September 22, 2017


Konrad S. Graf: ‘Bitcoin Is Among The Greatest Inventions In History’

Konrad S. Graf: ‘Bitcoin Is Among The Greatest Inventions In History’

When I initially got into Bitcoin, the first thing I did was apply the new digital currency to the Austrian economics I had learned in the past. Determined to learn the value of Bitcoin and whether or not it was actual money, I spent hours arguing about the subject throughout online forums. Diving down the rabbit-hole of crypto, through droves of academic literature and Internet research, I came across someone who explained these theories like no other.

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Konrad S. Graf is a writer who has produced an array of definitive pieces on Bitcoin monetary theory and history. You can find his work throughout the web on various websites speaking about economics, legal theory, and technology. Some notable works authored by Graf include the Origins of Bitcoin, the Bitcoin Decrypted Series, and Action-Based Jurisprudence. Graf has appeared on a few panel discussions over the years discussing cryptocurrency philosophy, including the 2014 Bitcoin conference in Amsterdam. He has presented his work at economic forums, such as annual Mises Seminars; Graf also explored Bitcoin at the 2013 Mises convention in Brisbane. The talented researcher and author has just finished a book that entails a culmination of five years studying Bitcoin’s theory and history. The book is called, Are Bitcoins Ownable? Property Rights, IP Wrongs, and Legal-Theory Implications. His latest work adds the “foundations and implications of action-based jurisprudence, forged through applying it to bitcoin,” which melds together his two major studies for the first time.

“Basically, Bitcoin is among the greatest inventions in history, and the rest of us need to mainly focus on trying to understand what that could mean for different fields rather than complaining about this or that mostly imagined problem.” — Konrad S. Graf got together with Konrad S. Graf for an in-depth discussion on Bitcoin and economic theory. We examine his writings, theories and research within the landscape of cryptocurrency and his study of financial technology. Graf tells us about his new book and his passion that shares fresh material to the masses and go where no Bitcoin discussions have gone before. (BC): How did you originally get into the study of economic theory and the Austrian side of economics?

Konrad S. Graf (KSG): My first inkling that there might be completely different and possibly much better ways to look at economy and government than what is on the conventional menu came from reading Henry Thoreau at age 14, first Walden and then, “On the duty of civil disobedience.” I read most of Ayn Rand’s books at around 17 and then most of Nathaniel Branden’s books around 18, and as sometimes happens, these led me to Henry Hazlitt and the great economists Frédéric Bastiat, Ludwig von Mises, and Murray Rothbard in my early days of college.

I figured out how to leverage flexible liberal arts college academic policies and worked with different professors to create multiple advanced independent study seminars, some in conjunction with weeklong summer programs at the Institute for Humane Studies and elsewhere. In effect, I was able to de facto major in Austro-libertarian studies as an undergraduate, including major elements from economics and law, and supporting elements from history, philosophy, and psychology.

I made it part of my mission to build on this start and continue investigating key framework elements of a just and prosperous social order. Austrian economics, and especially broader potential applications of Misesian method, which I call action theory, have been critical to this project. One of my main interests has been how to combine those insights with input from history, law, and ethics, but do so in such a way that each field still does its own job properly without bleeding into the others in ways that subtract from understanding rather than adding to it.

BC: Can you tell our readers how you found out about Bitcoin?

KSG: Following the publication of my paper on action-based jurisprudence in 2011 and a later presentation on that in Sydney, Australia in late 2012, I joined a Facebook group with the theme of action theory and its wider implications. It was there in February 2013 that I first saw some posts on Bitcoin by Pierre Rochard and was intrigued. I started looking into how bitcoin (the tradable unit) could be viewed from Austrian monetary theory and reading over the debates that had been going on. About a month later, I published my first piece on bitcoin and the regression theorem and this gained a wide circulation.

BC: What were your first impressions regarding the digital currency and has your perspective changed after more research?

KSG: I first started looking into “Is bitcoin money?” and related questions. One side of this debate came across as beyond skeptical right to actively hostile. Another side seemed a bit wide-eyed with true belief combined with some missing background knowledge. I knew right away that my work was cut out for me to develop my own views. Then I started to notice a few names next to consistently reasonable and informed comments, notably Peter Šurda and Jon Matonis. It was a relief to see some others had already been thinking along some lines similar to some of my first impressions.

