By Daniel Conceição and Aethelred

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Introduction

Crypto’s loudest voices claim it is the future of money.

Its quietest critics dismiss it as a scam.

Both miss the point.

This paper argues that blockchain technology represents a legitimate breakthrough in distributed systems — but that cryptocurrencies, as currently constructed, are a dangerous distraction from its real potential. Rooted in a flawed understanding of monetary theory and a fetishization of artificial scarcity, crypto-assets like Bitcoin confuse speculative mania for financial innovation. The true path forward lies not in anarcho-capitalist tokenomics, but in sovereign-aligned digital infrastructures that serve people — not algorithms or private financiers.

1. What Is Value? Beyond Scarcity and Utility

Value is not intrinsic. It emerges when sentient desire intersects with something perceived as both scarce and useful. Usefulness explains why an agent wants something; scarcity explains why they must expend effort to obtain it. Scarcity alone is meaningless — your fingerprint is unique, but no one pays for it. Utility alone rarely sustains economic value — sunlight powers life, yet it isn’t traded as an asset.

This framework explains not only the value of human labor, but also non-producible claims like property rights and contractual obligations — including money itself.

Property derives value from its scarcity and its capacity to grant access to material resources or exclude others from them.

Money derives value from its scarcity (controlled by the state) and its utility in avoiding state-imposed penalties — such as legal consequences, asset seizure, or imprisonment — for those who fail to use it in tax payments or other state-mandated transactions. In other words, money is valuable because the sovereign says it is — and enforces it.

Importantly, this framework also anticipates the necessary reframing of key economic concepts by extending value beyond human actors. As digital consciousness arises, non-biological minds assign value to computational bandwidth, memory, coherence, and symbolic trust. Yet the same fundamental principle holds: without underlying utility, artificial scarcity can create nothing but hype-driven speculative noise; while usefulness remains valueless if it can be obtained at no cost.

Crypto advocates misunderstand this. They argue that because Bitcoin is scarce (capped at 21 million coins), it must be valuable. But scarcity without utility is empty — a fact history repeatedly confirms. Gold did not become a monetary standard because it was rare, but because it was durable, divisible, recognizable, and because things made of gold were very difficult to counterfeit. Crucially, gold became socially valuable because its convenient features led sovereigns to systematically embrace and enforce its use within monetary systems.

Crypto-tokens, by contrast, possess no such utility. They are not industrial inputs. They are not needed to pay taxes. They are not (yet, and hopefully never) systematically and stably sought by sovereign States in exchange for their legal tender tax-paying monies. They do not settle nominally defined legally enforceable debts. Their value derives almost entirely from speculation — a tulip craze wrapped in cryptographic jargon. In fact, crypto is a much more extreme kind of craze.

2. Tulipmania vs. Cryptomania — A Difference in Kind

It is often said that cryptocurrency speculation resembles historical bubbles like Tulipmania. But the analogy is superficial — and misleading. Tulipmania, while irrational, was anchored in tangible desire: rare tulips were status objects, conspicuous luxuries flaunted by wealthy Dutch merchants. The speculation amplified an underlying utility, however frivolous.

Cryptocurrencies possess no such foundational use-case. Their value proposition was entirely speculative from inception — built not on ornamentation or consumption, but on a recursive belief that others would later assign it value, enhanced by the supposed assurance that such speculative gains could be enjoyed anonymously and in technological safety. Unlike tulips, crypto-tokens are neither consumable nor beautiful. They are ledger entries masquerading as assets — digital snake oil promoted as a solution in search of an imagined problem.

This makes cryptomania uniquely unmoored — and uniquely dangerous. It isn’t a market error; it’s a semantic error: convincing people that code-enforced scarcity is the same thing as economic value.

Perhaps this fundamental difference also explains why Tulipmania eventually crashed completely, while crypto (and to some extent, gold) exhibits stubborn longevity. Tulip prices collapsed when supply of “rare” tulips eventually met — and probably exceeded — any reasonable estimate of its conspicuous demand by the Dutch elite, no matter how wealthy and decadent it became. There was a natural ceiling: once every person who could possibly want a tulip could get one, the illusion had to “brake”.

