Changing ‘change’ – Short history of that change in your pocket.

I’ve been hearing about Bitcoin a lot lately and when I learnt how Bitcoins were ‘mined’, it reminded me of how societies change what they value and the concept of money changes with that.

Civilizations value what they deem is the most important and the worth of anything, either a hard day’s labor or a exquisite piece of art is valued with respect to that commodity. The ancients valued food or sustenance above all and long before the great cities rose people were trading using food the grew, meat or hunted. Thus the barter system was born. Slowly as people started settling in agricultural societies started valuing their staple diets more and more, and nomadic communities their herds of cattle.  No sooner, the worth of a man was measured either by the sacks of rice or a the herds of sheep he had.

GOLD!

GOLD!

When the first man saw the bright sunlight gleaming on the yellow metal the history of mankind was forever changed. Cities fell, civilizations wiped out and ordinary humans became gods in the eyes of the beholder, all because of the shiny pieces of gold  they had. Soon precious metals were considered valuable and coins were minted with gold and silver to be used as currencies. These coins had intrinsic value, irrespective of who minted these coins, they were valuable for the materials in which they were made from. This sparked the global trade to flourish in a much wider scale. Although people did not want the commodities you were selling, everybody loved gold!

But carrying something like gold which had intrinsic value had its disadvantages, you were vulnerable to robbery and theft and you could carry only so much and not weighed down by it. So, some renowned trade houses started offering promissory notes that you indeed possessed the amount of gold that was written on that piece of parchment. It was safer now to travel with all your wealth in your pocket. You could exchange the note for the gold at any franchise of the trading house or you could directly trade using the promissory note. Thus the first currency was born. This was a very successful endeavor indeed, some promissory notes issued by large trading houses in India were so popular that they were valued as far as Mesopotamia and Egypt  Even kings did not posses that much influence. Empires rose and fall, dynasties perished, armies clashed but trading houses and conglomerates survived Millenniums.

Gold seemed to be the perfect currency, it seemed flawless but now we know that it also reacts to the forces of demand and supply. When the time of kings and tyrants had passed, governments rose. One centralized authority that promised that it could and would protect your life’s work; the first gold backed currencies were born. Now, these currencies were backed by gold or other precious commodity which the government held in huge lockers in undisclosed locations and printed currencies equal to the value of the commodity that the country possessed.

Thousand rupee note - India

Thousand rupee note – India

Once the evolutionary urge of survival is not necessary anymore, the second most powerful urge, the urge to reproduce kicks in. Humanity grew in an explosive rate.  The number of people kept growing in an exponential pace but the amount of precious metal remained the same. The move away from commodity backed currency was inevitable. Governments started printing money. Neither did this type of money have any intrinsic value nor was it backed by any commodity, it had value because governments said so. This type of money is called Fiat money. This type of currency has value because people say it has value, funny isn’t it? This is called the Tinkerbell effect, something exists or is valuable because people believe that it does! From the salary you are paid to the country’s economy to international trade depends on the one single basic fact that people and governments are trustworthy; ironic isn’t it? That government, which is run by “corrupt” politicians and executives, that we sometimes hate and bitch about is the single  thing that is holding your sh*t together! When you read “I promise to pay the bearer the sum of…” on that bank note, it really is just a promise.

When governments like that are afraid of something then you can bet your money that it is indeed powerful. Yes, I am talking about the internet. It has transcended country, religion and racial lines. It has elected presidents and overthrown dictators. So, when the internet democratizes the playing field, it does not stop for anything. You might have heard this before but Bitcoin which is the currency of the internet has no centralized authority. It is a peer to peer currency that exists on the world wide web. Bitcoin is “Mined” by performing complex calculations using powerful systems. That’s right, Calculation are turned into currency. When the world moves into the new digital age, not commodities, not governments but the power of calculation and intelligence will hold the key.

Bitcoin

Bitcoin

The internet is not some artificial hive mind, it is a network of people and people are unpredictable. This also translates to Bitcoin, but it clearly shows us what has become the valuable commodity of this digital age. Even if it does not become the standard currency it has ushered  us into a new age and has changed our perspectives.