I also scrambled to learn and understand basically how Bitcoin works technically, and have kept at this. I had always been interested in general science and technology, but my main fields had been economics and legal theory, along with history and philosophy. I did have an advantage though. I have worked as an investment research translator for many years (Japanese to English), so I am used to doing fast research into how a wide variety of unfamiliar technologies and processes basically work and what the correct—and actually used—terms are with which to talk about them (and this in two languages at a time). This calls on a certain practiced (and mentored) intuition in judging when one has gotten it right and when not quite yet.

My basic perspective on Bitcoin has not changed much from those early months; it has just deepened through the different research and writing processes. Basically, Bitcoin is among the greatest inventions in history, and the rest of us need to mainly focus on trying to understand what that could mean for different fields rather than complaining about this or that mostly imagined problem. That is like reacting to news that the printing press has been invented by fretting about scribe unemployment instead of starting to think about what the printing press might help people do.

BC: What invoked you to publish “Bitcoin Decrypted”?

KSG: Those videos evolved from two presentations I did at the Mises Seminar in Brisbane, Australia in late 2013. The Mises Seminar organizers included Washington Sanchez, who has since started working on the promising OpenBazaar project, and Michael Conaghan, who has a really extraordinary command of some of the key literature that I try to build on. I wanted to present on how I interpreted bitcoin using economic theory, but I also wanted to give enough of a technical introduction that people were not still totally lost about how Bitcoin works. Bitcoin-negative sentiment seems to correlate with technical ignorance of how it works. So on the first day, I gave a technical overview and on the second day an economic-theory interpretation. That also led to the videos’ part structure and the narrated slideshow format. I later took the material in the first video and expanded it into the article, “Bitcoin: Magic, fraud, or ‘sufficiently advanced technology?’” This became one of my more popular and widely shared articles.

BC: Does bitcoin follow the regression theorem or do you feel it does not apply to the currency?

KSG: My first bitcoin articles focused on this. I was frankly less concerned about bitcoin than about the poor general understanding of the regression theorem. Too much of the commentary by self-identified Austrians seemed to amount to a kind of populist “gold is money” idea, what used to be called “metalism,” which Mises himself had critiqued in a not-too-gentle Misesian sort of way.

An added complication is that Mises and Carl Menger had made somewhat different points under what many people now think of as the regression theorem. Menger’s account looked much more like an historical and evolutionary narrative. However, on examination, the substance was relative liquidity theory, as Šurda has emphasized. It was presented in the guise of a conjectural history narrative.

Mises, writing several decades after Menger, used action theory more directly in explaining the regression theorem. Of course he did; he was using action theory (praxeology) to rethink and reintegrate the entire body of sound economics around the single organizing principle of human action. This is similar to the way that evolution by natural selection became the chief organizing principle that revolutionized and reorganized the field of biology.

My ‘On the Origins of Bitcoin’ also focuses on differentiating the pure theory aspect from historical and anthropological approaches. It seeks to integrate both Menger’s and Mises’s contributions with some distinctive insights from Nick Szabo (aspects of “Shelling Out: On the Origins of Money”) into a single account that can handle bitcoin, shell beads, silver coins, and anything else, all in a way I argue is compatible with the Misesian regression theorem. When I wrote that in late 2013, I had not yet read the main debt theory of money literature, which had been given a reboot in recent years, including by David Graeber’s book. In the Bitcoiniverse, Wences Casares has promoted aspects of this view. I have in mind a follow-up that integrates the best points from that literature into the synthesis, and critiques some other aspects.

In addition, Daniel Krawisz has since written a great paper, “Reciprocal Altruism and the Theory of Money,” that elaborates on a speculation by Richard Dawkins and other elements in Szabo’s “Shelling Out” that money use might be partly explained using the model of reciprocal altruism. My main reservation about this line of thinking is that reciprocal altruism is indeed a concept based in evolutionary biology, as contrasted with what I consider the scope and methods of economics proper. Of course, evolutionary biology is Dawkin’s main field, so there is no surprise on that count, and despite his expertise on his home turf, he seems to have no clue about real economics, as is all too common. Where, how, and why to draw a line between the insights of these respective fields is quite an interesting topic in itself. It opens up the prospect that there could be separate accounts of money use as construed from the perspectives of these two, quite distinct in my view, fields.