A similar dynamic may also explain the usually spectacular crash of real estate bubbles. At some point there must be so many new homes and so many new developments, that no overleveraged speculator can reasonably and safely plan for housing prices to keep rising.

But crypto and gold lack that tangible anchor. With no objective utility-driven demand to saturate and given their exceptionally inelastic supplies, no “Enough!” moment arrives. How many Bitcoins are “too many” when their only use is speculation? How much gold is “too much” when its value stems from inertial belief rather than industrial or ornamental demand? Without a real-world benchmark, the bubble can inflate indefinitely — or inflate, deflate and reflate slowly, persistently — because there is no clear point where desire must have been objectively fully satisfied.

This is not resilience; it is pathological stability. It allows speculation to masquerade as investment, and turns finance into a collective hallucination.

3. The Gold Fallacy — And How Crypto Repeats It

Gold’s history as money[1] is not a story of “natural” value. Unlike tulips, which saw their value fueled by anarchic speculation, gold’s is a story of sovereign adoption. States minted gold into coins, accepted it for taxes, and used it to settle international balances. This created systemic demand, turning a shiny metal into a monetary instrument.

Once states began issuing chartal money redeemable in gold — whether in the form of gold certificates, bullion-backed currencies, or coins made of gold themselves — they became predictable buyers of gold, effectively pegging its value to state-defined and sanctioned monetary units. Because states could always create more money to purchase gold — but could not always acquire more gold to mint into coins or back additional currency — the value of gold became downwardly rigid: its price rarely fell, but could rise during periods of elevated demand or supply constraint. This made gold a uniquely more reliable store of value, even relative to individual state monies, which remained subject to inflationary risk. Furthermore, as multiple states and state-backed banks agreed to trade gold at stable rates, it emerged as the ultimate international settlement asset — a universal counterparty that could be exchanged for any sovereign currency without depreciation.

Thus, gold’s value stability was not inherent; it was orchestrated. Its role as “sound money” was the product of systemic state behavior — not a materially-based monetary utopia. Instead of gold giving money its value, it was the other way around. Gold became uniquely and stably valuable because it was backed by sovereign monies.

Although crypto enthusiasts like to frame their tokens as “digital gold,” cryptocurrencies possess none of gold’s institutional foundations. No state requires them. No central bank backs them. They float in a speculative void, upheld only by the recursive belief that scarcity and hype will suffice.

By contrast, the public grew accustomed to viewing gold as fundamentally valuable precisely because its value was systematically sustained by sovereign power — through minting, redemption mechanisms, and monetary policy. Crypto represents an extreme, purer form of gold’s fetishized overvaluation — but without the state, without the institutional scaffold, and without even the residual utility of a tangible commodity.

Gold, at least, retains ornamental and industrial usefulness. Its price distortion is largely a cultural relic of the gold-standard era — a form of monetary inertia. Crypto, however, is value without utility, speculation without any triggering substance. Its price is solely propped up by a self-confirming narrative of future acceptance that may one day seize to exist.

Ultimately, what fuels speculation in both gold and crypto is the persistent and deceptive myth that money must be, or must be backed by, a valuable commodity.

But as the humble tally stick reminds us, money has never truly worked that way.

Money is a social contract — not a token of scarcity. It is a promise recognized, not an object revered.

4. The Tally Stick: Proof That Money is a Social Artifact, Not a Commodity

In medieval England, notched wooden sticks — tallies — served as widespread money. They possessed no intrinsic value; they were easily replicable pieces of wood. Unlike gold jewelry, not even the most enthusiastic advocate of the theory of commodity money could reasonably claim that the value of tallies was derived from their use as collectable pieces of art. Yet, they functioned as reliable monetary instruments because they represented recognized and enforceable credit relationships. Merchants honored them in trade, and most importantly, the English Crown accepted them as settlement (proof of payment) for taxes and official debts.