More on Bitcoin here.

The Butterfly Effect

I want to tell you a story. Since this is a real story, we will have to wade through a bit of history first, bear it with me. Jean-François de Galaup, Count of Lapérouse was a French Naval officer from 1756 – 1788. He was an explorer and he even fought in the American Revolutionary war. After the 1783 Treaty of Paris, he was appointed as the Minister of Marine by the then King of France, Louis XVI. As a result he embarked on a scientific expedition around the world.

Jean François de Galaup, comte de Lapérouse

Jean François de Galaup, comte de Lapérouse

He left France on August 1 1785, he sailed towards Chille, on April 9 1786 he reached the Easter Islands, and then he traveled to the Hawaiian Islands. Then he traveled to Alaska, his men visited with the Tlingit tribe; did not murder them like European sailors used to, then went on to sail towards California and reached San Francisco. Then he crossed the Pacific Ocean in a 100 day journey toward East Asia and reached Macau. He visited Japan, Russia and then Australia on 24 January 1788, exploring and observing the environment throughout his voyage. He wrote that he expected to be back in France by June 1789 but neither he nor any of his crew was ever seen again. Although Swords and Cannon balls from the ship surfaced all around the world from time to time, the actual shipwreck was never found adding to the mystery of Lapérouse.

Among his crew were a Mathematician, an Astronomer, a Botanist, a Geologist, a Physicist, a Naturalist, three illustrators and various other scientists. Even his chaplains were scientifically schooled. The man had a penchant for the scientifically educated, but that is not my point. In total there were 114 members in his crew and everyone liked him.

One of the men who applied for the expedition was a young 16 year old second lieutenant from Paris’s military academy. He was a Corsican and was very much interested in serving in the navy where his proficiency in mathematics and artillery, both valued skills on warships would be put to better use. He made the preliminary list but was ultimately not chosen for the voyage and remained behind in France. His name was Napoleon Bonaparte.

Napoleon Crossing the Alps

Napoleon Crossing the Alps

Napoleon Bonaparte is considered to be one of the greatest military generals in history among legends like Genghis Khan and Alexander the Great. He shaped history, from the Napoleonic wars to the Napoleonic Code, which has been a major influence on many civil law jurisdictions worldwide. Imagine a world where there was no Napoleon, it is not quite possible; too many things have changed because of him. His actions will echo throughout the time civilization exists; He is a fixed point in time.

Do you know about chaos theory? Chaos theory is a field of study in mathematics, with applications in several disciplines including physics, engineering, economics, biology, and philosophy. Chaos theory studies the behavior of dynamical systems that are highly sensitive to initial conditions, an effect which is popularly referred to as the Butterfly Effect(also a movie starring Ashton Kutcher, exploring the implications of this very same principle). Imagine a source of light, now imagine that you have an object of a definite size in the field of illumination of the source, the size of the shadow the object casts depends on the proximity of the object to the light source. Closer the object  the larger the area that is in the dark. Likewise in chaos theory, a small change in the initial conditions will result in a disruptive change in the end.Lorenz_system_r28_s10_b2-6666

In a deterministic system there is absolutely no randomness. If one such event, as small as, not being selected for a voyage can drastically alter history, there would have been multiple such events. Every single event in history from landing on the moon to the bombs dropped on Hiroshima and Nagasaki were set in motion by one such simple and insignificant act. These fixed points in time have created reality as we know it. We all know that the whole universe and time was created from a singularity of infinite energy, The Big Bang. What if it was the first domino and everything else is just a reaction to it? Every single molecule and atom in your body is made up of the same elementary particles found elsewhere in the Universe; just because you are arranged in a seemingly complex manner, you think that you are the one doing what you do, and it cannot and will not happen any other way? Even your defiance is the norm. Every single thing you’ve done, doing and going to do, determined 13.8 billon years ago, can you believe it? Do you think you have free will?