Numerous economists in history have believed that money works best when it arises naturally through trade\u200a\u2014\u200anot when it\u2019s forced on people by governments. Also, fiat money (paper money) would be something to be suspicious of, according to them. Does it sound a bit cryptocurrency-like? You wouldn\u2019t be wrong about that. Many of those economists belong to Austrian Economics: a school of thought that highlights personal freedom, market-driven decision-making, and the risks of too much government interference in the\u00a0economy.<\/p>\n
It started in the late 1800s with the works of several economists, including Carl Menger, Eugen von B\u00f6hm-Bawerk, and Friedrich von Wieser.<\/strong> However, it gained momentum through well-known figures like Ludwig von Mises and Friedrich Hayek. These tinkers promoted free markets, individual choice, sound money, subjective value, and minimal government in shaping economies and monetary systems. Fast forward to today, and we see similar themes popping up in the world of cryptocurrency.<\/p>\n Digital currencies like Bitcoin and Obyte challenge the idea of central control, support free-market rules, and give users more autonomy. Some crypto enthusiasts embrace Austrian principles, while many professional economists from that school remain cautious. Common points are too many to ignore,\u00a0though.<\/p>\n One big overlap between Austrian Economics and crypto is their shared concern about inflation and central banks. Austrian economists argue that central banks\u200a\u2014\u200alike the U.S. Federal Reserve or the European Central Bank\u200a\u2014\u200adistort the economy by printing money and manipulating interest rates, creating unsustainable booms and painful busts. This idea comes from thinkers like Mises and Murray Rothbard, who were critical<\/a> of fiat money and fractional-reserve banking.<\/p>\n Fiat money is currency created and controlled by governments, with no backing from physical goods like gold. It can lead to hidden wealth loss through inflation, benefit those who get the new money first, and encourage reckless spending and borrowing<\/strong>. Over time, this can cause financial crises, widen inequality, and weaken economic freedom, since the system depends on trust rather than real\u00a0value.<\/p>\n One of those financial crises prompted the creation of Bitcoin, by the way. This currency was born in response to the 2008 financial calamity and has a hard cap of 21 million coins. That fixed supply makes it resistant to inflation and gives it a kind of \u201cdigital gold\u201d status. People who worry about the long-term value of government currencies are drawn to this scarcity. And their concerns aren\u2019t just academic\u200a\u2014\u200ahyperinflation<\/a> in places like Venezuela and Zimbabwe shows how badly things can go when governments mismanage money. In this context, cryptocurrencies look like a safety net against monetary\u00a0chaos.<\/p>\n This financial school of thought also emphasizes the idea that individuals\u200a\u2014\u200anot governments\u200a\u2014\u200ashould make economic decisions. Said concept, called methodological individualism, values personal choice and decentralization, which are also key features of most cryptocurrencies. They let people hold and transfer money without relying on banks or government permission\u200a\u2014\u200aif you own your private keys<\/a>, nobody can take away your coins. At least not remotely, like freezing or blocking your accounts.<\/p>\n Besides, Austrian economists emphasize voluntary exchange and minimal interference in trade. <\/strong>According to this view, when people are free to make decisions without central planning, markets naturally organize and balance themselves over time. This belief in spontaneous order rejects the idea that governments or central banks should control economic activity. Instead, Austrians argue that innovation, pricing, and investment work best when driven by individual choices in a competitive environment.<\/p>\n Similarly, many cryptocurrency platforms\u200a\u2014\u200aespecially in decentralized finance (DeFi)\u200a\u2014\u200arun on open-access systems. These networks allow anyone with an Internet connection to participate, without asking for approval from banks or regulators. This openness mirrors the Austrian preference for economic freedom and individual action.<\/p>\n Friedrich Hayek<\/p>\n In 1976, Friedrich Hayek published The Denationalisation of Money<\/em>, where he imagined a future with private, competing currencies. He argued<\/strong><\/a> that taking money out of the government\u2019s hands would improve its quality through market competition. <\/strong>This idea rings true for many in the crypto space and has been an inspiration in the industry since the beginning.<\/p>\n Bitcoin and similar projects are digital currencies created outside state control, competing in the free market just like Hayek imagined. Hayek and Mises both supported the idea that order in markets emerges naturally when people are free to choose. You can see this in the world of decentralized finance (DeFi), where platforms like Ethereum or Obyte let users experiment with new financial tools and currencies.<\/p>\n These platforms make it possible to code your own financial rules and create new kinds of digital value\u200a\u2014\u200ano need for central banks or regulators to step in. This do-it-yourself spirit lines up nicely with Austrian ideas of spontaneous order and innovation through competition.