Bitcoin, we argue, is resistance money. It is a competitive check against corporate and state overreach. Bitcoin empowers individuals to elude the interlocking and increasingly tight gears of institutions, both private and public. And it provides a monetary good that aligns incentives and provides new financial structures and opportunities. We consider bitcoin’s monetary policy, governance, financial inclusion, privacy, and censorship-resistance. Our vision of bitcoin is not utopian; we document how its design incurs serious and unavoidable tradeoffs. Still, we contend that bitcoin improves the world by providing new opportunities for human flourishing that outweigh its costs.
- Chapter 1: Bitcoin Basics
We offer a primer on bitcoin’s origin, function, and purpose. Origin: Bitcoin was birthed in the cypherpunk movement, a movement concerned about the rising threat of digital authoritarianism. Function: Bitcoin’s protocol coordinates the behavior of users, nodes, and miners whose work together sustains a ledger that tracks a native digital asset -- bitcoin. Purpose: it has the benefits of a big-tech network (like Facebook or Twitter) without centralized control. But instead of hosting memes and arguments, this network hosts money.
- Chapter 2: What Bitcoin Really Is
We distinguish a number of fundamental questions about the nature and persistence of the bitcoin blockchain, protocol, and native digital asset, using concepts from metaphysics to offer precise answers to each. We argue that bitcoin (the asset) is an abstract substance that’s the topic of a massively co-authored and regularly updated story: the Bitcoin ledger. These metaphysical conclusions have important practical consequences, ranging from privacy to fungibility and apt regulatory treatment of bitcoin.
- Chapter 3: Where Bitcoin Fits
Bitcoin is one element in a broader landscape of monetary instruments -- fiat currencies, bonds and equities, physical commodities, and a host of cryptocurrency platforms, tokens, and schemes. In this chapter, we describe several key dimensions along which these instruments differ. Those dimensions track deeper normative questions -- not about what money is, but about what money should be. We then show how bitcoin implements answers to each of these questions. In sum, bitcoin is a decentralised commodity money with a programmatic supply schedule. We then show how this unique combination sets bitcoin apart from both legacy and more exotic cryptocurrency offerings. Bitcoin’s blockchain is not a comprehensive payment network like Paypal or Visa. Instead, it provides a base layer of final settlement without authority upon which other layers are being built. In providing this alternative base settlement layer, bitcoin fills a resistance role even if it only supplements rather than fully replaces other offerings.
- Chapter 4: Money Behind the Veil
What kind of monetary institutions would you hope for, if you knew everything about the world -- except your place within it? This question introduces a veil of ignorance, a conceptual tool we deploy in this chapter. We contend that the money we’d opt for behind the veil is a useful guide to the question of what money should be. We argue that the institutional overreach of private government (e.g. employers’ meticulous control over employees’ lives) highlights a special role for a money capable of final settlement without authorities. The resulting framework we develop using these conceptual tools transcends traditional political divides and provides a new way forward in evaluating monetary institutions.
- Chapter 5: Monetary Policy
Unlike fiat currencies and most cryptocurrencies, bitcoin has a predictably disinflationary monetary policy. We evaluate eight common arguments in favor of bitcoin’s distinctive monetary policy. Five of those arguments attempt to show that an expanding monetary base -- as is typical for fiat currencies -- is bad in the aggregate. We contend that they fail. An expanding monetary base needn’t be bad in the aggregate, and bitcoin is no panacea. But three other arguments trade on the differential effects from discretionary monetary policy or from monetary expansion; traditional approaches to policy benefit some and harm others. These three arguments, we contend, are much more convincing. And together they carve out a place for bitcoin. We’ll argue that despite the tradeoffs involved, the availability of a predictable, disinflationary settlement layer provides a competitive check against other elements within the global economic machine.
- Chapter 6: Security Through Energy
We explain Bitcoin’s consensus procedure -- proof of work -- and how it incentivizes fair play by requiring miners to expend resources to secure the network. But the energy expended is significant. Bitcoin uses about as much electricity each year as a small country -- Norway, for example. That’s a lot, but not the whole story. First, bitcoin mining can happen anywhere, so it incentivizes using the cheapest energy -- mostly waste energy and renewable energy. Second, it incentivizes development in renewable energy. Finally, we argue bitcoin’s energy use needs to be compared to the energy use of competitors that do the things that it does -- gold, government-backed currency, and cryptocurrencies with other ways of reaching consensus. We conclude by making these comparisons.
