In 1999, economist Milton Friedman—a Nobel laureate and a leading voice of monetarism—described something that did not yet exist. In an interview, he suggested that the internet lacked a reliable form of electronic cash that would allow money to be transferred from one person to another without revealing their identities.
Ten years later, an anonymous developer using the pseudonym Satoshi Nakamoto launched Bitcoin—a peer-to-peer system that did exactly that. The monetarist was right.
The irony is that Friedman was hardly the last person one would expect to propose such an idea. He is remembered as a defender of central banking, albeit one tied to a strict monetary rule. In contrast, the ideological father of Bitcoin is often considered to be another economist, his ideological opponent, the Austrian Friedrich Hayek.
This marks the first crack in the familiar genealogy of the crypto community. Digital money had several prophets, and they did not always agree with one another.
Common Ground
What made Hayek a convenient figure for the role of chief inspiration? In 1976, he published a work titled "Denationalization of Money" (in Russian, "Private Money"). His thesis was radical: the state monopoly on currency issuance is harmful, and the right to issue money should be given to the market. Let private issuers compete, and let people choose the currency they trust.
Friedrich August von Hayek. Source: Wikimedia.
Digital gold seems to respond to this thesis: no central bank, issuance determined by code rather than bureaucratic will, and an open, verifiable ledger. In a blog post by Colin Wu, Bitcoin is described as a technological "order without trust"—a system where mathematics and protocol replace intermediaries. At this level, Hayek and Satoshi agree: money does not necessarily need a state; it only requires rules that cannot be broken.
One might want to conclude here—Bitcoin is indeed the embodiment of Hayek's dream. However, opening the book reveals that this construction begins to fall apart.
Foundation of the 70s, with Amendments
The industry often seeks Bitcoin's intellectual roots in the mid-1970s, as if key discoveries were made then. Some of this picture is accurate, while other parts are conveniently adjusted.
Cryptography did indeed make a breakthrough in 1976. Whitfield Diffie and Martin Hellman published a paper titled "New Directions in Cryptography" and introduced the concept of public-key encryption: the public key is shared freely, while the private key remains secret.
Later, it was revealed that the same solution was presented in the early 1970s by James Ellis, Clifford Cox, and Malcolm Williamson at the British Government Communications Headquarters—but their work remained classified. Thus, the foundation for future "anti-state money" was laid by government cryptographers.
The theory of distributed systems does not fit into the mid-70s timeline: the Byzantine Generals problem was formulated by Leslie Lamport and co-authors only in 1982. Their work is crucial for digital gold—but not for this chronology.
Notably, Satoshi's actual references tell a different story. In the list of citations in the Bitcoin white paper, neither Hayek, Diffie, nor Lamport appear. Instead, Stuart Haber and Scott Stornetta are co-authors in three out of eight sources—they developed the hash chain system for timestamping documents, a direct precursor to blockchain.
The industry tells one genealogy, while Satoshi's footnotes point to another.
Infographic: ForkLog.Stability vs. Scarcity
Opening "Private Money" reveals the first contradiction immediately. The Austrian did not advocate for a fixed amount of money—he argued for the opposite: the issuer should actively regulate issuance to maintain stable purchasing power.
According to Hayek, competition is won not by the rarest currency, but by the most stable one—devaluation harms creditors, while appreciation harms debtors, and people choose the instrument with predictable purchasing power.
Bitcoin is structured the opposite way. Its issuance is set in stone: 21 million coins, with supply halving every four years until it ultimately stops (around 2140).
Halving calendar. Source: Bitbo.Satoshi directly compared this to gold mining, calling the final state "inflation-free." There is no manager to adjust supply to demand; there is a rigid schedule—and a price that absorbs all demand fluctuations.
The result is volatility, which the Austrian considered a sign of bad money. In Bitcoin's early days, it was extreme—the price could soar and plummet by tens of percent within weeks. In recent years, the amplitude has noticeably smoothed out: by 2025, volatility fell by about half compared to 2021 and was lower than that of individual stocks in the "magnificent seven" like Tesla and Nvidia.
