For the past several years I have studied the evolution of ideas that eventually resulted in the launch of Bitcoin in 2009. This study encompasses two main areas. The first area covers privately-issued digital currencies before Bitcoin (the step-by-step evolution of thought about how to make a decentralized and robust cryptocurrency work in the first place). The second area covers Bitcoin’s economic and philosophical origins to explore what motivated cryptographers, mathematicians, etc. to develop privately-issued currency.
At a conference and later as part of a podcast, I presented a table that I had built in order to keep track of some of the attempts, successful and unsuccessful, to launch a privately-issued digital currency. Each time, audience members expressed their liking of it and requested that I share it. So here it is: version 1.0. Enjoy.
Mises’s regression theorem requires that for a new medium of exchange to emerge, it must first have had direct (non-monetary) use before it can become a medium of exchange.
A recent article of mine published by the American Institute for Economic Research (AIER) entitled “Mises’s Regression Theorem, Bitcoin, and Subjective Value Theory” discusses what I see as some problems with Mises’s regression theorem as well as problems with arguments from contemporary authors who have written their own views on it — namely that Mises limited the scope of his theorem to barter situations (he didn’t) and that it would be logically impossible for Bitcoin to have emerged without adherence to the theorem (it isn’t).
Bitcoiners and Austrian economists alike usually debate whether Bitcoin’s emergence violates Mises’s regression theorem, yet both seem to overlook that the certainty that Mises unnecessarily attaches to his regression theorem (regarding the impossibility of any hypothetical different way in which a new medium of exchange could emerge) necessarily violates the subjective theory of value (a theory to which Mises otherwise adhered). This violation of the subjective theory of value is my main critique of Mises’s theorem – although I still find some usefulness in it. I refer the reader to my article for my full argument.
As to the (separate) question regarding Bitcoin’s possible adherence to or violation of Mises’s theorem, my own view is that Bitcoin could have quite easily satisfied the theorem, and a number of authors have addressed this. The below table appeared in a draft version of my article but never made it to the AIER publication due to editing requirements (no tables allowed). I found it useful to note the various direct (non-monetary) uses proposed in the literature. I also note that at least most of them, in one way or another, ultimately boil down to two major categories: signaling of values and speculation. Lastly, I must mention that Bitcoin having a native monetary unit that sits on top of an inseparable payment network complicates the issue by (to at least some degree) blurring the lines between distinct monetary and non-monetary categories. I discuss this at length in more detail in the aforementioned article.
Non-monetary uses of Bitcoin identified by various authors – each of which could satisfy the regression theorem for Bitcoin
An “inherent geek appeal, professional challenge to specialists, curiosity, and membership signaling”
“The truly unique functions of bitcoin, as detailed by Surda [sic] (2014), are non-monetary, and include the following: It it can act as an effective means of notarization, it can act as ‘smart property,’ it can perform conditional transfers, it eliminates the need for intermediaries, particularly in multi-party transactions, it can act as a form of stock ownership eliminating the need for separate stock exchanges, it can record transactions for auditing purposes, etc. etc. These factors are of course closely associated with (but not the same as) the monetary function.”