Bitcoin that Hayek didn't ask for - ForkLog: cryptocurrencies, AI, singularity, the future

# Bitcoin that Hayek didn't ask for

And predicted by monetarist Friedman

In 1999, economist Milton Friedman — Nobel laureate and leading voice of monetarism — described something that didn't yet exist. In an interview, he suggested that the internet only lacked a reliable electronic cash system that allows money to be transferred from one person to another without revealing identities.

Ten years later, an anonymous developer under the pseudonym Satoshi Nakamoto launched Bitcoin — a peer-to-peer system that did exactly that. The monetarist was right.

The irony is that Friedman is hardly the last person from whom the industry would expect such an idea. He is remembered as a defender of the central bank, albeit bound by strict monetary rules. And in the ideological founding of Bitcoin, the community credits another economist, his ideological opponent — Austrian economist Friedrich Hayek.

This is the first crack in the familiar genealogy of the crypto community. Digital money had several prophets, and they did not agree with each other.

Common denominator

What made Hayek a convenient figure for the role of the main inspirer? In 1976, he published the work "Denationalization of Money" (in the Russian edition — "Private Money"). The thesis sounded radical: a government monopoly on issuance is harmful, and the right to issue money should be handed over to the market. Let private issuers compete, and people choose the currency they trust.

Friedrich August von Hayek. Source: Wikimedia Digital gold seems to answer this thesis: no central bank, issuance governed by code, not the will of officials, an open and verifiable registry. In Colin Wu’s blog, Bitcoin is described as a technological "order without trust" — a system where mathematics and protocol replace intermediaries. At this level, Hayek and Satoshi speak the same: money does not necessarily need the state, just rules that cannot be broken.

Here I want to end — the first cryptocurrency is the embodiment of the Austrian’s dream. But opening the book itself, the construction begins to fall apart.

The 70s foundation, with amendments

In the industry, it is customary to trace the roots of Bitcoin to the mid-1970s — as if key discoveries were made then. Part of this picture is true, part is fitting it into a convenient framework.

Cryptography indeed made a breakthrough in 1976. Whitfield Diffie and Martin Hellman published the paper "New Directions in Cryptography" and introduced the concept of public-key encryption: the public key is shared freely, only the private key remains secret.

Later, it turned out that the same solution was also proposed in the early 1970s at the British Government Communications Headquarters (GCHQ) by James Ellis, Clifford Cocks, and Malcolm Williamson — but their work remained classified. Thus, the foundation of future "anti-government money" was laid by government cryptographers.

The theory of distributed systems in the mid-70s does not fit: Leslie Lamport and co-authors formulated the Byzantine Generals problem only in 1982. For digital gold, their work is fundamental — but not for this chronology.

It is also telling whom Satoshi actually cited. The Bitcoin white paper’s references do not include Hayek, Diffie, or Lamport. Instead, Stewart Haber and Scott Stornetta are listed as co-authors in three of the eight sources — their system of hash chains for stamping documents, a direct precursor to blockchain.

The industry tells one genealogy, but Satoshi’s footnotes point to another.

Infographic: ForkLog.## Stability versus scarcity

Opening "Private Money" — and the first contradiction becomes immediately clear. The Austrian did not call for fixing the amount of money — he argued the opposite: the issuer should actively regulate issuance to keep purchasing power stable.

According to Hayek, the competition is won not by the rarest currency, but by the most stable — devaluation harms creditors, inflation hurts debtors, and people choose tools with predictable purchasing power.

Bitcoin is built the other way around. Its issuance is fixed once and for all: 21 million coins, halving every four years, and eventually stopping (around 2140).

Halving calendar. Source: Bitbo. Satoshi directly compared this to gold mining in the white paper, calling the final state "inflation-free." There is no manager who would adjust the supply to demand. Instead, there is a strict schedule — and the price absorbs all demand fluctuations.

The result is volatility, which the Austrian considered a sign of bad money. At Bitcoin’s inception, it was extreme — the price could soar or plummet by dozens of percent within weeks. In recent years, the amplitude has noticeably smoothed out: by 2025, volatility had roughly halved compared to 2021 and was lower than that of individual stocks like Tesla and Nvidia.

