Season 1 Weekly

Dollars and Bitcoins

It’s the year 3069, you are an astronaut. You’re fed up of Earthly life and decide to shoot off into deep space in your brand new TeslaX Model V (which is equipped with the 42nd gen Merlin engines and is capable of an interplanetary flight with a range of 200 light minutes). After a week of travel, you land your TeslaX on Triton, Neptune’s largest moon.

Having landed there you realize that about 10 other humans had silently hitchhiked the ride. Now you gotta kickstart your life on this planet. In this post, we’ll accompany your civilization from its infancy to maturity and explore its economics. We’ll see how your civilization begins trade, adopts diamonds as its currency, starts using bills backed by diamond, switches to a fiat currency and eventually accepts cryptocurrencies as the standard.

In case you feel that this journey is a bit too much reminiscent of what happened here on Earth, well, I won’t deny, that’s true and kind of like the whole point. It would have been boring to just point out what happened before. Instead, following a story as it develops would be worthwhile, especially so, since you’re the protagonist!

Level 1 – Enter the Triton

As soon as you land, one of those hitchhikers pulls out a banana and starts consuming the most consumed fruit of your ex-planet. You realize that dude has another one hanging (a real banana, don’t think otherwise). You ask him to share it with you. He says he will, if you would give him your cap (which says “#Triton Forever!”). The two of you exchange and now you have something to eat and dude has something to show off.

You just engaged in a simple trade where the two parties possessed exactly what the other required. A barter exchange, therefore, was enough to satisfy your needs. Such exchanges continued. At times you exchanged your sunglasses for a Snickers while at other times your TeslaX key for the right to enjoy your night with another hitchhiker (this other hitchhiker was a great storyteller and therefore you subscribed to her services by paying your TeslaX key as a fee. If what I learnt is true, she probably narrated an Edgar Allan Poe story and you were very satisfied).

One fine day this companion of yours returned from a short trip to the nearby Neptune with your TeslaX. She brought back diamonds! Turns out, atmospheric pressures can sore so high in Neptune that it often rains diamonds. This was great news…

Level 2 – Finding the Gem

Lately, there have been some problems with your Triton settlement. What was initially a group of 11 hitchhikers has now expanded into a civilization of 1000 or so humans thanks to the gift of reproduction. With the population, cometh the demands. While some humans specialized in farming, others specialized in constructions. This meant a part of the society had more food than they could eat and others could build more houses than they’ll need.

They started to sell their products and services among each other. This often posed a problem. You may require food but the people who sell food don’t need a house, exactly what you had to offer in return. At times they tried exchanging something else for food, but this something else was extremely variable and none of the parties felt that exchanging it was fair trade.

When diamonds were introduced in your society, these solved this problem. Now you could exchange diamonds in return for food, services or other stuff. The reason diamonds were a good candidate was because they were rare, no one could simply procure diamonds (they needed to use the TeslaX to collect some from Neptune but the present owner of the vehicle barely leased it). This meant the number of diamonds in the society was more or less constant with a small upward trend as time progressed.

Diamonds were indestructible and were not perishable. If you were frugal enough, you can hold your diamond wealth for generations without it decaying. However, diamonds had almost no intrinsic value. You can’t live in them nor eat them, but they looked good and was a metaphor for prestige and wealth. With all these properties, diamonds soon became an abstract measure of wealth that could be exchanged whenever two parties traded anything.

But there was a problem. Thieves started to torment the civilization. It was hard to hide hard diamonds in your pockets. Anybody would know that this dude here is carrying currencies and launch an attack! Also, over time as more diamonds were mined (collected) and entered circulation, the prices started to inflate. One diamond used to fetch two nights of storytelling. Now it fetches just a few hours.

Level 3 – Making the Notes

The government (and yes, there’s one, and you’re let’s say, what would you like to be, the president? Ok, you’re the president of Triton! Congrats.) decided to issue currency bills and quite (un)originally called then Dollars. These dollars solved two problems. You no longer had to carry 1000 diamonds to buy a tPhone 12 Pro. You just needed a note (or bill) that was issued by the government and had the value of 1000 Dollars (1 Dollar = 1 Diamond).

