What Gives Crypto Value? 💵

Oh, here we are running into the underground crypto moon base research laboratory, right? It's been running. Uh, crypto is just buy and sell without improving our lives. No, Tim Foil had it. It's not. That's your opinion because you haven't taken the time to educate yourself about cryptocurrency. So, a short story about where crypto value comes from, right? And this is this is like specifically for you, Tinfoil. At first glance, crypto seems strange. A digital token with no physical form, no state backing, no inherent material use, somehow carries value. I think this is exactly what he's having trouble wrapping his head around. People trade it, people hold it, build systems around it, markets assign billions in worth to assets that exist only as entries in a distributed ledger. The na the question naturally follows, why? Why? Why are people doing

this, right? You think they're doing it for no reason at all? Do you think they're all doing it because every single one of them is delusional? Trillions of dollars of delusion. Okay. Value in crypto does not originate from substance. It originates from agreement. When a group of participants recognize a digital asset as meaningful, as useful, scarce, or representative of access within a system, demand then begins to form for it. That demand is not abstract. It connects a real behavior, transaction, staking, governance, collateral, coordination. Utility reinforces attention. Attention reinforces liquidity. Liquidity reinforces trust and trust reinforces participation. Over time, a network forms around the asset. I'm going to read that one more time. Utility reinforces attention. So something it being useful for, right? Then the attention of that utility reinforces the liquidity, the monetary demand. Liquidity therefore reinforces the trust.

So the liquidity therefore reinforces everybody's trust in it. Trust reinforces participation. The more trusted it is, the more people participate in it. Over time, a network forms around the asset. Literally absolutely no different than any other form of currency in the world. Scarcity then matters. If access to the system requires the token, then the token supply is limited. Participants compete for ownership, right? Scarcity amplifies the demand already created by coordination and utility. Speculation enters next. So, we're going through all the phases here, right? Participants begin to price not only what the system is, but also what it might become. So, speculation comes into the mix. Future adoption becomes present value. Markets move ahead of reality but they do so based on shared expectations of growth. Most of the tokens fail in this process because they are new startup companies.

Most new startup companies fail. So this is nothing new. This is nothing surprising. People want to point to the fact that certain tokens and projects fail like new startup companies failing is is some kind of surprise. It happens every day. They remain scarce without demand, useful without adoption or believed in without network reinforcement. Markets filter them out. Liquidity disappear and value starts to collapse just like anything else in the entire world. But some assets persist, right? Some survive that dilemma. They survive because participants continue to coordinate around them to use them to trust them and to integrate and build on them. They expect their relevance to continue. value stabilize is not because of intrinsic backing, but because the system is built around the asset sustaining itself. The crypto value is not an illusion. It's an emergent structure. And we're

going to go right into the talking points on this. Yes, I do use chat GBT to organize my thoughts because I plan out whole series of information to go over and I want it to correlate well together and stuff. So, yes, uh I know somebody's going to say, "Oh, you're just reading from chat GBT." Yeah. Well, you you know, you try to talk for hours on a topic and stay on topic, right? Uh this helps me keep everything organized and on, you know, for some reason, a story presented information seems to click with people a lot better. But now we're going to get into more of a, you know, a different way of presenting the information and probably a little bit more intricate. So hopefully that reinforces what we just read. So what value means in crypto? valuing crypto

does not come from a physical backing or government authority. And I think this is something that people are so used to that it's very hard for other people to wrap their head around anything other than physical backings like gold, silver, basket assets, whatever, or a governmental authority. And it's funny because a lot of the people who argue against crypto are quote unquote uh conspiracy theorists, right? and they hate government authority and they don't want to get away from money that has value based off of government authority. I think it's kind of a weird conundrum. So, it emerges from a combination of perceived usefulnesses, scarcity. Usefulness is also utilities, you could say it that way, things that it does well. Scarcity, coordination, and demand. Crypto value is social, economic, and technological all at one time. It's very much the evolution

of money in general. Scarcity alone does not create value. Many tokens are scarce. Most have little value. Scarcity only matters when something scarce is also desired or useful within a system. So, it has to be both. It can't just be scarce, right? It also has to be sought after. People have to actually want it. Scarcity amplifies value. It doesn't create value. beautifully said in my opinion like value is not created just because of scarcity right there could be something in the world that's very scarce but nobody wants it and that doesn't make it valuable right but scarcity does amplify the value of something that's already perceived as valuable so utility as a source of value I think this is pretty much the an like this is kind of exactly What I was trying to get at um that I

think was where we were disconnected tinfoil hat is that utility as a source of value in crypto is is a predominant idea and where most of the idea of value in crypto comes from. Some crypto assets provide functional roles like transaction fees, staking, security, governance rights, collateral network and I would also add to that ownership, right? Ownership is a big part of that. Just like stocks in the stock market. Somebody with a bunch of money and they have 50% of the stocks that are issued by said company. Can you imagine being somebody who owned 50% of Tesla? I don't think anybody does, but if you could imagine that person would have a large ownership of the Tesla company. Same idea. Utility creates ongoing demand. Coordination and shared belief. Number four, crypto systems depend on collective agreements. Participants recognize a

token as meaningful because others do as well. Value forms through coordination around a shared standard. Network effect. As more participants use a system, then the utility increases, the liquidity improves, the trust grows, and integration expands. And I would also say as more people use it, developers come in and build more cool stuff in a system. Network's growth reinforces the asset value. And stick around all week uh guys cuz we're going to continue this conversation. Speculation and forward expectations, markets price, future potential. Many crypto assets derive value from expected adoption and not even just current use. Speculation reflects anticipated utility. Uh market selection. Thousands of tokens exist, but markets allocate attention and capital selectively over time. Some assets sustain demand while others lose relevance. Value stabilizes through market filtering. Right? Multiffactor nature of crypto value. Meaning that the value of

crypto is not one straightforward thing. It is multiffactored. Sustainable crypto value typically combines scarcity, utility, network effect, belief, and liquidity. No single factor is sufficient alone or by itself. So it's not one single single factor that gives you know crypto value. It's a multitude of different things together that give it value. Right? Come on. We already read the story. Why is it freezing up? So core insights here. Crypto assets hold value when enough participants agree they matter. The system reinforces that agreement. Again, it's no different than a governmentalissued currency. The government told you it's valuable. That's why it's valuable.