The recent collapse of Mt. Gox—a prominent exchange site for the internet currency Bitcoin—has sparked wide discussion about the future of “virtual” money and the social groups that create it. Some remain cautiously optimistic (though pointing out that Bitcoin may take itself a little too seriously), while others have said the currency amounts to a “Ponzi scheme” with “no store of value.” As a post from our friends at Cyborgology noted last year,

Calling Bitcoins “virtual currency” is nonsensical because all currencies are virtual in that they are “collective hallucinations” about measurement of worth.

Classic sociological theory investigated how society creates value, and came to similar conclusions. Gold and paper money needed a lot of collective social support to become valuable.

• Karl Marx and Friedrich Engels. 1867. Capital. A Critique of Political Economy Volume One London: Penguin, 1990.
• Georg Simmel. 1900. The Philosophy of Money. New York: Routledge, 2011.

What makes one currency more “valuable” than another is institutional support, but this wasn’t always guaranteed for the U.S. dollar, either.

• Bruce G. Carruthers and Sarah Babb. 1996. “The Color of Money and the Nature of Value: Greenbacks and Gold in Postbellum America.” American Journal of Sociology 101(6): 1556–91.