What are your thoughts about cryptocurrency?
Perhaps the most interesting question is this: if something has no physical form, but millions of people agree it has value, how real is it?
I think the answer lies in a combination of belief, trust, technology and human psychology.
1. Faith in the system
People trust that the underlying technology, particularly blockchain, works. Transactions are recorded on a shared digital ledger, making them difficult to alter retrospectively.
2. Faith in scarcity
Some cryptocurrencies, particularly Bitcoin, have a limited supply. Bitcoin has a maximum supply of 21 million coins. People believe that scarcity will help preserve its value.
3. Faith in collective belief
This is perhaps the most fascinating part. Cryptocurrency relies heavily on people believing that other people will continue to value it.
It creates a cycle:
I believe it has value.
You believe it has value.
We both believe others will continue to value it.
That collective confidence helps sustain its market value.
4. Faith in the future
Some investors aren’t simply buying digital currency. They’re investing in an idea of what the financial world might become: less dependent on banks, more decentralised and increasingly digital.
5. But faith can become speculation
This is where things become precarious. Technology can be genuine while the price of an asset is driven by hype, fear, greed and speculation.
A cryptocurrency can be technically sound and still lose most of its market value.
The philosophical question
There is something quite extraordinary about cryptocurrency.
We have created an economic system in which something intangible can acquire enormous financial value through collective human agreement.
It makes me think about the nature of belief itself.
Are people investing in cryptocurrency because they believe in the technology, or because they believe that other people will continue believing in it?
Those are two very different forms of faith.
And I think distinguishing between them is essential to understanding cryptocurrency.