Historical volatility of Bitcoin compared to Tesla and Nvidia stocks, % annualized. Source: Charles Schwab But even the reduced amplitude of fluctuations is incompatible with the ideal of money, whose value is so stable that it requires no thought.

For the Austrian school, the key function of money is everyday exchange. Based on this, Bitcoin should have lost to competition, not led the market. What the industry praises as "digital gold" in this coordinate system is more like a diagnosis. And this concept is not at all Hayek’s. It is based on the principle of scarcity, not stability.

In 2005, Nick Szabo described Bit Gold — an asset whose value is based on "unforgeable costliness": creating a coin requires real computational effort, and this effort cannot be faked.

Szabo’s cost mechanism borrowed from Adam Back: his Hashcash from 1997 forced the sender to "burn" CPU time to make spam unprofitable. Satoshi combined these elements and created money backed not by the issuer’s promise, but by energy spent.

The scheme works — but this is a "gold" device, not a managed currency as described by the Austrian. He saw a flaw in precious metals: their reserves cannot be flexibly adjusted to the economy’s demand for money.

The paradox is deeper. The strict mechanism is closer not to the Austrian school, but to its opponent. Milton Friedman proposed "coining" the central bank with a fixed rule — increasing the money supply by a steady 3–5% annually, regardless of the current cycle phase.

Portrait of Milton Friedman. Source: Wikimedia Bitcoin elevated this idea to the absolute: a rule exists — no improvisations, no manager. As for monetary policy, it is closer to Friedman’s ideas. The only difference is that the monetarist wanted to keep the central bank, while the code completely abolished it.

Bitcoin supporters will argue: the fixed limit is a "healthy currency," protection against inflationary arbitrariness, the very dream of the Austrian school. This argument was developed by economist Saifedean Ammous — in his concept of "hard money," Bitcoin surpasses even gold because its supply cannot be increased in response to demand.

There is some truth here — Hayek and Satoshi coincide in rejecting government monopoly. But they differ in the means: the Austrian fought inflation through stability, Bitcoin — through scarcity. And the latter provides not constancy, but volatility.

Hayek sought money that you don’t notice because its value doesn’t change. Digital gold has become an asset whose price is discussed constantly.

Pluralism versus monopoly

The second contradiction is obvious: the Austrian wanted many competing currencies, but the industry has come to dominance by one.

By May 2026, Bitcoin accounts for about 57% of the entire digital asset market — it fell from a peak of 65% in June 2025 but remains the anchor of the entire system. It resembles a new monopoly, only private instead of state.

But this criticism is weaker than it seems. Hayek did not insist on endless diversity of currencies. In the revised edition of "Private Money" (1978), he allowed that competition might reduce the choice to one or two stable standards — the leader is determined by the market, not by decree. The fact that there will be few issuers did not scare him.

However, the question is not what the market chose as the leader, but whom exactly. Hayek expected that the most stable currency would prevail. The winner was an asset valued for the opposite — for growth and scarcity, not stability. It established itself as "digital gold" and a speculative bet, surrendering the role of everyday money.

In practice, Hayek’s scenario has indeed materialized, but outside the Bitcoin ecosystem. The market has indeed chosen stable private money for transactions: stablecoins like USDT and USDC.

By 2026, their total capitalization exceeded $316 billion, and in terms of transferred value, "stablecoins" have long surpassed the first cryptocurrency. Private issuers, competition for stability — almost verbatim Hayek.

30-day transfer volume in stablecoins reached $3.7 trillion. Source: Artemis. Monthly transfer volume dynamics in Bitcoin. Source: The Block Almost — because the stability of stablecoins relies on their peg to the dollar. That is, to the money of the very state whose monopoly Hayek proposed to abolish. The market reproduced his mechanism and turned the meaning inside out: the most "Hayekian" money in the industry is backed not by the rejection of the central bank, but by its obligations.

