I regularly join Philip Clarke’s ABC Nightlife radio show to discuss, and answer questions on, investing and markets. This week, the board lit up with people wanting to ask about the topic du jour – Bitcoin. Is this explosion in interest a signal that Bitcoin is in bubbly territory, or a pointer that it’s here to stay?

Bitcoin has become such a divisive topic. I mentioned on Phil’s program that someone needs to explain to me the process or path Bitcoin (or some other cryptocurrency) follows to become a replacement for fiat money.

Fiat money is currency that is backed by the government that issued it (and its ability to tax its citizens), rather than by a physical commodity, such as gold or silver.

The difference between fiat money and commodity money relates to their intrinsic value. Historically, commodity money has an intrinsic value that is derived from the materials it is made of, such as gold and silver. Fiat money by contrast, has no intrinsic value – it is backed by the promise of a government or central bank. The promise is supported by the ability to tax and the promise is the currency is decreed capable of being exchanged for its value in goods.

Importantly, fiat currencies provide central banks with greater control over its supply and its price, and therefore the ability to manage the economy through monetary policy. A universal currency among all nations, with different strengths and weaknesses, as well as fundamentally different belief and value systems, would make the Euro’s impact on its constituent countries look like child’s play. The unknown consequences would make countries reluctant to support such a step potentially for generations.

Bitcoin supporters, advocates and zealots run a marketing message that runs from “new money for the world” to “money of the internet” and, more recently, to “digital gold” and to a “store of value”. But the arguments are all based on a belief or a faith in a transition to that status. Rarely are the arguments supported by an explanation of the path Bitcoin will take to arrive at that point.

As I mentioned on Phil’s ABC Nightlife program, I will happily add Bitcoin to my family’s investment portfolio if someone can articulate the path bitcoin takes to arriving at a universal reserve currency.  At the moment Bitcoin is still priced in US dollars, not the other way around.

And the reason I require that explanation is because it is one of the main arguments buyers use to justify purchasing Bitcoin.

Today Bitcoin is not a monetary system, even though many hope that it becomes one. Listen carefully to the statements of Bitcoin’s supporters and they are based on faith in an outcome the path of which is unclear if not impossible.

In the interview linked below, journalist Brett Scott, on the right of the screen, does a terrific job of articulating the issues underlying the bulls’ arguments. Meanwhile the Bitcoin bull only demonstrates faith in the outcome without articulating the path to that outcome.

Scott argues that just because an object is rising in price, it doesn’t mean it becomes a monetary system. He describes Bitcoin as a “Money Priced Digital Collectible”, which is certainly not a monetary system.

Scott notes that core to the Bitcoin marketing story is an imagined future point where the price rises and suddenly it “inverts” and everything is priced in Bitcoin. He explains his point by suggesting Bitcoin bulls may as well argue that the rising price and popularity of Apple shares will eventually mean everything is priced in Apple shares even though Apple shares derive their value from fiat money pricing.

While you need to be warned the debate is embedded on a cryptocurrency exchange’s website you can watch the debate here.

Feel free to comment if you can explain in detail the path Bitcoin takes from speculative collectible to world’s reserve currency.

Of course, you don’t need to believe it will become the world’s reserve currency to make money from Bitcoin. But then neither does it matter whether you trade Bitcoin, stamps, collectible cars, art, wine or low digit number plates – you can potentially make money in all of these things.

Click on this link if you’d like to listen to the most recent program.