(I was going to hold this one until later, but I kind of need to explain it first, so that things that come later make more sense.)
Ever since I read Robert Jordan's The Eye of the World in high school, I've been fascinated by elemental magic. I played D&D for a long time and also designed new material, and I came up with lots of spells and classes and such that used elemental magic of one kind or another, usually focused around a single element.
The initial version of the magic system was rather vague: there were four elements (Air, Earth, Fire, Water), and mages were employed to head off natural disasters or something by manipulating the actual element itself, not energy like WoT. The power for magic was drawn through ley lines (another theme that I thought was cool at the time; they were popular in fantasy, but the Rifts RPG also used the same concept). I did know that, a long time in the past, someone had "broken" magic, separating it into its component parts - i.e., mages used to be able to use all four elements, but now they can only access one. Rarely, someone is born who can use more than one element (originally, it was up to four, but I reduced it to two).
I tinkered with it over the years, adding and changing things as I came up with new ideas. The ley lines thing went first. I was inspired by the second Avatar series to add eight new elements (Storm, Ice, Blood, Wood, Metal, Shadow, Lightning, and Light), which meshed with the "broken magic" concept and helped it to make more sense, and also added a lot more story options.
Magic is genetic - either you're born with the ability, or you aren't. There are outside factors that can affect this - proximity to an elemental node, your bloodline (more Wielder ancestors means a greater chance), and your race (non-humans manifest about three times as often as Humans) - but anyone, regardless of race, can be born with the Talent. It ends up being about 5% of Humans and 15% of the other races (I figure there are 250 million people on Venosea - you do the math).
A little history, because this is kind of the central precept of the world: A few thousand years ago, magic was one source - any mage (called Wielders) could use any element (to a greater or lesser degree; all but a rare few were strong in only one or two elements), and could even combine their effects - holding a sand in the air and heating it with Fire to turn it into glass, for example. Academies were established where Wielders could learn to use and control their ability, but the schools were largely autonomous - each nation had its own, and there was no governing body, so they each had their own standards, curriculum, etc., and each was loyal to its parent nation (and that nation's allies).
One year, a war broke out between two nations. It dragged on for years, pulling more participants into it - those allied to the nations, and some who sought to seize an opportunity to grab power or territory. Eventually most of the world was engulfed in the conflict. Sometime during the war, someone perfected the process to create mindless, soulless constructs called "dragons" (which varied in appearance depending on the creator, but were basically classical dragons) - basically, a mass of elemental matter bound into a form of the creator's choosing. Dragons could only be created via a ritual and controlled by a powerful Wielder, who was linked to it. Even though the knowledge was initially limited to the Academy that first created them, it soon got out through various means, and other Wielders made their own, which resulted in even more destruction.
One major downside to using a dragon (and something no one knew, at first) was that if a Wielder was killed while controlling a dragon, his or her consciousness would inhabit the soulless construct, creating a new, sentient, and effectively immortal being. Some dragons, upon discovering their fate, went insane; others revelled in the destruction they could cause in their new form, and still others simply vanished. Not long after this came to light, the Academies put a ban on the creation of dragons by tacit consent (though this didn't stop unaffiliated individuals from creating their own).
Naturally, this didn't stop the dragons already wreaking havoc. A group of Wielders who opposed the war came up with a new plan - if they took magic away from the people, maybe it would halt the conflict and/or destroy the dragons (since they were sustained by magic). They gathered to perform a ritual during a lunar eclipse to temporarily bind magic, so that they could force everyone to take a step back and possibly negotiate a peace.
The ritual was underway when a group of dragons attacked, disrupting it. The spell went awry and, instead of being bound, magic was shattered into its component elements. The resulting backlash caused catastrophic natural disasters - tidal waves, massive storms, volcanic eruptions. The land heaved, the skies fell, and the seas boiled. This cataclysm, which lasted nearly a month, later became known as the Shattering. When it was all over, most of the world had been reshaped, and nearly 70% of the population was dead. The remaining dragons vanished during the chaos and were soon forgotten.
The elements manifested as "nodes" of invisible energy; they appeared at the site of the ritual and slowly travelled across Venosea, wreaking more havoc as they went, until they settled into places that best suited them. This took another decade, during which magic was highly unstable and everyone learned to mistrust or even fear it for its unpredictable (and often dangerous) effects. Eventually things settled down, magic became stable, and the "lesser elements" began to manifest. To make matters worse, strange beings were born to families lived near the nodes - children who had been altered by magic into new forms. These gave rise to new races - Avarii, Ma'jaat, Vargrim, and Valdameri - which could interbreed with Humans, but not each other.
The next few centuries later became known as the Dark Ages - a time when nations and civilizations were trying to establish themselves, the new races appeared, and Humans came to terms with the fact that they weren't the only race on Venosea any more. Records of this time are few and scattered, and no one's exactly sure how long they lasted (estimates range from 3-500 years). The commonly agreed end of the Dark Ages is the rise of the Creuzland Imperium. Creuzland conquered most of the land on one of the northern continents and created a new empire. The emperors were largely decent rulers, and the people under their rule flourished, which enabled civilization as a whole to recover more quickly.
Fifty years later, Emperor Ranulfus, a Lightning Wielder, sponsored the first Academy in the Imperial capital of Vilsstadt. With magic and the Academies now legitimized, other nations starting establishing new Academies. It wasn't until a century or so after that the current Headmaster of the Vilsstadt Academy came up with the idea to establish the Order - an organization independent of all nations that would oversee all the Academies and magic in general, and would not take part in any nation's politics or conflicts (more on this later).
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