Bitcoin History: Libertarianism and the Economy’s ‘Final Boss’

In the great game of the world economy, the final boss victory for crypto would be to rob nation-states of the ability to issue legitimate money – at least, that would be the libertarian win condition.

“Everyone who has been around long enough in crypto, if you scratch off the surface, is a closeted but very committed political radical,” Preston Byrne, an attorney and past startup founder, told CoinDesk.

In Byrne’s view, libertarianism is a close cousin of the original philosophical core of crypto: cypherpunk. Cypherpunks want control over how much anyone knows about them, but libertarians have a more profound agenda: They want to eliminate coercion of any kind. So it makes sense that libertarians would gravitate to a technology that undermines nation-states’ ability to mandate which money we all use with each other.

The two viewpoints have always been intertwined, as internet prophet and early Intel engineer Timothy May attested in 1994’s “The Cyphernomicon“:

The crypto industry is “not just talking about a payment system,” Nic Carter of Castle Island Ventures told CoinDesk. “For the most part, we’re talking about a monetary system. Those are like deeply, deeply political things, because whomever administers the monetary system has enormous leverage in the way that society looks,” Carter said.

Crypto is philosophical technology or maybe technological philosophy.

Aside from payments, in its generally accepted definition, money also provides the basic unit of account and a way to store value.

Money that can flow freely and whose supply won’t expand just because a politician wants to build some highways, pyramids or award some no-show jobs gets right to the heart of what libertarians are all about. The 1997 book “The Sovereign Individual” by James Dale Davidson and William Rees-Mogg foretold a future where civilians shop for a state much as they shop for electricity suppliers in deregulated markets.

The book predicted that money would play a key role in undermining state authority, largely due to nation-state preference for continually downgrading the value of their currency. Remarkably, they predicted a money native to the internet (“cybermoney”) would be key to this undoing. They wrote:

This argument that the internet would change how value gets transferred seems like a natural extension of the work of Austrian-born economist Friedrich Hayek, who published “The Denationalisation of Money” in 1976, a book that advocated for competitively issued private forms, a model that sounds much like the current explosion in stablecoins we are seeing today.

The economist-philosopher was also an advocate for decentralization long before Satoshi’s white paper, contending that central planning is cumbersome and daft.

“We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used,” Hayek wrote in his 1945 essay, “The Use of Knowledge in Society.”

How do people, in Hayek’s conception, coordinate their activities? They do it with prices.

With prices, people are able to put their knowledge about local supply and demand into the system without revealing to others exactly what they know, much as zero-knowledge proofs allow a person to answer a question without revealing any more information than is essential.

“Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge,” Hayek wrote 75 years ago. “But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place.”

The ability to coordinate society simply through price signals rather than politics is crucial to the libertarian worldview, and many suspect those price signals get warped by, for example, a government that has so much power to influence the economy on a macro scale.

It is far better, in this view, for such signals to circulate through an economic system (like Bitcoin) that is indifferent to particular circumstances of a historical moment.

“Libertarianism, as developed to this point, discovered the problem and defined the solution: the State vs. the Market,” philosopher Samuel Konkin wrote in 1980’s “New Libertarian Manifesto.” “The Market is the sum of all voluntary human action. If one acts non-coercively, one is part of the Market. Thus did Economics become part of Libertarianism.”

Like the old man in the Legend of Zelda game who handed the hero, Link, his double-powered white sword, blockchain is what enabled libertarians to start standing up a little economy all their own.

It wasn’t until crypto that libertarians started to build things people actually use that reflected libertarian values. Successfully doing so caused the CEO of a publicly traded company, Overstock.com, to bow multiple times and say “I’m not worthy” when he first encountered ShapeShift founder Erik Voorhees at a gathering of bitcoiners.

Voorhees built a significant nook within that crypto-libertarian economy and Overstock’s founder could see it. Voorhees’ company has seen setbacks on its ideal, but it’s moving fast to get back in line with its founder’s values.

Meanwhile, the architect of the software that powers EOS quit working on it because the reality didn’t square with his views about the primacy of individual liberty.

Bitcoin’s creator decided it would have a fixed supply: 21 million coins. Similarly, there’s no more DAI in the world than MakerDAO users are willing to post collateral for and borrow.

These aren’t just design choices. They are statements.

Carter contended the blockchains “that are interesting tend to have relatively well-developed views on society, and then that is manifested in their protocol.”