Historical volatility of Bitcoin compared to Tesla and Nvidia stocks, % per year. Source: Charles Schwab.However, even the reduced amplitude of fluctuations is incompatible with the ideal of money, whose value is so stable that one does not have to think about it.
For the Austrian school, the key function of money is everyday exchange. Based on this, Bitcoin should have lost the competition rather than led the market. What the industry praises as "digital gold" is, in this framework, more of a diagnosis. Moreover, this concept does not belong to Hayek at all. It is based on the principle of scarcity, not stability.
In 2005, Nick Szabo described Bit Gold—an asset whose value is based on "unforgeable costliness": creating a coin requires real computations, and this labor cannot be simulated.
Szabo's cost mechanism was borrowed from Adam Back: his Hashcash from 1997 forced the sender of an email to "burn" processing time to make spam unprofitable. Satoshi combined these elements and created money backed not by the issuer's promise, but by expended energy.
The mechanism works—but it is a "gold" device, not a managed currency as described by the Austrian. He saw a flaw in precious metals: their supply cannot be flexibly adjusted to the economy's need for money.
The paradox runs deeper. The rigid mechanism aligns more with Hayek's opponent than with him. Milton Friedman proposed to "fix" the central bank with a fixed rule—growing the money supply by a constant 3-5% per year, regardless of the current phase of the cycle.
Portrait of Milton Friedman. Source: Wikimedia.
Bitcoin elevated this idea to an absolute: there is a rule—no improvisations, no manager. As for monetary policy, it is closer to Friedman's ideas. The only difference is that the monetarist wanted to retain the central bank, while the code completely abolished it.
Bitcoin supporters might argue: the fixed limit is the "healthy currency," a protection against inflationary caprice, the very dream of the Austrian school. There is some truth to this—Hayek and Satoshi coincide in their rejection of state monopoly. However, they diverge in their means: the Austrian fought inflation through stability, while Bitcoin does so through scarcity. The latter leads to volatility, not permanence.
Hayek sought money that you do not notice because its value does not change. Digital gold became an asset whose price is constantly discussed.
Pluralism vs. Monopoly
The second contradiction is evident: the Austrian wanted many competing currencies, while the industry has come to the dominance of one.
By May 2026, Bitcoin accounted for about 57% of the entire digital asset market—it has dropped from a peak of 65% in June 2025 but remains the anchor of the entire system. This resembles a new monopoly, only private instead of state-run.
However, this criticism is weaker than it seems. Hayek did not insist on an endless variety of currencies. In the updated edition of "Private Money" in 1978, he allowed that competition might narrow the choice to one or two stable standards—the market determines the leader, not a decree. The fact that there would be few issuers did not frighten him.
However, the issue is not that the market chose one leader, but which one it chose. Hayek expected the most stable currency to prevail. Instead, an asset valued for the opposite—growth and scarcity, not stability—won. It has cemented its status as "digital gold" and a speculative bet, relinquishing its role as everyday money.
In practice, Hayek's scenario did come true, but outside the Bitcoin ecosystem. The market indeed chose stable private money for transactions: stablecoins like USDT and USDC.
By 2026, their total capitalization exceeded $316 billion, and in terms of value transferred, "stablecoins" have long surpassed the first cryptocurrency. A private issuer, competition for stability—almost verbatim Hayek.
The 30-day volume of value transferred in stablecoins reached $3.7 trillion. Source: Artemis. Monthly trends in Bitcoin's transferred value. Source: The Block.Almost—because the stability of stablecoins relies on their peg to the dollar. That is, to the money of the very state whose monopoly the Austrian proposed to abolish. The market reproduced his mechanism and inverted the meaning: the most "Hayekian" money in the industry is backed not by a rejection of the central bank, but by its obligations.
And none of the outcomes turned into a pure victory for the Austrian idea. Bitcoin captured the market at the cost of the very instability that Hayek deemed a vice. Stablecoins provided stability, but borrowed it from the dollar. Money free from the state and chosen for stability remains a thought experiment.
