Bitcoin has been all over the news recently… or maybe that’s only the case in my mind, because I have some money invested in it lol. Either way, the value of bitcoin has skyrocketed over the last few months.
This ‘bitcoin boom’ has triggered conversations all over the world about what it means for a currency (or anything really) to have value — a topic very near to my heart. One such conversation I had on Facebook went like this:
Matt B: “The ‘currency’ has no value. The technology is where the values lies. And there has only been no such increase in ‘value’ of an ‘asset’ in history in such a short period of time besides The Tulip bubble of 1637.”
Me: “That’s like saying the dollar has no value because it depends on pieces of paper. The value of anything, whether it be a good, a currency, or an idea, is entirely perceptual.
People think a bitcoin is valuable enough to trade for dollars. Whether this state of affairs can continue remains to be seen. But for now, it’s pretty absurd to claim that a bitcoin has no value… and I’m aware of tulip mania 🙂 a perfect example of the pure faith that economic value is based on.”
Matt B: “you are correct in that the value of goods are completely perceptual. That is why bitcoin trades for what it does, because of human perceptions. However, human perceptions are often wrong. Behavioral Economics goes into great depth about this subject.”
This response got me thinking.
If something is completely perceptual, how can perceptions about it be wrong?
Visual illusions are a perfect example of this. Do you see motion in the image below? Maybe it won’t surprise you that it’s a perfectly stationary image. Despite the objective lack of motion the human eye will invariably (with a few exceptions) see this image wiggling around.
But what does that mean, “objective lack of motion”? As far as we know, everything moves. From the tiniest atoms and specks of dust to much larger things like galaxies and the fabric of reality itself, motion is ubiquitous. So in a sense, isn’t the ‘trick of perception’ seen in the illusion above more accurate than our conception of a stationary image?
More to the point, the concept of an objective, external reality is less straightforward than we might intuitively think. Despite popular opinion, neither science nor engineering rest on the principle of a verifiable, objective reality (known as ‘veridicality‘). The philosophy behind these more tangible disciplines operates sufficiently well simply by means of ‘consilience,’ or the convergence of evidence across sources. In other words, human perception is often wrong, but when multiple, independent perceptions converge on the same conclusion they often produce a functional result. We see this played out in every aspect of our lives — nothing in science or mathematics is absolute knowledge; it’s all just approximations based on the average of many many sources of independent investigation.
In fact, evolutionary modeling suggests that perception in general is simply not designed to be accurate. Veridical perception, or the alignment of our subjective experience with an objective reality, may be selected against by natural selection. In other words, we have evolved to purposefully see reality in a distorted way. This makes quite a bit of sense if you think about it: in order to survive as a living, bounded organism is it more useful to
A) see yourself as an unbounded, infinitely connected extension of the universe
B) to have an awareness of where you are compared to your food source
As Dr Donald Hoffman puts it:
“a striking gustatory illusion can be induced by miraculin—a protein found in the red berries of Richadella dulcifica (Koizumi et al. 2011). For more than an hour after eating these berries, sour substances taste sweet. The textbook theory of illusions would say that the sweet taste is illusory, because it’s not veridical. But this sounds odd. What can we possibly mean by the veridical taste of a molecule? What objective standard tells us its true taste? Couldn’t taste vary across species? One might hope, for instance that dung tastes different to coprophagic creatures, such as pigs, rodents, and rabbits, than it does to us (Hübner et al. 2013).”
There are several layers of irony wrapped up in this conclusion that perception is not veridical. In my opinion, the most hilarious is that if human perception is not veridical, then our conclusions about the veridicality of our perception are not to be taken at face value!
Now, I agree with Matt B’s main point, which is that the rapidly accelerating pace of bitcoin value is an economic bubble. However, I’m not sure how much this really means. After all, consciousness itself seems to be a hologram projected inwards from the outer edges of an expanding bubble composed of the fabric of space-time. So, in a sense, reality itself may be nothing more than an infinitely reflected series of projected bubbles resulting in a holographic field of perception… or does the holographic field of perception result in the infinitely reflected series of projected bubbles?
Can we ever know?