TLDR: Do you feel disturbed by the price swings that characterize the crypto markets? Let’s lift our spirits by reminding ourselves of the ethics and ingenuity of its ‘founding fathers’. The cryptographers and economists who paved the way for a series of innovations. Their stories remind us that crypto solves a real problem and isn’t going away.
Especially in periods of so-called ‘time capitulation’ (lackluster price action that seems to last forever) we risk losing our faith. In these times, it’s good to zoom out. Not only from the 4-hour charts, but also from our short time desires. Instead of worrying about price, let’s remind ourselves why we are drawn to these markets, to this community. The real value of crypto, in short.
Let’s start with the problem that’s been plaguing our economy for the better part of a century now: the lack of sound money. From there, we move to solutions that crypto offers.
1. Sound Money’s Founding Father: Hayek
Many paths had to converge to give birth to Bitcoin. One was the path of sound monetary theory. A founder is Friedrich Hayek (1899-1992), an economist from the ‘Austrian school’ of economics.
Hayek was opposed to the central planning of markets or money. He was highly critical of central banks and their control over interest rates. He believed that when central banks manipulate interest rates, it disrupts the natural information conveyed by the price system, leading to the misallocation of resources and economic booms and busts. He argued that interest rates, like other prices, should be determined by the free market, reflecting the true preferences of savers and borrowers.
Hayek also viewed the use of fiat (government) money as fundamentally flawed. Fiat money is money not backed by a physical commodity like gold. Why? Because it allowed governments to create money at will, leading to inflation and economic instability.
The problem for Hayek was that he saw no easy way out of the monetary system. Some sort of neutral money was needed, with a fixed supply. Such money would allow the price system to function without distortion. But which type of money, now that gold had been discarded? And how could such a type of money gain prominence? In 1984, he was quoted:
“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”
Friedrich Hayek lived to a ripe old age, but not quite long enough, unfortunately, to see the day that Bitcoin was invented. Which brings us to the cypherpunks.
2. Our Founding Fathers: the Cypherpunks
Whenever Americans are in doubt about their position on something, they have a last resort. They can turn to the Constitution, they can go back to the founding fathers. They can read speeches of legendary early presidents like Washington, Jefferson and Lincoln. What do we believe in as a country? And they might find answers (or a new issue to fight over!).
As crypto investors, we have our own founding fathers. The cypherpunks. A loosely affiliated group of computer scientists who came together to actively implement solutions for the…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