And none of the outcomes was a pure victory for the Austrian idea. Bitcoin entered the market at the cost of the very instability Hayek considered a flaw. Stablecoins provided stability but borrowed it from the dollar. Money free from the state and chosen for stability remains a thought experiment.

Anonymity — not Hayek

In Bitcoin’s genealogy, two different ideas of freedom live on, and Hayek is responsible for only one. The Austrian cared about the independence of money from the state, not the anonymity of the payer. The right to be unseen came from another source — from cypherpunks.

The path to anonymous transactions was opened by David Chaum. As early as 1982, he proposed "blind signatures" — mathematics allowing a bank to certify a coin without seeing its denomination or owner. From this, Chaum created DigiCash — the first attempt at untraceable electronic cash. The idea was precisely in confidentiality: money that leaves no trace.

The company went bankrupt in 1998. Anonymous money was ahead of its time and demand, but failed commercially. However, the idea persisted.

Its ideological champion was Timothy May. His "Crypto Anarchist Manifesto" of 1988 contained a clear ironic reference to the "Communist Manifesto" — and the thesis was not Hayek’s "let the market issue money," but "cryptography will blind the state." Anonymous transactions, markets outside control, reputation instead of passports — that was his horizon.

The bridge to Bitcoin was built by Hal Finney. In 2004, he assembled RPOW — a system of reusable proof of work, a direct predecessor of mining; Satoshi sent him the first-ever Bitcoin transaction. Finney linked together the privacy of cypherpunks, the Proof-of-Work line, and the network launch.

And then — the main irony. Bitcoin, celebrated as a victory of cypherpunks, violated their core value. Chaum aimed for untraceability — but the first cryptocurrency is the opposite: every transaction is visible to everyone, forever. Satoshi himself acknowledged this in the Privacy section of his white paper: protection here relies only on the fact that the public key is not linked to a name. It is pseudonymity, not true anonymity. Essentially, Bitcoin is the most transparent money in history, the opposite of Chaum’s concept.

It is telling that even May himself became disillusioned. Shortly before his death in 2018, he noted that exchanges with passport checks, KYC requirements, and account freezes are hardly what Satoshi envisioned. The prophet of crypto-anarchy did not recognize his idea in what the industry has become.

Thus, "digital freedom" turns out to be a patchwork of incompatible parts: for Hayek, it meant independence of money from the state; for Chaum and May — invisibility of the individual to it. They were combined into one myth, but Bitcoin did not fully fulfill any of these promises: it is neither the stable money of the Austrian nor the untraceable cash of cypherpunks. The slogans matched — but the substance diverged.

A debate, not an embodiment

What remains of the genealogy into which Bitcoin is automatically inserted?

The common denominator is real. Hayek, Chaum, May, and Friedman — despite all differences — aimed at one: to remove money from the exclusive power of the state. Bitcoin inherited this framework, and that’s why it is so easy to see it as a successor to each of them.

But beyond the framework, the similarities end. The Austrian wanted a stable currency managed by a living issuer — Bitcoin imposed a strict limit and volatility. Hayek expected the most reliable money — but the winner was a speculative asset. Chaum and May built untraceable cash — but the first cryptocurrency made the registry public. Each of these ideological inspirations would recognize a feature in it, but not the whole.

Infographic: ForkLog. And here’s the paradox. Bitcoin succeeded not because it fulfilled someone’s program, but because it failed to fully implement any. It took from Hayek distrust of the state, from the Chicago School a strict rule, from cypherpunks cryptography, and assembled from these parts something none of them designed.

Friedman’s 1999 forecast was almost verbatim fulfilled: reliable electronic cash for peer-to-peer transfers appeared ten years later. But what emerged did not match the ideas of any of the thinkers — neither the managed money of the monetarist with a central bank, nor the stable private currency of the Austrian, nor the untraceable cash of cypherpunks. They predicted the future, but did not realize it according to anyone’s blueprint.

And perhaps that is the strength. The first cryptocurrency is held not on anyone’s beliefs, but on rules that anyone can verify. If the Austrian, monetarist, or cypherpunk saw their dream in it, it doesn’t matter for the network’s operation. The Bitcoin Hayek didn’t ask for needs no approval.