There’s a class of philosophers today who are native to the internet. It’s not lost on some of these thinkers that cryptocurrencies aren’t just software but also a way to express conviction about the social world.

They are a way to incentivize people to play a new kind of game in new ways.

Ole Bjerg is a philosopher at the Copenhagen Business School who has written extensively about money, including about bitcoin. He and Byrne pointed out that libertarian skepticism extends beyond the state to the massive corporations that rely on it to persist.

In a conversation with CoinDesk, Bjerg contrasted bitcoin with the banking industry, which he said has no conviction. “Banks and the financial system, they would portray themselves as: ‘We are capitalists.’ … They’d say, ‘We need competition and innovation. Innovation is good.’”

But then when entrepreneurs actually try to compete with a genuinely new, disintermediating way to manage payments, Bjerg continued, “then all the sudden the banks become state socialists and say: ‘No, no, we can only have one currency.’ What I see is bitcoin has shown the true face of the banking system in a way. It was all about monopoly.”

James Ellis is an independent philosopher and scholar who has been investing in cryptocurrencies for some time. Ellis is better known as Meta-Nomad to his followers online. He said the project of cryptocurrency “was sort of philosophical from the start. Not anarchic but detached. An element of leaving something behind and finding your own space.”

Ellis believes crypto fits into a larger theme he likes to pursue, that of exit. Cypherpunks started articulating ways for citizens to make their activities illegible to the state, and Bitcoin’s arrival presaged a future where even whole economies could be built invisible to terrestrial authorities.

“If you can cordon off your own currency then arguably you can cordon off your own state,” Ellis said. This is the idea that cypherpunks and libertarians share, but not all libertarians are cypherpunks and not all cypherpunks are libertarians.

If the libertarian is the hero of some kind of Mega Man-esque game, what does the hero do after the rug pull of the final boss? He declares: No more bosses.

Bosses in video-game legend are defined by one thing: firepower. To the libertarian mind, that’s no way to be a boss.

“One of my goals when I’m talking about politics with people is to get them to see the gun in the room,” Chainstone Labs CEO and Satoshi Roundtable co-host Bruce Fenton told CoinDesk in an interview. An OG both in bitcoin and libertarianism, Fenton invests to express his viewpoint.

A worldview needs practitioners like Fenton and theorists who can help fellow travelers envision the next steps after they are victorious. Travis Corcoran is a Kickstarter-enabled novelist who self-describes as a “Catholic anarcho-capitalist.”

To him, a philosophy offers at least one of two things: “a way of understanding the world” or a way of “thinking about what is the good life,” he told CoinDesk.

Previously a software developer, Corcoran was on the cypherpunk mailing list back in the day and he was sold on cryptocurrency from the jump, but he is best known as the author of the Aristillus Series, a sort of libertarian what-if story in space. Cryptocurrency hasn’t popped up in his books yet, but he promised that it is coming.

“Libertarianism doesn’t even want to talk about understanding the world,” Corcoran said. “Libertarianism says: The best way to interact with each other is without force, without top-down controls.”

This notion of eschewing force or coercion emerged several times in reporting this essay, and it is key. Libertarians disagree on a lot, but they have consensus around the Non-Aggression Principle, that force must not be used against people or property.

Similarly, Preston Byrne said, “Libertarianism doesn’t command you to do anything. It commands you to not command.”

Arthur Breitman, the architect of the governance-oriented blockchain Tezos, put it another way. “The thing that defines libertarianism for me is consent,” he said. “We are a social species. We are meant to collaborate with each other.”

The nice thing about Tezos, Breitman contended, is that no one is forced to use it. The same, so far, can be said of all blockchains, though all bets are off once central bank digital currencies arise.

Libertarianism always has a bit of a macho, do-it-yourself and “damn the torpedoes” veneer that is no doubt off-putting to many. It is the kind of thinking that can lead a gang of entrepreneurs to attempt to found a utopian enclave in another nation on another continent, only to have it devolve into hopeless infighting.

Indeed, the philosophy’s favorite novelist might be science fiction’s Robert Heinlein, author of both the paean to free love, “Stranger in a Strange Land“, and the revolutionary vision, “The Moon Is a Harsh Mistress.” Heinlein articulated the high expectations of the do-it-yourself ethos in his novel, “Time Enough for Love,” when he wrote:

Libertarians, in other words, can be a little extra, as the kids might say – perhaps even sometimes a bit self-delusional (suburban dads cosplaying as Delta Force). Or they can at least come off that way to those who don’t buy in. Fenton granted to CoinDesk that the school-of-thought has some image problems.

