Ep. 196 Stephan Livera Interviews Bob Murphy on the Economics of Bitcoin
Stephan Livera hosts a popular podcast on Bitcoin and Austrian economics. He recently had Bob on to discuss, appropriately enough, the economics of Bitcoin from an Austrian perspective.
Mentioned in the Episode and Other Links of Interest:
- Stephan Livera’s YouTube page.
- Bob and Silas Barta’s guide to Bitcoin. BMS ep. 191 clarifying the debate over Bitcoin.
- Help support the Bob Murphy Show.
The audio production for this episode was provided by Podsworth Media.
About the author, Robert
Christian and economist, Chief Economist at infineo, and Senior Fellow with the Mises Institute.
The major error, or misdirection here is Bob and Silas talking about Bitcoin as the only cryptocurrency, or the only cryptocurrency worth talking about.
Let me make an analogy here. Personal computers were a revolution similar to cryptocurrency in the sense of potential to liberate individuals – decentralized cryptocurrency has the same potential. Bitcoin, introduced in 2008 was the first cryptocurrency. MS-DOS was one of the first personal computer operating systems, introduced in 1981. It was so primitive it didn’t even offer folders / directories to organize your files. Now imagine it’s 1994, 12 years after MS-DOS and all Jerry Pournelle talks about is MS-DOS 1.0.
That would be absurd right?
Worse still it focuses attention on the crypto 1.0 that can not, ever, grow to be used by hundreds of millions of people for daily low-value transactions, so it can’t threaten fiat systems in any way. Ever. And it cannot provide anonymity, so it can’t help you avoid big brother.
Something doesn’t add up here when you put on airs to be knowledgeable about cryptocurrencies, yet all we get is total silence from you about any system better than the first 1.0 offering which is critically flawed from a libertarian perspective.
It is really bad, Bob. Please talk with someone besides a Bitcoin shill someday who can present these issues to your audience. There are some great and engaging people on the right side of this issue.
Thank you.
Let me copy over the comments I put on the Mises.org entry for this interview:
I learned about Bitcoin in 2010, and didn’t buy any. Woops.
Bob, the “hard limit of 21M Btc” is, of course, just software. And it would be just as easy to make 42M Btc as it was to create the forks of Bitcoin Cash, Bitcoin Cash Satoshi Version, and so on. (and on, and on…)
Many other crypto currencies exist with entirely separate platforms, different ethos, different goals, different mechanisms (including extreme privacy for people who want that) which Bitcoin does not have.
In my opinion, these other crypto will be used the same way people today use silver and copper and Yen and every other currency and commodity in the social role of “money” where those are accepted.
Even if Bitcoin is what people use to refer to the world of crypto currencies, it doesn’t mean Bitcoin is the only crypto currency, just like people used silver during the age of the international “gold standard”.
So long as folks choose to use what is today called Bitcoin, it cannot go past 21M.
If you want a continually inflating crypto currency, use Doge, It’s there for anyone who wants it. I’m looking forward to Elon Musk putting a Doge miner on the moon.
Thanks Bob. And just to be clear, I knew that the below was correct, I just wanted Stephan to endorse the claim.
“Bob, the “hard limit of 21M Btc” is, of course, just software. And it would be just as easy to make 42M Btc as it was to create the forks of Bitcoin Cash, Bitcoin Cash Satoshi Version, and so on. (and on, and on…)”
Let’s say an ounce of gold is $300 if a society does not use it as money and $2000 if they do. For Bitcoin, the “inherent/direct use” value is $0 and it’s medium of exchange / money price is ~$55k.
Gold seems to justify its status of store of value since (some) direct users still demand it at the “overvalued” price of $2000. Hence, I can confidently hold gold knowing those people will (most certainly) still exist in the future and still demand gold at $2000.
This is not true for Bitcoin. No one wants Bitcoin for its “direct use” and hence its price is purely a function of speculation based on past prices and the current mood of the croud. Hence, I fail to see how Bitcoin could possibly be seen as a store of value. The only people buying/hodl’ing Bitcoin are doing so because they think the price will go up in the future. How can you be confident about future demand when the demand can only ever be speculative? The demand is never “non-speculative” i.e. for direct use.
By the way, my argument is not contradicting those Mises+Rothbard quotes. I am not saying it’s theoretically impossible for Bitcoin to succeed, just that it won’t in practice.
It would be easy to create a “fork” in Bitcoin and create a new software, and easy enough to create any new crypto. But not in a decentralized method like Bitcoin, there is a reason the SEC can’t target Bitcoin in and of itself. They can target on and off ramps to Bitcoin, but there is no central authority to Bitcoin other than the consensus of nodes and the network’s miners. There is the Bitcoin cryptocurrency, and then there is the decentralized PoW network it relies on. A good comparison to Bitcoin would be like sharing torrents. Ethereum is often compared to Napster in the sense that it is a centralized platform that allows users to share and access data or information. Napster was a file-sharing platform that allowed users to share music files with each other, which eventually led to the platform being shut down due to copyright infringement, they declared bankruptcy. Similarly, Ethereum has a single point of failure in that the government can easily shut it down or change the currency within by orders from the top down.
Bitcoin, on the other hand, is often compared to decentralized torrents such as BitTorrent. Like Bitcoin, decentralized torrents use a peer-to-peer network to share and access data, but they are typically used for sharing large files such as movies and music. BitTorrent allows users to download small pieces of a file from multiple sources, rather than downloading the entire file from a single source. This makes it more efficient and allows for faster download speeds. Bitcoin operates in a similar way, using a decentralized network to verify and record transactions on its blockchain, all open sourced P2P and uncensorable. There is NO single point of failure. It is truly a trustless solution.