Like all currencies, Bitcoin is a collective dream, and we all shook in our sleep

For hundreds of years, cowrie shells were used as currency in Asia, Africa, Europe and Oceania. These sea snail shells were pretty. They were used in jewelry and sewn onto clothing. Some cultures perceived them to have magical protective properties. But cowrie shells didn’t really have any tangible, practical use.

Although cowrie shells had no utility in the way that flint and steel would have been considered useful for much of the time period when each was in use, cowrie shells have some interesting properties. They are durable. They are small and portable. Even today it would be difficult to construct a seaworthy fake cowrie shell. Many people throughout history have passed one metal off as another – not a big concern when dealing in easily identifiable shells. A 19th century king of Dahomey said he preferred payment in cowrie shells to payment in gold.

Today you can buy cowrie shells in bulk for less than ten cents each.

What happened? Cowrie shells only had value as long as enough people thought they had value. Too many people stopped believing.

Pretty much all currencies work this way. There is nothing that makes an artificially printed piece of paper or a series of numbers on the screen of your phone inherently worth more than a cowrie shell. Still, because we all believe in the value of US dollars, they work quite well as a medium of exchange.

Cryptocurrency, despite its name, has never worked well as a medium of exchange. Although cryptocurrency is portable and does not wear out over time, its wild fluctuations in value have never made it useful to buy things with. Few merchants accept crypto.

Also, cryptocurrency seems pretty easy to steal. Just a few days ago, the FBI seized $3.36 billion in Bitcoin that had been stolen from the Silk Road marketplace a decade ago. In a separate incident, $3.6 billion in stolen cryptocurrency was linked to the 2016 hack of Bitfinex. At least to steal cowrie shells, the thief must be in the same geographical location as the victim.

Despite the drawbacks that have plagued cryptocurrency since its inception, many of the well-heeled have poured money into it. As of this writing, a single Bitcoin is worth just $17,000 – still obviously quite a lot of value. Still, Bitcoin was worth almost three times as much at the beginning of this year.

The latest blow to the legitimacy of Bitcoin and other cryptocurrencies is the collapse of the cryptocurrency exchange FTX. On November 11, the company announced that it had filed for Chapter 11 bankruptcy. The 30-year-old founder and CEO of FTX, Sam Bankman-Fried, started the week with a fortune of $16 billion, and ended the week with nothing.

Investigations are currently underway regarding as much as $473 million in crypto assets that may have been stolen from FTX. With investors already jittery in the wake of falling cryptocurrency prices, FTX’s customers began fleeing at the first hint of potentially compromised accounts. It was the cryptocurrency equivalent of a bank run. A plan materialized for FTX to bail out by selling to rival cryptocurrency exchange Binance. The lawyers were unable to get the paperwork done quickly enough before the deal fell through.

Unsurprisingly, the price of Bitcoin and other types of digital assets fell on the news of the FTX implosion. However, the fallout seems to amount to more than a temporary drop in prices.

While cryptocurrency theft is nothing new, the FTX collapse is unique. FTX was a pretty big deal. Until last week, FTX had naming rights to the Miami Heat’s arena. Belief is what gives cryptocurrency its value, and many more people are going to lose their religion after such a rapid, high-profile implosion.

Cowrie shells lasted for centuries as currency. I am not sure that we in modernity have the ability to maintain the faith for that long.

Jonathan Wolf is a civil litigator and author of Your debt-free JD (affiliate link). He has taught legal writing, written for a wide range of publications, and made it both his business and his pleasure to be financially and scientifically knowledgeable. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization he is affiliated with. In any case, he will not share the credit. He can be reached at [email protected].