It is often a key step to return to basic principles and then start applying them. When I approached bitcoin and the regression theorem, this meant for one thing differentiating technical and economic layers. Doing so helped clarify how bitcoin could be a purely technical “token” (technical layer) first, and then also later gain a medium-of-exchange value (economic layer), and that those were quite separate and distinct processes in time, ones that likewise require the use of distinct fields to describe.

BC: How do you think Mises and Rothbard would view Bitcoin if they were to witness it today?

KSG: Well that is very speculative. My guess would be they might both start out quite skeptical, and then with time and learning, get more curious. If you had a time machine handy, I would like to ask Mises if he would be willing to take a look at On the Origins of Bitcoin. If there is one person I would like to read some of my work, it would be him, because I view some of his contributions as essential starting-place infrastructure for many of the things I have been working on.

From what I have read about Rothbard, if he were here today, I might start by offering to help him set up something like BreadWallet on his smartphone and send him some satoshis. He might then get very curious indeed and go and read not only the Bitcoin white paper, but also the entire Bitcoin Wiki that same night, and pretty soon he would start getting other people set up, and he would randomly send students satoshis during his lectures. That is my guess.

BC: Why do you think a few Austrian economists feel that Bitcoin is a Ponzi scheme?

KSG: First, there is a distinction between popular figures and one type of Austrian-inspired investor on the one hand and Austrian economists on the other. My impression has been that much of the louder anti-Bitcoin rhetoric from a nominally Austrian direction has tended to come from the former. This includes gold salesmen who have had a “gold is money and fiat is garbage” pitch running for a long time and just tossed bitcoin in with the garbage without ever learning much about it first. Some of the actual Austrian academics, to their credit, have tended to make more guarded comments mainly when asked, qualifying a few skeptical remarks by saying they didn’t know much about it yet. Then there is Robert Murphy, who I have since discovered started writing about Bitcoin in an informed and thoughtful way already several years ago.

BC: In your recent book, Are Bitcoins Ownable? Property Rights, IP Wrongs, and Legal-Theory Implications, you discuss both the crypto-anarchists and those who support the legal aspect. Can both of these elements co-exist within the Bitcoin network?

KSG: There are several themes in the book related to this. I start by taking what usually looks like a two-bucket situation and add a third bucket to it. Let us say the first bucket has Bitcoin and some elements of crypto-anarchist thought and practice in it. The second bucket has law as people mostly look at it today. That means what the legislature passes, what administrative agencies rule, what judges decide, and what police do.

The third bucket, then, is what I call legal theory plus the ethics of legal practice. With this I am talking about what is just, what is correct, and what ought to be done—or often more to the point, what ought not be done. This could all differ more or less widely from descriptions of some particular modern legal system’s pronouncements and activities. I mention slavery and abolitionism as an archetypal example of divergence between what actual legal systems do and what is right and just.

Is it still useful for even any one person alone to have a way to make an independent assessment of what is right and just? I think it always is. So how can one do that? What are the best grounds for making such assessments? I argue that with legal concepts in particular, this needs to be addressed as a legitimate, independent field of knowledge, not just a matter of arbitrary opinion or convention or a popularity contest, like we will all vote on how many sides a triangle really has.

Another point I make is that even if bitcoins were thought to be ownable in principle, the blockchain itself could still not show ownership directly. It only indicates mere possession (effective control). A central implication of the whole idea of property law is that there can be a distinction between possession and ownership. When one sees somebody riding a bicycle, this alone cannot tell one if he is the owner, a thief, or a borrower. Different and additional information is needed to judge that.