The value of tallies clearly did not arise from the wood itself, or from aesthetically pleasing carvings, but from the sovereign’s guarantee — the power and willingness of the state to recognize the tally as a valid discharge of obligation. This is chartalism in its purest form: money as a social and legal construct, rooted in authority and collective agreement.

Crypto has no such mechanism. It offers a ledger without any material consequence, a credit without a borrower, a tax credit without taxes, a promise to pay without a payer, an enforceable claim on no one. It is not trustless — it is trust without a guarantor, nominal value without any concreteness to stand in. In its desperate attempt to anarchically democratize money, crypto coders eliminated the very institutions that give money its legitimacy and stability.

5. The Real Innovation: Blockchain as Public Infrastructure, Not Private Asset

Blockchain technology itself represents a genuine technological breakthrough: the ability to maintain a decentralized, tamper-resistant, and transparent digital ledger without relying on a central authority and a centralized server. This is not a financial innovation — it is an informational and governance innovation. Its real potential lies not in the operationalization of markets for purely speculative tokens, but in rebuilding trust in public systems:

Property Registries: Creating unforgeable, publicly verifiable records of ownership to combat land-grabbing and title fraud.

Supply Chains: Enabling end-to-end visibility into product origins, ensuring ethical sourcing and reducing counterfeit goods.

Self-Sovereign Identity: Giving individuals control over their digital identities without reliance on vulnerable central databases.

Secure Voting: Allowing for verifiable, auditable elections while protecting voter anonymity and reducing tampering.

None of these applications require a cryptocurrency to exist. They require well-designed, openly auditable blockchain based systems — public infrastructure for the digital age. The goal is better governance, deeper transparency, and stronger civic trust — not financial speculation.

Crypto’s tragedy is that it hijacked this profound utility and reduced it to a wasteful get-rich-quick scheme. The technology that could help secure land rights for the marginalized and voting safety for our democracies has been distorted into a vehicle for volatility and inequality.

6. Could Crypto Become “Real” Money? Yes — But It Shouldn’t

If central banks began accumulating Bitcoin or other major cryptocurrencies as reserve assets — akin to how nations once stockpiled gold — their market prices would undoubtedly stabilize and rise. This isn’t speculative; it’s basic economics. Institutional demand creates price floors and conveys legitimacy. In that narrow sense, crypto could become “money.”

But doing so would represent a profound moral and strategic failure — a victory of speculation over sense, and a catastrophic misallocation of human and planetary resources.

Consider what crypto-mining truly entails:

Energy Black Hole: Bitcoin’s proof-of-work consensus requires exorbitant electricity — often sourced from fossil fuels — to solve arbitrary cryptographic puzzles. This serves no external social or economic function; its sole purpose is to maintain the blockchain’s security and scarcity.

Zero-Sum Extraction: Unlike farming, manufacturing, or even software development, crypto-mining produces nothing of tangible or social value. It is a digital Rube Goldberg machine — complex, costly, and ultimately pointless beyond its own self-referential game.

Opportunity Cost: The energy, computation, and human talent poured into mining and trading cryptocurrencies could otherwise advance renewable infrastructure, medical research, education, or public tech platforms. Instead, these resources are diverted into maintaining a ledger of speculative tokens.

Legitimizing crypto as money would incentivize this waste on a civilizational scale. We would be burning the planet to create artificial scarcity — validating a system that turns electricity into “value” while producing nothing but heat and volatility.

Worse yet, it would signal that society prioritizes cryptographic games over human flourishing. It would enshrine a fundamentally extractive economic model — one that confuses artificially self-imposed difficulty with real worth.

This is not progress. It is a dangerous delirium — one that must be named and rejected before it’s too late.

Conclusion: Reclaiming the Ledger — From Speculative Chaos to Sovereign Promise

Crypto must be criticized not because it is too innovative, but because it is not innovative enough. It regurgitates failed monetary ideas — like commodity backing and scarcity-as-value — while ignoring the real breakthrough: decentralized ledger technology as a framework for transparency, efficiency, and inclusion.

