Is Bitcoin Hayekian?

Abstract

The chapter questions the soundness of the sometimes taken-for-granted proposal that the tokenomics of Bitcoin takes its roots in Austrian economics, especially in Hayek&s;s analysis of money as sketched out in The Denationalisation of Money . Since the inception of Bitcoin, the question ‘what is it all about?’ is relentlessly asked. The chapter first investigates the literature on the nature and value of Bitcoin. Then, it presents the tokenomics of Bitcoin, i.e. , the rules that define the monetary norm of Bitcoin. It appears that, by design, the dynamics of adjustment of Bitcoin is at odds with Hayek&s;s ‘good money.’ In the short term, Bitcoin&s;s constant elasticity of supply makes its value volatile. In the long term, the increasing marginal cost of mining, increasing level of difficulty, and decreasing reward with halving make the increase of the value of Bitcoin necessary for keeping mining (and thus the whole protocol) financially sustainable.