All the diamonds were locked up behind safety lockers. You, therefore, have two layers of abstraction in every trade you make. First diamonds abstract the wealth and now Dollars abstracted diamonds!

(BTW, if you’re wondering how the hell you’re still alive as we’re at least 500 years into the future from 3069, well maybe you had taken some elixir.)

There were some issues with counterfeit notes and notes getting torn, but the government, headed by you, handled it with grace. Soon the society (now about a million members big) developed a trust on the government. Your gov had a legislature that made laws, a judiciary that enforced it and an executive body that gave speeches.

Level 4 – Trusting the Trust

One fine day your government announces that 1 dollar would no longer mean 1 diamond. The economy was now fairly large and the government fairly powerful. It said with confidence that all Triton inhabitants should trust the government that each dollar is worth a dollar! In case someone says it’s not worth a dollar, gov would send troops, arrest the dude, and fine him 100 dollars. People say that’s fine. And fine it was.

By now Triton had a billion inhabitants (quite densely populated as you might realize). It was divided into multiple countries. Each country had a government. You were now the president of the strongest one and when your country announced the introduction of a fiat currency, everyone else followed suit albeit with some dissatisfaction.

Now the currency was as strong as the economy. If for some reason there was a war and the government was destroyed, there would be no one to enforce the currency. Gone are the days where dollars were backed by tangible diamonds. All that there was now was trust. If there was trust, there was value in the currency. Trust therefore became the primary currency.

Problem was however that some people had more control over this trust than others. As a result, corruption was commonplace. You avoided it, but some people in your administration were knee-deep into it. Bankers, wealthy people and government officials often made monetary policies that favoured themselves. This made the currencies across the Triton volatile. Poor Tritonians would at times dip below poverty as the dollars (or whatever currency their Tritonian country had) they owned often lost their value due to inflation.

Level 5 – One for all and all for one

The last nail in the coffin came during the year of 4069, exactly 1000 years after you had landed. (Yes, you are still alive but tell me how come 11 people gave rise to a 1.1 Billion just 1000 years later? Damn, y’all really fertile!)

Your government started to ease up regulations on the big banks in the country. They found the freedom to give away loans and sell the debt to insurance companies. These big insurance firms were now insuring really bad deals which were almost bound to fail. Soon everyone realized that although they were rich on paper, the money they thought they owned didn’t really exist. Suddenly, people started to accumulate their wealth from all sources to battle the upcoming recession.

Money was pulled out of banks, investments stopped and the economy stalled. Poor Tritonians lost the savings of their lives as the stock market crashed and banks were declared bankrupt. All this just because the people had blindly trusted the government. But it seemed that their trust was betrayed. This sparked off a revolution. Some individuals realized that trusting the big banks was no more an option. They wanted to trust nothing but logic. And maths is the language of logic. Therefore, up came Bitcoin, another (un)originally named cryptocurrency that was backed by pure mathematical rigor.

You see, there are two ways to keep track of wealth. You can do that in deductive terms where every individual has a net worth. Assets are added and liabilities are subtracted. Or you can keep track of all the transactions by pairing earnings with spendings. The former was utilised until now. Dollars were the representatives of your net worth. The latter was used in this cryptocurrency. Here a ledger replaced the dollar.

This ledger contained records of every transaction ever made. The program that ran and conducted transactions was visible to everyone yet the logic was immutable and universal. No longer would the individuals have to trust a bank or a government for their currencies. This new system was superior in that every node in the network had an equal say for every decision in the algorithm. Therefore such a currency became backed by computational power and electric supply.

Trust was replaced with logic. The power of probability succeeded age-old trust. Coins were now just an abstraction over the transactions which were in the heart of the currency.

Now, that’s all I know about. I don’t know whether this currency would be suitable for the long term. But for now, at least in Triton, it is what it is…

Arkadeep Mukhopadhyay