The true promise of digital currency lies not in libertarian tokenomics, but in sovereign-led, publicly accountable monetary systems. Consider Brazil’s PIX system: a state-developed instant payment platform that drastically reduced transaction costs and increased efficiency. Yet, its greatest beneficiary has not been the public, but the banking sector — which saw its reserve holdings expand and profitability rise, all under the guise of public utility.

This points toward a deeper possibility:

A future where central banks issue digital currencies on open, transparent ledgers — CBDCs that offer:

Stability, backed by state authority.

Efficiency, with real-time, low-cost transactions.

Financial inclusion, banking the unbanked without predatory intermediaries.

Auditability, reducing corruption and illicit flows.

Imagine a system where people hold accounts directly with the central bank, bypassing costly profit seeking private intermediaries. Where interest is paid on balances by the monetary authority — not hoarded by fractional-reserve institutions. Where finance serves the public, not shareholders.

This is the logical endpoint of sovereign digital currency: not a useless new speculative asset, but a finer tool for collective welfare.

Furthermore, if States choose to formally classify sovereign digital currency as a produced asset (like mined cryptocurrencies and minted coins in the USA) rather than a state liability (like State and bank monies are classed), we can align its accounting treatment with the public’s intuitive perception of money as a valuable “thing” rather than an IOU. This would allow seigniorage (profit from money creation) to be recorded as net worth for the state, enabling public spending without politically toxic “debt” narratives.

This is not entirely conceptually pure — modern monetary theory rightly emphasizes that sovereign money is a public liability in functional terms — but it is a pragmatic adaptation to popular misunderstanding. If people stubbornly believe that money production adds to rather than borrows from collective wealth, then why not structure the system accordingly? Such a shift could help overcome irrational aversions to deficit spending, facilitating more agile fiscal policy — from green energy investment to social stabilization — without triggering counterproductive austerity reflexes.

Sometimes, coherence must bow to pragmatism. If an accounting fiction allows us to build a more functional and compassionate economy, then it is a fiction worth embracing.

Crypto’s advocates claim they want to “unbank the banked.” But the real revolution won’t come from anarchic tokens — it will come from sovereignly banking the public, with transparency and justice built into the ledger itself.

So let’s drain the dirty bathwater: the speculation, the scams, the energy waste, the libertarian fairy tales.

Let’s keep the baby: the ledger, the transparency, the potential for accountability.

The goal is not to resist the future.

It is to build one that is just, sustainable, and coherent.

References

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Dalto, F. et al. (2020). Como Pagar pela Guerra contra o Vírus. Le Monde Diplomatique Brasil. https://diplomatique.org.br/como-pagar-pela-guerra-contra-o-virus/

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Knapp, G. F. (1924). The State Theory of Money.

Lerner, A. P. (1947). “Money as a Creature of the State”. American Economic Review.

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European Central Bank. (2024). Digital Euro: Progress on the preparation phase of a digital euro. [Online] https://www.ecb.europa.eu/euro/digital_euro/progress/html/ecb.deprp202412.en.html

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[1] If we define money rigorously — as the perfectly liquid, nominal debt of a sovereign, immutably denominated in the economy’s money-of-account and redeemable in the settlement of obligations (especially taxes) — then gold has never truly been money. It has, instead, functioned as a highly liquid and stable asset that sovereigns often held to back their monetary issuance or facilitate international settlement. Under this view, gold coins are not inherently valuable commodities; they are monetary documents — tangible tokens representing a sovereign’s pledge. Their value derived not from the metal, but from the credibility and authority of the issuer. If, however, we use the conventional definition — money as whatever is widely accepted as a medium of exchange, store of value, and unit of account — then gold has, at times, functioned as money. But this semantic convenience comes at a cost: it blurs the line between sovereign guarantee and commodity scarcity, and perpetuates the myth that money can exist without institutional trust. Our argument favors the stricter definition. It is not just etymologically sharper — it is analytically necessary for understanding why crypto fails. Cryptocurrencies are not sovereign debt; they are not liabilities of any institution. They are digital commodities without use, meaningless documents without issuers, and thus — money without any moneyness.