<\/p>\n Still, not everyone in the Austrian camp is sold on crypto. A big concern comes from Mises\u2019 \u201cregression theorem,\u201d which says that money has to start as a widely used commodity. Some Austrian economists argue that cryptocurrencies don\u2019t fit the bill\u200a\u2014\u200athey didn\u2019t grow out of barter or have any previous real-world use, so they wouldn\u2019t meet the historical criteria for\u00a0money.<\/p>\n The Mises Institute has published several critiques, including \u201cThe Money-ness of Bitcoins<\/a>\u201d and \u201cBitcoin: Money of the Future or Old-Fashioned Bubble?<\/a>.\u201d More recently, in 2024, they accepted<\/strong><\/a> that \u201cBitcoin has also become much more widely used as a medium of exchange, but it is not yet money.\u201d<\/strong> They claim Bitcoin (or cryptos, by extension) isn\u2019t money because it\u2019s not yet widely or universally accepted for everyday exchanges. People often need to convert it to traditional currencies to buy things, and using it still involves finding others who accept it. That\u2019s broadly debatable, though.<\/p>\n We can perfectly argue that you can\u2019t use gold to pay for a coffee, or Indian rupees outside India\u200a\u2014\u200anot without exchanging them. These mediums of exchange need to be accepted by others, too, and it\u2019s highly unlikely that a Starbucks cashier will receive a gram of gold or a banknote from India outside India. Indeed, it\u2019s more probable that they accept some kind of crypto,\u00a0instead.<\/p>\n Moreover, if Austrians believe that value is subjective, then early Bitcoin users valuing it for its security, scarcity, or utility might be enough to explain its rise.<\/strong> Also, today\u2019s fiat money isn\u2019t commodity-backed either\u200a\u2014\u200ait\u2019s valuable because people accept it, not because it\u2019s tied to gold or any other commodity. We can see some mixed opinions here,\u00a0then.<\/p>\n Bitcoin, specifically, may appeal to many supporters of Austrian Economics, but it\u2019s not without its critics. Some Austrians point out<\/a> that Bitcoin mining uses large amounts of energy, potentially distorting the market through subsidies or unsustainable practices. Others note its growing reliance on centralized actors\u200a\u2014\u200alike large mining pools and exchanges\u200a\u2014\u200awhich can clash with the Austrian focus on decentralized, individual action. Plus, since Bitcoin isn\u2019t backed by a physical commodity, it doesn\u2019t fully satisfy traditional Austrian preferences for hard\u00a0money.<\/p>\n That said, other crypto networks offer alternative approaches that more clearly align with Austrian ideas<\/strong>. Obyte<\/a> could be one of them. This is a decentralized, open platform without middlemen (miners or \u201cvalidators\u201d), structured as a Directed Acyclic Graph (DAG), in which transactions are added to the DAG only by its\u00a0users.<\/p>\n Besides its native currency (GBYTE), anyone can create and exchange custom digital assets<\/a> here. Unlike Bitcoin, Obyte supports tokenized commodities\u200a\u2014\u200ameaning you can back your digital money with real-world goods. A great case in point is Aufort<\/a>, a European company that uses Obyte to tokenize gold, bringing back the idea of commodity-backed currency in a digital\u00a0form.<\/p>\n Obyte also offers a high degree of flexibility. It doesn\u2019t lock users into one model\u200a\u2014\u200ainstead, it lets people and markets decide what counts as money. Because Obyte allows anyone to design tokens for specific uses, it embraces the Austrian view that economic activity begins with human action. In a world that\u2019s increasingly skeptical of fiat money, platforms like this one may offer a more welcoming and Austrian-style path forward for crypto enthusiasts.<\/p>\n Featured Vector Image by pikisuperstar \/\u00a0<\/em>Freepik<\/em><\/a><\/p>\n Austrian Economics and Cryptocurrencies: Against Fiat and Centralization<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":" Numerous economists in history have believed that money works best when it arises naturally through trade\u200a\u2014\u200anot when it\u2019s forced on people by governments. Also, fiat money (paper money) would be something to be suspicious of, according to them. Does it sound a bit cryptocurrency-like? You wouldn\u2019t be wrong about that. Many of those economists belong […]<\/p>\n","protected":false},"author":0,"featured_media":230921,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-230920","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/230920"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=230920"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/230920\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/media\/230921"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=230920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=230920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=230920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Against Inflation & Central\u00a0Banks<\/strong><\/h3>\n
Self-Sovereignty & Free\u00a0Market<\/strong><\/h3>\n
Denationalization of\u00a0Money<\/strong><\/h3>\n
Objections by Austrian Economists<\/strong><\/h3>\n
A Way to Create Free\u00a0Money<\/strong><\/h3>\n