Anonymity is Not Hayek
In Bitcoin's genealogy, two different ideas of freedom coexist, and Hayek is responsible for only one. The Austrian was concerned with the independence of money from the state, not the anonymity of those who use it. The right to be invisible came from another source—from the cypherpunks.
The path to anonymous transactions was opened by David Chaum. In 1982, he proposed "blind signatures"—a mathematical method allowing a bank to verify a coin without seeing its denomination or owner. From this, Chaum created DigiCash—the first attempt to create untraceable electronic cash. The intent was precisely for confidentiality: money that leaves no trace.
The company went bankrupt in 1998. Anonymous money was ahead of its time and demand but failed commercially. However, the idea remained.
Timothy May made it an ideology. His "Crypto Anarchist Manifesto" from 1988 contained an explicit ironic reference to the "Communist Manifesto"—and the thesis was not Hayek's "let the market issue money," but "let cryptography blind the state." Anonymous transactions, markets beyond government control, reputation instead of passports—this was his horizon.
The bridge to Bitcoin was built by Hal Finney. In 2004, he assembled RPOW—a system of reusable proofs of work, a direct predecessor to mining; he was also the recipient of the first-ever Bitcoin transaction sent by Satoshi. Finney connected the privacy of cypherpunks, the Proof-of-Work line, and the very launch of the network.
And then comes the main irony. Bitcoin, which is celebrated as a victory for cypherpunks, violated their key value. Chaum built untraceability—Bitcoin is structured the opposite way: every transaction is visible to everyone and permanent. Satoshi himself acknowledged this in the Privacy section of his white paper: protection here relies only on the fact that the public key is not tied to a name. This is pseudonymity, not anonymity. Essentially, Bitcoin is the most transparent money in history, the opposite of Chaum's intent.
It is telling that May himself was disappointed. Shortly before his death in 2018, he noted: exchanges with passport checks, KYC requirements, and account freezes are hardly what Satoshi envisioned. The prophet of crypto-anarchy did not recognize his idea in what the industry had become.
Thus, "digital freedom" turns out to be a collection of incompatible elements: for Hayek, it meant the independence of money from the state; for Chaum and May, it meant the invisibility of the person to the state. They were merged into one myth, but Bitcoin has not fulfilled any of the promises completely: it has not become either Hayek's stable money or the untraceable cash of cypherpunks. The slogans converged, but the content diverged.
A Debate, Not an Embodiment
So what remains of the genealogy into which Bitcoin is defaulted?
The common denominator is real. Hayek, Chaum, May, and Friedman—all, despite their differences, aimed to remove money from the exclusive authority of the state. This framework Bitcoin inherited, which is why it is so convenient to record it as an heir to each of them.
But beyond the framework of coincidence, the similarities end. The Austrian wanted a stable currency managed by a living issuer—Bitcoin provided a rigid limit and volatility. Hayek expected the most reliable money to prevail—what won was a speculative asset. Chaum and May built untraceable cash—while the first cryptocurrency made the ledger public. Each of the ideological inspirers would recognize a separate trait in it and would not accept the whole.
Infographic: ForkLog.In this lies the paradox. Bitcoin succeeded not because it fulfilled anyone's program, but because it did not fulfill any completely. It took Hayek's distrust of the state, the Chicago school's rigid rule, and cypherpunks' cryptography, and assembled from these elements something none of them designed.
Friedman's 1999 prediction came true almost verbatim: reliable electronic cash for peer-to-peer transfers appeared ten years later. But the result did not align with the vision of any of the thinkers—neither the managed money of the monetarist with a retained central bank, nor the stable private currency of the Austrian, nor the anonymous cash of the cypherpunks. The future was predicted, but it was realized not according to anyone's blueprint.
And perhaps therein lies its strength. The first cryptocurrency is not based on anyone's beliefs, but on rules that anyone can verify. Whether the Austrian, the monetarist, or the cypherpunks would recognize their dream in it is irrelevant to the network's operation. Bitcoin, which Hayek never asked for, does not need his approval.