What Happened to Bitcoin?

Those who involved themselves in Bitcoin markets after 2017 encountered a different operation and ideal than those who came before.

Today, no one much cares about what came before, speaking of 2010–2016. They are only watching the upward price momentum and are thrilled for the increase in the asset valuation of their portfolio.

Gone is the talk of separating money and state, of a market-based means of exchange, of genuine revolution that would extend from money to the whole of politics the world over.

And gone is the talk of changing the operation of money as a means of changing the prospects for freedom itself. The enthusiasts around Bitcoin have different goals in mind.

And during this entire period, the exact time when this digital asset might have protected multitudes of users and businesses from rapacious inflation, the original asset that carries the symbol BTC was systematically diverted from its original purpose.

Hayek Had It Right

The ideal was nicely articulated by F.A. Hayek in 1974. Much of his career as an economist was spent arguing for sound monetary policies. At every important turning point, he faced the same problem: Governments and the institutions they serve did not want sound money.

They wanted to manipulate the currency system to benefit elites, not the public. Finally, he refined his argument. He concluded that the only real answer was a complete divorce of money and power.

“Nothing can be more welcome than depriving government of its power over money and so stopping the apparently irresistible trend toward an accelerating increase of the share of the national income it is able to claim,” he wrote in 1976 (two years after his Nobel Prize). He continued:

“If allowed to continue, this trend would in a few years bring us to a state in which governments would claim 100% of all resources — and would in consequence become literally ‘totalitarian.’” He went on to say:

“It may turn out that cutting off government from the tap which supplies it with additional money for its use may prove as important in order to stop the inherent tendency of unlimited government to grow indefinitely, which is becoming as menacing a danger to the future of civilization as the badness of the money it has supplied.”

The problem in achieving this ideal was technical and institutional. So long as state money worked, there was no real drive to change it. Certainly the push would never come from the ruling classes who benefit from the present system, which is precisely where every argument to restore the gold standard faltered.

How to get around this problem?

Bitcoin Could Free the World From Central Banks

In 2009, a pseudonymous developer or group released a white paper, written in language for computer scientists and not economists, for a peer-to-peer system of digital cash. For most economists at the time, its functioning was opaque and not quite believable. The proof came in the functioning itself which unfolded over the course of 2010.

To summarize, it deployed a distributed ledger, double-key cryptography and a protocol of fixed quantity to release a new form of money.

This isn’t a technical article. It’s enough to know that Bitcoin achieved the ideal about which Hayek could only dream. So I became an early enthusiast, writing hundreds of articles, even publishing a book in 2015 called Bit by Bit: How P2P Is Freeing the World.

I could not have known it at the time, but those were in fact the last days of the ideal. Shortly after, the protocol came to be controlled by a consolidated group of developers who jettisoned the idea of peer-to-peer cash.

They turned it into a high-earning digital security — not a competitor with state-based money — but rather an asset designed not to use but to hold.

Tragedy

Many of us saw all this unfold in real-time and many of us were aghast. Roger Ver’s new book Hijacking Bitcoin explains what happened. It’s a book for the ages simply because it lays out all the facts of the case and lets readers come to their own conclusion. I was honored to write the foreword, which follows…

The story you will read here is of tragedy, the chronicle of an emancipationist monetary technology subverted to other ends. It’s a painful read, to be sure, and the first time this story has been told with this much detail and sophistication. We had the chance to free the world. That chance was missed, likely hijacked and subverted.

Those of us who watched Bitcoin from the earliest days saw with fascination how it gained traction and seemed to offer a viable alternative path for the future of money. At long last, after thousands of years of government corruption of money, we finally had a technology that was untouchable, sound, stable, democratic, incorruptible and a fulfillment of the vision of the great champions of freedom from all history.

At last, money could be liberated from state control and thus achieve economic rather than political goals — prosperity for everyone versus war, inflation and state expansion.

That was the vision in any case. Alas, it didn’t happen. Bitcoin adoption is lower today than it was five years ago. But hardly anyone foresaw it at the time. I certainly did not.

It All Went Wrong

My first clue that something had gone wrong came in 2015, when I noticed significant changes, including higher fees. I reached out to a number of experts who explained to me about a quiet civil war that had developed within the crypto world.

The so-called “maximalists” had turned against widespread adoption. That’s why I was for it. But they liked the high fees.

Bitcoin’s original vision was being lost. It became not a revolutionary challenge to the corrupt monetary system we all live under, but just another way to make money. How many people who bought Bitcoin since its current resurgence even know its philosophical origins in monetary freedom?

We’ve missed an opportunity to change the world, a tragic tale of subversion and betrayal. There’s still the chance for this great innovation to liberate the world, but it requires a restoration of the revolutionary vision that inspired it.

I still cling to an emancipatory vision of Bitcoin. I embrace the idea of peer-to-peer currency for the masses, alongside a competitive marketplace for free-enterprise monies.

But Bitcoin has been corrupted. It started out as one thing, and ended up another. We’ve seen this happen in sector after sector. Institutions born and built by ideals are later converted by various forces of power, access and nefarious intent into something else entirely.

We’ve seen this happen to digital tech in particular and the internet generally, not to mention medicine, public health, science, liberalism and so much else.

The story of Bitcoin has followed the same trajectory, a seemingly immaculate conception turned toward a different purpose, and serving again as a reminder that on this side of heaven, there will never be an institution or idea immune to compromise and corruption.