If Austrian economics is the theoretical foundation for Bitcoin, I think Ronald Coase is the inspiration for general cryptonetworks.

In 1937, Coase wrote a seminal paper titled “The Nature of the Firm”. It laid the groundwork for a whole new branch of microeconomics, called the theory of the firm, and won the 1991 Nobel Prize.

The mark of geniuses, in social sciences at least, is their ability to uncover important hidden truths that are so self-evident in hindsight. And Coase is one of these geniuses.

In a typical fashion, he asked a simple question that was of no interest to most economists before him: if markets are so good at allocating resources, why do firms exist? After all, markets are one of the most worshiped concepts since Adam Smith, and rightly so. …

Written by Qiao Wang and Dan McArdle


One way of thinking about cryptoasset valuation says that only assets that can become a store of value (SoV) are deserving of high network value. This is a mental model that has been around for a while, and one that we largely hold when making investment decisions. So let’s unpack it.

You might think that high usage leads to high network value, i.e., if millions of people use a coin as cross-border payment or as gas for dapps, it must be valuable, right?

Generally, this can only be true if users want to hold the coin for a while, in addition to actually using it. If you want to use a coin that you don’t already own, but everyone who has the coin today just wants to hang on to it, you have to offer people a high enough price for it that they’ll let go. Conversely, if users are willing to get rid of the coin right after they’re done using it, there’s almost always more than enough to go around and no one has to bid up the price in order to use the network. …

“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 them 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 August von Hayek, Austrian economist, and 1974 Nobel Prize winner.

Bitcoin proponents love Hayek, because they share the same anti-establishment ethos. They often quote Hayek’s work as the theoretical foundation for why Bitcoin will become a widely adopted currency.

Qiao Wang

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