In the previous material of this series, we talked about the fateful Dunbar number, which interferes with the coordinated interaction of a large number of people. So how did we manage to get away from the concept of purely personal exchange inextricably linked to the trust of a particular individual, and therefore limited to the cognitive capabilities of a person, and achieve a modern, global expansion of economic, legal, and managerial institutions?
Language, Money, and Markets Are the First Tools of Explosive Social Scalability
Language was the first important tool of technological social scalability. First, oral speech, then writing on clay, papyrus, parchment, and then paper allowed forming a system of supply and demand, monitoring the results of business communications and connecting interested contractors. Then people learned how to transfer information over long distances as they began to use e-mails, and much later telegraph, radio, telephone, fax, and, finally, the internet. Looking ahead, it is worth noting that the internet remains the best possible means of communication to date, which is one of the most important components of social zoom.
Money is the second of the fundamental elements of the social zoom. The exchange of shells replaced the barter system, thus becoming the world's first currency system. Such a system turned out to be ineffective, however, since anyone could collect more seashells, become rich, and thereby devalue all other money. So, humanity came to the conclusion that successful economic activity requires a universal yardstick, which is trusted by all counterparties, and which could not be easily obtained or manufactured independently. Therefore, people started using precious metals for the production of coins. Naturally, the first counterfeiters and scammers appeared almost simultaneously and turned out to be the ancient colleagues of modern hackers and the founders of scam projects.
A phenomenon emerged in parallel with money in the form of markets, or a chain of exchanges, which coordinates the production and marketing cycle, and thereby structures the price range for certain goods and services, and minimizes the need for bargaining. As a result, a well-knit bundle of money and markets allowed a much larger number of different participants to engage in economic activity than the previous exchange mechanisms could ever allow.
Legal and Cultural Institutions: The Carrot and Stick Method
In the past, all innovations were aimed at reducing our vulnerability to other participants within interactions. Each of them allowed us to think less and less about the motivation and possible maliciousness of other counterparties, and ponder the manipulations we were carrying out.
Centralized institutions of government regulating the behavior of large groups of people in various areas of life started playing an important role in social scalability. The threat of repercussions that the legal apparatus provided was the deterrent mechanism for stemming the rampancy of robbers, thieves, and greedy speculators.
Also, a significant role in social zoom was played by a culture that allowed people to predict the behavior of others within the same culture. This factor still plays an important role in its strengthening or weakening both on a local and global scale, despite the active process of globalization. We are still inclined to do business with people who, we think, share the same culture with us.
An Important Milestone in the History of Social Scalability
The next important stage of social scalability came with industrialization, which began in the middle of the 18th century. This process was described by Adam Smith, the father of the modern economic theory, in the form in which we now know it today "...If we think about all the knowledge and crafts necessary for the manufacture of this beautiful and useful object without which these northern countries of the world would unlikely be able to serve as a convenient place for living; about the tools of all the various workers employed in the production of these various necessities and amenities; if we look at all this, I say, and we think about the diverse work processes invested in all of this, we will understand that without the assistance and cooperation of many thousands of people, the poorest inhabitants of a civilized country could not lead the way of life that they usually lead now, and which we incorrectly consider to be very simple and ordinary," he wrote in his famous work "An Inquiry into the Nature And Causes of the Wealth of Nations."
It is noteworthy that even then, humanity could not do without a clear division of labor, and after all, even after Smith, more than one technological revolution took place, which segregated professional activities into narrow specializations.
Why Do We Need Blockchain?
As we already mentioned above, the internet is an actual communication tool, and it greatly facilitated the establishment of new contacts around the Earth. So, for now, it is still a relevant component of social scalability. One connection is not enough, however. With the increasing scalability of communication and markets, there is inevitably a need for scalability of money and, as a consequence, in minimizing the need for trust. It is these issues that are solved by cryptocurrencies and blockchain. It should be noted that this problem has been brewing for a long time, as the prerequisites for the creation of a decentralized system were noticed in the middle of the last century.
"We cannot expect that the problem will be solved by preliminarily communicating all such information to the central authority, which, after integrating it, will issue any appropriate orders. We must solve it with the help of some form of decentralization. However, this is only a partial solution to our problem. We need decentralization, because this is the only way we can ensure the immediate use of knowledge about the specific circumstances of time and place. People on the ground cannot make decisions solely on the basis of a limited, albeit profound, knowledge of the facts from their immediate surroundings. The problem of transferring additional information that they need in order to write their decisions into the general picture of the changes in the wider economic system still stands," wrote economist Friedrich Hayek in 1945 in his work "Using Knowledge in Society."
In 2009, the creator (or creators) of Bitcoin proved that instead of an entire army of traditional centralized institutions, including accountants, regulators, and lawyers, you can use a decentralized system, with a very high level of security of transactions. "An automated, global, and secure system will allow us not only to multiply the level of trust by rejecting the human factor but also to move from a local system with manual control to a globalized one," said Szabo.
If we talk about cryptocurrencies in general, and about Bitcoin in particular, its exchange potential is already obvious. For example, the price of Bitcoin has grown from zero to $8,000 in just a few years, which indicates its prospects and the trust vested in it by the world community. In addition, it is already possible to pay using Bitcoin in many parts of the world, that is, using digital currencies, not only on crypto exchanges but also in average institutions, such as in food delivery services, hairdressing salons, and office rental agencies. Now, on a trip, you do not need to convert your country's fiat money into a local currency and pay bank commissions. What could ever serve as a better illustration of the fact that the crypto industry is the main driving force of social scalability nowadays?