On Antony Zegers’ “Bitcoin Core Cargo Cult”

Antony Zegers

There was a Medium article floating around about a month ago that warned supporters of Austrian economics about a so called “Bitcoin Core Cargo Cult.” The author, Mengerian (Antony Zegers), says that Bitcoin supporters “appeal to superficial aspects of Austrian School economics” and “use Austrians’ affinity for Gold to advocate something with superficially similar properties, without reference to the actual reasons behind why they see Gold as a good form of money.”

Zegers uses this as an opportunity to promote Bitcoin Cash (BCH) as the better money. I’m not very interested in debating the merits of Bitcoin vs BCH (mostly because I don’t care about the BCH project) so I would rather spend the time to point out where Zegers makes mistakes in his analysis. That said, I will need to address this issue to a degree to make some counterpoints.

Despite constantly using it in our daily lives, the concepts behind money can be confusing and often take some time to understand. Subtle errors can throw your position on money way off (I know this from experience), so it’s good to come into this discussion with a clear head and room to admit your own mistakes.

Also, so it’s clear, I’m not suggesting that no Bitcoin supporter ever makes errors or that no one has ever made the arguments that Zegers is criticizing, but I am suggesting that Zegers is making a straw man of the general position of Bitcoin supporters/maximalists.

Zegers is correct to say that we shouldn’t try to force-fit aspects of gold to Bitcoin. He is also correct that is it important to understand the reasons why gold was valued as money in order to apply them to Bitcoin or some other attempt at money. But there’s a problem: it’s not convincing that the examples Zegers gives of this superficiality apply at all. In fact, it’s Zegers who makes superficial arguments to make the arguments of his opponents appear to be something that they are not.

Let’s look at each case.


Zegers’ first target is Jimmy Song, who coined the terms “Crypto-Keynesians” and “Crypto-Austrians” to describe the two camps in the scaling debate (with BCH supporters being the former and Bitcoin supporters being the latter).

Zegers writes:

For the last several months, Jimmy Song has taken to using the Austrian/Keynesian analogy in articles, tweets, and videos [2, 3]. He argues that because Bitcoin Cash advocates focus on making it easy to spend, that this means they are like Keynesians who believe spending drives the economy, and uses the term “Crypto Keynesians” to describe them. He says Bitcoin Cash has a “You must spend” mentality [3].

Spending versus saving, however, is just a surface observation. The more important fundamental property is the free choice between those options. This is what will permit people’s time preference to be communicated to the wider economy in a sustainable way. When Austrians see coerced spending via central bank inflation and government taxes on saving, they naturally emphasize the importance of saving. And when they see artificial restrictions on spending created by unnecessary technical restriction in Bitcoin, they emphasize the importance of low-friction transactions.

Whether you agree with Song or not, if you’re going to criticize his position as superficial, it’s important to not leave out the reasons why he is making these claims. In his SegWit2x post mortem, Song defines “Crypto-Keynesian” and “Crypto-Austrian” and argues that the security risk of hard forking to increase the block size could have deleterious effects on Bitcoin’s store of value; therefore, this risk is not worth the supposed benefits (linear scaling) gained by increasing the block size.

But what’s worse is that Zegers says that the “more important fundamental property is the free choice between those options.” This is a red herring. This is cheap pandering to libertarian ideals and doesn’t actually address Song’s points. Unless someone in the Bitcoin world starts pointing guns at others to influence their decisions, there is still free choice.

Furthermore, it’s interesting that Zegers would refer to keeping the block size small as “artificial restrictions” while also bringing up things like “free choice,” “coerced spending,” and “government taxes.” What exactly is artificial about a consensus rule? It would be nice to at least hear an acknowledgement of why many want to keep block sizes small instead of dismissing it as artificial or unnecessary. But instead, people like Zegers paint a picture that there is little to no appetite among Bitcoin maximalists to find ways to scale Bitcoin.

This leads me to a final point here: Zegers’ appeal to time preference. This seems like another attempt to pander to libertarians, but his reference to it backfires. As stated before, increasing the block size of Bitcoin is a security risk and doesn’t seem worth the risk when it only scales Bitcoin linearly. In order to be globally accepted as money (which is what we want, isn’t it?), Bitcoin needs to be scaled in a way that makes a few hundred transactions per second utterly laughable. Scaling by increasing the block size provides a Band-Aid solution that comes with the high potential cost of creating an avenue to be able to attack the network. This is quite the high time preference position to have. Taking the lumps of slow and expensive transactions for a short time to make sure that the network stays secure for a much better scaling solution such as the Lightning Network seems like the much better path.

Bitcoin Immutability

Zegers takes on economist Saifedean Ammous and his views on Bitcoin as sound money. Zegers suggests that Ammous says that Bitcoin’s supply cannot be inflated. What Ammous argues, however, is that the rules for Bitcoin’s inflation should not be altered. Bitcoin, as it is currently coded, has an inflationary schedule. It’s ultimate supply of 21 million coins has not yet been reached, so with each new block that is mined, new Bitcoin is added to the network. The number of new Bitcoin in each block is halved after some periods of time; and once the limit is reached, no new Bitcoin will be added.

There is absolutely no problem with comparing Bitcoin’s coded rules to gold’s unalterable physical properties since both would qualify as aspects of sound money. Zegers says that Ammous “skips some steps in the deductive analysis that Austrians should follow,” but he never actually says what these are or says what the actual properties of money are. Instead, he accuses Ammous’ support of Bitcoin as “aping” gold. But that’s not what Ammous and other Bitcoin supporters are doing. They’re acknowledging that money has certain properties, like immutability, so Bitcoin, like gold, should also have these properties if it is to become money.

Hard forks are opportunities to change the code and thus the rules of Bitcoin, which bring to question whether Bitcoin will be tomorrow what it is today. Gold answers this by having unalterable physical qualities. It’s a bit trickier for Bitcoin, but that doesn’t mean anyone is superficially mimicking gold. Messing with Bitcoin’s rules may not directly impact its most crucial properties, but as I mentioned before, it creates avenues for attack if the network security is compromised. And since Bitcoin is an attack on central banking and the state in general, both institutions would love nothing more than to influence the network and its rules.

Once again, Zegers defends his position with a red herring that panders to libertarian and Austrian principles of free markets:

I have previously argued that it is the market that ultimately shapes Bitcoin’s properties [7]. If this understanding is correct, it leads us to positive attitudes about community debate and hard forks. It means we should not fear hard forks, as those that add value (such as raising transaction capacity) can be adopted, while those that destroy value (such as increasing the number of bitcoins) will be rejected by the investors in the market.

Yes, overall, it is the actors in the market who will ultimately determine the fate of Bitcoin, but to suggest that every Tom, Dick, and Harry would have the say in determining technical rules is silly. Think of it as building a bridge. Yes, the market should ultimately “decide” how bridges are built, but we employ experts in bridge design and construction to actually build them. We don’t have the “market” decide to accept or reject which materials to use or how long the spans should be. We rely on engineers to perform that technical work since most people don’t have the specialized knowledge to make reliable decisions on it. The engineers understand how tweaking one parameter will affect other parameters. Good intentions like saving some money on materials in one area of the bridge may cause it collapse. The same applies to Bitcoin.

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