Ethereum occurred resulting in several newly founded States within the Ethereum Nation. The State of Arbitrum (a financial hub), the State of Optimism (a governance and economic collective), as well as a number of other governance and economic zones within Ethereum were founded starting in this period.

With these new States, the now United States of Ethereum made significant strides towards a more robust federated governance model. At the core, the District of Ethereum would remain the central hub for governance, economic, and military policy, while individual states offered citizens lower cost of living, more localized governance, and specialized services depending on the needs of the local population.

The DeFi boom period ended in 2022 with a great financial crisis caused by lax lending standards of centralized neobanks which served the crypto frontier. The United States of Ethereum entered another period of economic contraction, although this time the contraction was less severe due to the previous governmental reforms as well as the robust decentralized finance infrastructure that had been put in place in the years leading up to the financial crisis. In the years following, Ethereum recovered much of its economic activity and price stability and in 2024 a new wave of investment and mania appears to be just over the horizon.

While still a young nation, the United States of Ethereum has achieved significant progress in terms of a stable governance, economic, and military policy since its founding in 2015. The foresight of it's founding fathers and the robust decentralized governance model they established have placed The United States of Ethereum in a remarkably good position to compete as a nation not just on the crypto frontier but also in the global economy of 2024 and beyond. What heights will Ethereum reach? Only time will tell.

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