The Libertarian Origins of Bitcoin Point to Its Inevitable Failure

While the origins of bitcoin’s original developer are shrouded in mystery, the ideations and philosophy that underlies its conception are completely transparent and rooted in a long lineage of bad ideas. Originally the technology was intended to be a “A Peer-to-Peer Electronic Cash System”, effectively a form of internet money. However, wrapped up in this seemingly benign idea are a set of imaginaries rooted in the Cypherpunk movement, a long lineage of heterodox Austrian economics from the early 20th century. Since then, market forces have shaped bitcoin and the crypto ecosystem into an entirely different beast altogether. It has morphed from an allegedly disruptive technology for democratizing payments and instead has sublimated into the worst speculative excesses that arose out of the financial crisis, which ironically is encoded into the first bitcoin genesis block. It is now a pure speculative plaything for Wall Street Speculators to gamble the random wild winds of sentiment and manipulation, fueled by a circus of deranged gamblers who are unwittingly used as exit liquidity. 

The original ideations of their white paper grew out of the Cypherpunk movement, a portmanteau of “cypher” and “punk” which describes the unorthodox and rebellious ideology of the privacy advocates who in the 1990s were pushing for digital cryptography to deregulated and unclassified as a munition allowing export to the larger world. The advances in cryptography these individuals made in that period had directly weakened US export controls and the Clinton Administration’s ability to regulate cryptography. The Ayn Rand-worshiping libertarian ideals synthesized with their bleak dystopian science fiction visions and inspired these individuals to build a worse world predicated on an extreme ideology to completely remove governments’ existence in society and financialize all aspects of human life. This included the commercialization of justice and politics through extremely dark ideations such as assassination markets in which the the darknet would provide a market place for pay-for-hire murders. 

At the core of the crypto movement is the idea of technolibertarianism⁠ — a political philosophy that endeavors to maximize the autonomy and independence of the individual and maximize the scope and pace of technology’s reach all while ignoring externalities on the larger world. It is a worldview that emphasizes the individual right of association and minimizes the role of the state which should allegedly subordinate itself to the pace of so-called “progress”. 

When one looks closer at the ramifications of libertarian projects in practice, history has shown these projects to fail spectacularly. The canonical exemplar of this phenomenon is the “Free Town Project”, a utopian project in New Hampshire in which a town called Grafton was taken over by libertarians who transformed the town into an allegedly laissez-faire commune of self-professed sovereign individuals. In practice, what transpired was the multiplicative rise of municipal problems arising out of a disregard for the brute reality of public goods problems. “Potholes multiplied, domestic disputes proliferated, violent crime spiked, and town workers started going without heat.” The entire arrangement fell apart when these tent-dwelling seasteaders refused to dispose of their rubbish, and instead left their garbage in the woods. This attracted bears from the wilderness to proliferate the town, leading to increasing attacks on the town folks themselves. Despite all the empty rhetoric about liberty, they could “bearly” escape the brute reality of the fact that public goods need common upkeep. 

There is no free lunch when it comes to tragedies of the commons, and for much the same reasons, the bears are coming for the bitcoin market. The creation of bitcoin and its subsequent collapse of crypto will similarly follow the example of the town of Grafton. The ideals of technolibertarianism are irrevocably baked into the implementation of all crypto projects and with them carry the seeds of their own destruction. The consensus mechanism called Proof-of-Work, which allowed bitcoin to be partially censorship-resistant, also ended up compounding and magnifying energy waste in a world that is already suffering the runaway effects of climate change. There is no escaping the reality that eventually, the externalities of all this waste will pile up on the world just like the trash left in the forest. 

The original sin of bitcoin is its Austrian economics roots and its bizarre fetish for power-in-gold, a phenomenon that John Maynard Keynes most aptly described as a “barbarous relic” best left in the 1800s. With the introduction of bitcoin, these same Austrian proponents now advocate that bitcoin is the revised and future version of “sound money” for the digital era. Yet the inescapable problem with Austrian economics remains, it rejects empiricism and attempts to derive all of the economics from first principles deductive reasoning rather than the analysis of data or real-world phenomenon. It is intentionally set up to be outside the realm of reason, unfalsifiable and is thus much closer to armchair philosophy than economics. Sound money is in fact, not sound at all, as fixed stability of monetary supply ends up propagating price volatility in the components of goods, services, and labor rather than allowing governments to adjust supply and create a buffer of stability in the events of manias, shocks and cycles. 

Austrian economists have always had a rather bizarre interpretation of the purpose of money and their manifestos reflect a pre-quantitative reading of economics rooted more in superstition than science. The entire philosophy of “sound money” and Austrianism is a historical anachronism, a jejune intellectual debitage best left to the ash bin of history and remembered as the economic analogue of what alchemy was to chemistry⁠ — an attempt to transmute worthless ideas into gold rooted not in knowledge but the naked will to power untempered by reason. 

And yet, despite all this, bitcoin continues in this increasingly bizarre and antiquated tradition of right-wing alchemy. Despite all of the sound, fury and gaslighting, all that crypto’s ascendency has amounted to is an explosion of fraud, scams, ransomware, and mania, which will inevitably lead to its undoing. The bears are restless, and they’re coming for the crypto bubble.