But realistic or not, takes such as Heinlein’s make it a bit surprising to hear libertarianism’s proponents propound this non-aggression consensus, an idea that sounds – while not exactly pacifistic – more like pacifism than the typical, say, Western head-of-state would endorse.

But while libertarians have that one point in common, they differ in many ways. Byrne provided the most helpful way of breaking out the various categories without making it over-complicated. He described three varieties of libertarians:

Corcoran loosely identifies with the last category. “Any time a bunch of friends get together and accomplish something without violence, that’s an example of anarchy,” Corcoran said.

To Fenton, whatever kind of libertarianism an adherent gravitates to, crypto complements it. “It’s a free and open voluntary system and that’s exactly what it means. … Whereas, most of our relations in the world, they are coercive,” Fenton said.

In other words, the bosses of our modern economy can force everyone to use a particular currency because they have the heavy artillery; governments have the monopoly on legal violence.

As cryptocurrency has progressed, it’s become clearer that it offers new pathways for large groups of people to come to agreement. In crypto parlance: consensus.

Many hope that the importance of distributed consensus could extend beyond maintaining a ledger.

Consensus is very hard. That’s why the game of statecraft today is largely played by some version of majority rule. Some theorists think we now have the tools to do better.

Rachel O’Dwyer, now a lecturer at Dublin’s National College of Art and Design, wrote an essay in 2015 called “The Revolution Will (Not) Be Decentralized: Blockchains,” which dealt with the re-centralizing tendency of technology while noting some special hope for blockchains, the data structure that underlies most major cryptocurrencies.

O’Dwyer only wrote to point out only that cryptocurrency’s underlying technology opens up a new design space for decision-making, but her point would be echoed in 2017 by the then-CEO of bitcoin infrastructure firm, Chain, Adam Ludwin, in an open letter to Jamie Dimon, the chairman of JPMorgan Chase.

Ludwin wrote, “Decentralized applications are a new form of organization and a new form of software. They’re a new model for creating, financing and operating software services in a way that is decentralized top-to-bottom.”

Ludwin would go on to say that blockchains really only had one advantage over other kinds of software, but that one advantage had a distinctly libertarian tinge: a means to circumvent coercive powers’ ability to silence.

“Censorship resistance means that access to decentralized applications is open and unfettered. Transactions on these services are unstoppable,” he wrote.

That was back when the industry was more about transactions. These days, it’s more about individuals holding onto value themselves in a way that’s also non-intermediated and resists the states’ or the banks’ ability to assert control. To that point, Carter brought in another philosopher, John Locke, who offered a theory of property in his treatises on government.

“That’s quite central, I think, to the crypto doctrine, to reasserting extremely strong property rights that can’t really be interfered with. That’s the new thing about crypto that distinguishes it from other assets. It’s just really hard to confiscate,” Carter said.

“Confiscation resistance” might be another feature the industry’s libertarians will one day tout alongside censorship resistance; in the U.S., authorities already seem to have taken notice.

So in our imagined libertarian video game, the hero doesn’t beat the final boss in a face-off. The libertarian does it by making the state’s firepower irrelevant.

In other words: Today everyone only uses state-backed money. Maybe one day some people start using the internet’s money and maybe eventually too many people are using it for the state to stop it. That’s a rug pull.

Said another way, the libertarians don’t break the princess out of the castle; they build another castle beneath the castle. Then the princess slips from one to the other when Bowser isn’t looking.

It’s more Dwarf Fortress than Fortnite.

That is to say, censorship and confiscation resistance are just the beginning. After that there is getting along together in a decentralized fashion, and that’s just a totally different way of life. It’s a game with no win condition.

Libertarians seem to believe people could live side by side more amicably by building a system around what people are capable of rather than around protecting against what might harm them – a system geared more for the next opportunity than the next larceny.

For example: “If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances,” Hayek wrote in 1945. “We must solve it by some form of decentralization.”

For Katelyn Sills, a libertarian-sympathetic but not allegiant software developer and blogger, the real question is whether or not people get to choose what kind of decision-making system they are subject to.

Like Breitman, consent to be governed is an important philosophical sticking point, even though she knows that any piece of land can really only have one government (for now).

