Where did the fairy come from? It was a common question in 19th C Cornwall. And, there were a variety of theories, so pick the one you like, or come up with another
A K Hamilton Jenkin concludes that the most generally accepted theory explaining the phenomenon of the small people is that they represent the folk–memory of an ancient race of inhabitants who were conquered by the Celts but who lived for a long time afterwards leading a furtive existence in the moor lands and cliffs until, finally, they faded away and were remembered in the old tales.
Robert Hunt relates the following theory of the ant:
The ant is called by the peasantry a Muryan. Believing that they are the Small People in their state of decay from off the earth, it is deamed most unlucky to destroy a colony of ants. If you place a piece of tin in a bank of Muryans at a certain age of the moon, it will be turned into silver.
Margaret Ann Courtney reinforces the superstition and says it was considered unlucky for the above reason to destroy an ant’s nest, and”a piece of tin put into one could, in bygone days, through pisky power be transmuted into silver, provided that it was inserted at some varying lucky moment about the time of the new moon.
Courtney mentions that unbaptised children were thought at the beginning of the nineteenth century in England to turn into piskys when they died. They gradually went through many transformations at each change getting smaller until at last they became Meryons.
Courtney relates another tradition which says that piskys are Druids who, because they would not believe in Christ, were for their sins condemned to change first into piskies; gradually getting smaller, until they, too, as ants are lost.
Courtney advances another former belief that moths were considered in Cornwall to be departed souls, and were still in 1890 called piskies in some parts. She also mentions that a green bug which infests bramble–bushes in late autumn bears the name of pisky.