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Against the IFP

Centralizing control over a currency’s infrastructure is a seemingly obvious mistake.

One would think any Austro-libertarian worth their salt would be able to see thru such a charade. Yet here we are, again. Face to face with economic illiteracy. Not garden variety lefist economic illiteracy, but one far more stinging and painful - one which comes from within our own community, rather than from without. 

First, Bitcoiners faced the economic illiteracy of maximalism and small blockers. Attempts to masquerade money’s primary function as value storage (Ammous) or rejecting Menger’s Regression Theorem altogether (Szabo) are luckily demonstrably false. Nevertheless, the shock of our fellow Bitcoiners illiteracy was like an unexpected slap in the face. Suddenly, we were forced to confront the fact that the ignorance of our allies in the fight for sound money, had led them astray. Yet, thru BCH we were thankfully able to keep Satoshi’s dream of peer to peer cash intact. 
Well, crypto anarch…

Bitcoin Maximalism: A House Divided

Based on the response to The Economics of Bitcoin Maximalism, it's become clear that not only is the maximalist community divided, but that the competing factions are speaking entirely different languages altogether.

I’ve separated the Bitcoin maximalists into several camps based on their ideologies.

The Saifedean School

Approximately half of the bitcoin maximalist community is at least wise enough to accept the validity of regression theorem. However, they falsely claim that the utility requirement of regression theorem is satisfied by its role as a store of value. This fiction was made popular by Saifedean Ammous in The Bitcoin Standard.

I’ve debunked this claim on several occasions (check out this recent episode of the CoinSpice podcast) by reiterating the Austrian position on the secondary functions of money. That is to say, money’s use as a store of value is secondary to, and dependent upon its ability to function as a medium of exchange. In other words, the reserve demand for money is derived from its exchange demand, not the other way around.

The Nick Szabo School

The other half of the bitcoin maximalist community boldly rejects the store of value claim; nor will they concede Bitcoin’s utility is p2p cash (as Satoshi said it was), since this would force them to sympathize with chains that enjoy lower transaction fees. However, by denying any utility of all cryptocurrencies, the Szabo school is forced to dispense with the regression theorem altogether.

In other words, since they’re unable to identify the initial use-value of Bitcoin, they throw the baby out with the bath water and scrap the entire theory. Nick Szabo once called me a dogmatist for defending the Austrian position. Guy Swann from the Cryptoconomy podcast, recently claimed here that regression theorem is a Keynesian idea!

The underlying problem with this line of thinking is that Mises described the regression theorem specifically to remove a circularity from the economic corpus.

As he explains in Chapter 8 of his Theory of Money and Credit:

“The money prices of today are linked with those of yesterday and before, and those of tomorrow and after.”


“To trace back the value which money has today to that which it had yesterday to that which it had the day before, and so on, is to raise the question of what determined the value of money in the first place.”

According to the Austrians, that determining factor was the commodity’s utility. Gold & silver were, for example, initially utilized for decorative or ornamental purposes. By denying this utility requirement, maximalists are unable to explain the origins of money and thus, fail  to understand the nature of money entirely.

At minimum, it's incumbent upon anyone denying regression theorem to resolve this circularity since they’re reintroducing it to the economic literature. In this, the Szabo school and it’s adherents fail to even make an attempt.

The Fence Sitters

Some of the more vocal fence sitters include Michael Goldstein and Vijay Boyapati, but in truth, almost every maximalist pays homage to both Ammous and Szabo without understanding that their ideas are diametrically opposed to one another and are fundamentally mutually exclusive, let alone factually incorrect

This only serves to reinforce the idea that maximalists are either emotionally beholden to an incorrect position, or lack a solid foundation in economics altogether.

Bonus: The Craig Wright School

Ironically, the best argument I've heard for Bitcoin maximalism comes from the notorious BSV proponent, Dr. Craig Wright. In this episode of The Agora, he urged me to think of Bitcoin as a protocol like TCP, rather than as money. Although this explanation certainly makes sense in the framework of a metanet, it isn't as useful for cypherpunk and agorist purposes as a general currency is.


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