But blockchains allow her to tinker with new arrangements for finding consensus in a way almost nothing else does.

“What crypto is giving me is the ability to experiment with societal-level, institutional-level building blocks, with structures and designs, without having to go off and create an entirely other country. The costs are just lower tremendously. And I think that allows for a lot of innovation,” Sills said. “It’s very consensual.”

Which is another way of saying what Fenton said: pursuing ways of living among others without guns in the room.

Sills has more sympathy for left-of-center issues and causes than many others in the industry’s libertarian cohort, and perhaps for that reason she liked the thought experiment laid out by another internet-native philosopher, the rationalist blogger Scott Alexander, who wrote on Slate Star Codex in 2014 about a nation where there were a bunch of closely packed islands (an archipelago). Each island had a different government but it was really easy for people to shift their citizenship and residence from one to another.

Alexander’s ultimate point was that the internet made it more feasible for people to create societies they liked and to largely live within them – to exit at the margins.

Alexander’s larger point is that this is the beginning of a much more robust societies-within-societies moment. More than subcultures, even: groups intertwined by shared tastes, ideas and currencies.

Implied in Alexander’s exhortation is that if everyone can interface more with folks who want to live as they do, then they should also STFU about others who don’t (but no one does).

Obviously, the libertarian willing to metaphorically build the castle beneath the castle is more the anarchist than the legalist, in Byrne’s construction. So what kind of society would be built in that castle?

One future that came up again and again in CoinDesk’s conversations was one described by the aforementioned Konkin. In his manifesto he described a way of thinking he called “Agorism,” an ideology where all problems could be solved in the market. Adherents would practice counter-economics, a black market, not because of what it sold but because its participants abjured established authorities.

Though he wrote in an era where the dominant audio format was the cassette tape, his ideas make more sense if you just add blockchain. Konkin’s writings square nicely with Dan Larimer’s vision of decentralized autonomous organizations (DAOs), which has been showing progress in 2020, in fits and starts.

As Corcoran put it, “When things are lurking in the corners or on the outside long enough it really does build up momentum and it can start to do things much better than the market-dominant product can.”

But ideological purity seldom wins history.

In fact, maybe the greatest philosopher of history would say it never does. It’s a simplification, but Georg W.F. Hegel said that history is a process of ideas merging: A big idea is confronted with its antithesis and the two eventually synthesize into one weltanschauung.

And, even now, some prominent libertarians argue for a retreat from the path of libertarian rigidity.

Tyler Cowen is an economics professor at George Mason University and co-author of one of the last really big blogs, Marginal Revolution. In 2007, he described “The Paradox of Libertarianism,” in which he argued that governments expand as libertarian thinking allows their underlying economies to grow.

“That is the fundamental paradox of libertarianism,” Cowen wrote. “Overall, libertarians should embrace these developments. We should embrace a world with growing wealth, growing positive liberty, and yes, growing government.”

He hasn’t backtracked from this view; Hayek’s ghost screams.

But to such developments Preston Byrne, for one, is philosophical. “Libertarianism is a minority viewpoint. … We get our kicks other ways,” Byrne said. “People are quietly building their empires here, brick by brick.”

So the libertarian wins, in theory, by not playing by the final boss’ rules, which makes for a very long game.

It’s tough to recruit playmates to such a game, at least for now. Libertarians have to prove the strategy works on a smaller scale, by building organizations that succeed in principle and in fact.

And for others, it’s not so much empires as, perhaps, distributed villages. In cyberspace, not meatspace, but real villages, not just metaphorical ones a la Facebook or Reddit. Villages with markets and schools and mutual aid but – crucially – without guns in the room.

“In terms of the multiple kinds of libertarians, there is definitely a strand of people who call themselves libertarians who are primarily concerned about not being kept down by considering other people,” Sills said. “What I like to think about is: You can agree to constrain yourself in ways that are beneficial to society.”

That kind of thinking helps create a bridge (or a synthesis) from the early era of crypto, more the Bitcoin types and its direct successors, to the ones who came later, with Ethereum and beyond, a generation of which Sills is a part.

Those opting for crypto to undermine those telling them what they can’t do might be merging their ideas now with those looking toward a future focused on unlocking all that this technology is capable of doing.

And perhaps as that happens in cyberspace and on the ground, its upshot will be that when the princess slips out of the old-economy castle herself, she will find that there are any number of other castles she might like to go to and tunnels that make it easy to find them.