- Chapter 7: Financial Inclusion
A tragic feature of the present global distribution of goods and institutions is that the least-well-off have the worst access to credit and savings; they’ve been systematically excluded from the tools that could improve their lot. We show that the problem here is systemic and institutional, deriving from a global financial system that relies on the good will of intermediaries and authorities. We document the harm that results and show that bitcoin mitigates the problem. Just as the internet democratized information, bitcoin democratizes engines of economic value. In providing final settlement without authority -- and thus expanding access to credit and savings -- bitcoin is the most inclusive financial system yet on offer, with internet access as the only requirement for entry. We contend, finally, that bitcoin’s inclusive promise deserves special attention and weight because it accrues most of all to the least well off and because financial inclusion is a good that enables other goods.
- Chapter 8: Privacy in Public
Privacy -- the ability to selectively disclose oneself to the world -- remains an important good even if we have no unqualified right to it. And drawing on the theory of revealed preferences, we show that financial privacy is an important kind of privacy; what we do with money shows who we are. Financial privacy is under threat from a range of private and public actors. Popular digital payment networks exacerbate the problem. We then show how bitcoin enhances privacy despite its transparent and publicly accessible ledger. But privacy isn’t an unmitigated good. Bitcoin’s pseudonymity helps criminals hide, and its finality means victims have little recourse to recoup what’s been lost. Together, these features make bitcoin useful for harmful criminal enterprise, dark markets, money laundering, terrorist financing, and scams that target the least financially literate and well-off. We close with a discussion about how to weigh privacy against other values -- especially the public’s interest in curbing criminal financial activity. Bitcoin’s similarities with traditional physical cash guide the way forward. If cash makes the world better off, then so does bitcoin.
- Chapter 9: Resisting Censorship
We live in an increasingly censorious global financial system. At the center lies the US dollar and the chokehold on its flow imposed by a range of American institutions. We argue that the private nature of the institutions at play -- banks, payment processors, money transmitters, and so on -- does not diminish the severity of the resulting harm. The root problem here isn’t the state; it is the reliance on a final financial settlement layer with intermediate authorities. These intermediate authorities do sometimes have a legitimate interest in curbing some illicit financial activity. But they overreach, usually harming those on the fringes of society. Bitcoin, we argue, is an effective (albeit imperfect) curb on harmful institutional expansion. We develop the point through this analogy: bitcoin is to money as unions are to labor.
- Chapter 10: Alchemy
Having avoided the question of bitcoin’s price in earlier chapters, we here consider the matter directly. We argue that bitcoin’s protocol predictably engenders volatility in the price of its native asset. Although this volatility creates some problems, it solves one important bootstrapping problem. This solution helps bitcoin fulfill its most fundamental promise -- to be resistance money. Our arguments support (and qualify) the slogan that bitcoin is a machine that turns greed into freedom.
- Chapter 11: Against Bitcoin
We have implicitly raised many objections to various aspects of bitcoin in previous chapters. Here we gather those objections into a cumulative case against bitcoin. We classify the objections under various headings, develop what we take to be the strongest versions of each, and then evaluate them. Our goal is not to show that the objections decisively fail. Rather, we seek clarity about the barriers they impose, the assumptions they make, and how to weigh these objections against bitcoin’s expected benefits in any complete reckoning.
- Chapter 12: The Scorecard
We unveil a cumulative scorecard for bitcoin that integrates the results of the previous chapters. We place each factor discussed in prior chapters within a framework that takes into account the distribution, likelihood, and weight of advantages and disadvantages. We do not claim that our framework resolves all disputes about the status of bitcoin. But it brings to the fore the dimensions that matter, clarifies the fault-lines that remain, and helps identify empirical, technical, and normative theses that deserve further attention. We then assess whether future changes to that scorecard are likely in each case--like, for example, whether technical solutions to bitcoin’s scaling challenges improve the odds of financial inclusion. We then apply our results to a few other cryptocurrencies and blockchain applications, including smart contracts and decentralized finance (DeFi). We conclude with a meditation on what our arguments imply for individual ethics, public policy, and futurology.