Before railroads adopted a common time standard in the 1800s, competing schedules made coordination impossible. Bitcoin works the same way: its blockchain creates a decentralized clock that lets strangers agree on transaction order without a central authority, making trustless money possible.
But if you look at the history of capitalism, you see that the main, the turning points where new industries were formed and we have these like bubbles of innovation that are bursting were always propelled by these moments where we can come to the table and agree on these things. A great example that I really find interesting is how at some point we created a common time in the United States. So in the early days of the railway industry, it was very complicated for entrepreneurs to coordinate their activities because every town had a different time. It was not just the time zones as we know them today. It was like you would go to, you would travel to the next town, they'd use a different time. And so you had like hundreds of different times simultaneously in the United States.
Of course.
In the middle of the 19th century. And so if you were operating railway companies and there was a lot of competition initially, you'd have to coordinate travel with multiple trains for merchandise and for people, but every town used a different time. So imagine the complexity of that. Actually impossible to manage such complexity. So at some point, the railway companies realized it was in everyone's interest to stop competing with time and to just agree on a common time. And that time was called Railroad Standard Time, RST. And it was created by the companies as a way to make the industry more, more ready for further innovations.
But this is a bunch of companies within the rail sort of railway system and they all commonly agreed, hey, this is the new standard.
Yes. And that happened in the, around the middle of the 19th century and really created this common platform for innovation to happen at a faster pace because now it was easier to coordinate.
Wow. Well, how does that happen? Is it usually like the biggest player that is like, this is gonna be the standard or is it, Everybody just really feels the pressure and after a while they just, everything blows up. Or maybe there is a specific event that is usually a trigger. How is the process from going, this doesn't work, but we have no way of organizing to actually organizing?
Yeah, there's no magical recipe here, but there's like a lot of research that has been done around managing the commons, particularly by an economist called Elinor Ostrom. Received a Nobel Prize for her work that identifies a few good practices that can help create these commons, manage these commons. And clearly having like a more powerful actor try to twist everybody else's arms to impose their own standard is not the way to go. But providing like a clear strategy for what will maximize joint value creation and making people accountable, each and every one of them accountable for it, is really a good standard practice to get the conversation going. This idea of like having a common time to be able to coordinate even with competitors is a fundamental idea in the history of capitalism. In fact, if you look at some of the most recent innovations, Today, when I started reading a long time ago about Bitcoin, that's one of the things that I got the most excited about is how Bitcoin is basically designing its own internal clock to overcome the fact that in the absence of a central authority on the internet, it's impossible to know what time it is.
Right.
And if you cannot know what time it is, it's impossible to tell whether I sent you transaction before I sent another transaction to some other person. So if you cannot keep track of time on the internet, you cannot keep track of who owns what, and you cannot have like a decentralized form of payment system or decentralized form of money. And so the way Bitcoin solves this problem without having a central authority that creates a standard, that imposes a standard and says, well, this is the time it is now, for everyone is by using algorithms and making sure that there's a difficulty adjustment algorithm that maintains a ticking clock that's very steady. Every 10 minutes on average, there will be a new block. No matter how many people join the network, no matter how many miners are lending computing power to the network, there's this algorithm that will try to maintain a steady clock so that coordination can happen on the internet. Without a central authority. And this new way of managing time and creating time in a decentralized fashion is a fundamental innovation that started with Bitcoin. And that I think is one of the most fascinating aspects of Bitcoin.