With Bitcoin, a legal assessment of ownership (assuming ownability for a moment) would have to be a separate process from just looking at the blockchain. We would need to discover whos, whens, and hows in the human social layer. Data on the blockchain can only provide a certain type of limited evidence about current possession, and such possession itself could then only be one type of evidence about ownership, if indeed bitcoin were to be considered ownable on theoretical grounds, which is addressed mainly in about the last third of the book. I wanted people to think about different factors and contexts and grounds along the way more than just rush to get to one simplistic answer or another, which would thereby neglect most reasons why the question is interesting.

BC: Is the subject of bitcoins being “ownable” a matter of importance to the industry in the future?

KSG: My analyses pertain to philosophical views on what is just and correct and not to particulars of any existing positive law system’s practices. So it is not “legal advice” or prediction. I do not know what this or that system will do. Some people specialize in looking at those things and giving that kind of advice for particular jurisdictions. Still, readers could find something useful in the action-based analysis of the scenarios presented. What is the difference between trespass by hacking and brain-wallet sweeping, for instance, and how might this aid in interpreting scenarios using justice principles? I argue that action analysis supports an extremely clear legal reasoning method that can produce consistent results that potentially anyone could agree on when faced with the same set of facts about a given case, even in technically novel cases such as those involving bitcoin in various ways.

BC: Within the Austrian standards of sound money does bitcoin qualify as a fungible currency in your opinion?

KSG: Much Austrian-inspired talk about sound money developed in the context of critiquing and opposing state fiat money inflation and that has its own long history of rhetorical back and forth. It carries heavy “baggage” from that background. The best approach for the Austrian-inspired is probably to step back from that pre-existing discourse, learn a fair amount about how the Bitcoin system actually works first, and then go from there.

BC: You say bitcoin “does not fall so easily into existing categories” do you think Satoshi designed the currency to be this way purposely? Maybe it was made to be imperfect in its design from the beginning?

KSG: I wouldn’t think so. Bitcoin was an outgrowth of a long effort by numerous researchers to invent workable digital cash. I suspect most people underappreciate the whole idea of “digital cash,” because it is so easy to vaguely consider it as more or less close to a digital bank account entry. However, it is a totally different thing. A bank account entry is only a symbolic representation. It might, for example, be traded for amounts of paper cash, but the bank account entry is not itself already that paper cash. With digital cash, the digital object is the cash itself; it is just in a digital form instead of a paper form. So it is actually quite different in its economic nature from a bank account entry. There is likewise no such thing as a “bitcoin account” on the Bitcoin network.

Satoshi put pieces together and added the special Byzantine sauce that finally produced something that really worked as digital cash. A look at the history of independent parallel invention, from calculus to the telephone, suggests that if Satoshi had not done this first, someone else might have done it sooner or later. All the components needed to make it work had finally come into existence in the prior decades, whereas basically none of those puzzle pieces existed at all before roughly the 1970s, and more robust and usable forms of those pieces mostly arrived only much more recently than that. Also, there were some real problems that were waiting to be solved with digital cash. So the motivation and the puzzle pieces were all waiting for the first person to see the possibilities and then actually assemble that puzzle.

The fact that it can be so tough to categorize bitcoin under existing concepts from economics and law tells me first that it is a completely new type of thing that needs to be given serious study and thought, and second that this provides a great opportunity to reassess the foundations of existing categories and definitions. Even if we run something like Bitcoin up against these concepts, they shouldn’t choke on it. Bitcoin might be a messenger. Instead of it being Bitcoin that is a problem, something in those concepts, or at least most people’s operating versions of them, may need to be ironed out, refined to the next level.

BC: How do you feel about the general state of Bitcoin right now with its current price and capital injections into its infrastructure?

KSG: It is mostly encouraging. Regarding investment news, there are a lot of different types of content there. I am in the chorus that tries to remind people that directly controlling their keys is quite different from having an account with what I call a “neo-bank” Bitcoin service that is in possession of the keys. Some multisig wallet services could offer an interesting middle ground for some applications. On the other hand, I have also pointed out how important it is that even Bitcoin neo-bank users do have an opt-out path in that they can move to direct key management (except in a sudden shutdown; then it is too late). This customer-defection threat could help keep Bitcoin neo-banks more honest than if customers had no real practical alternative, as has been the case with conventional banking, the main opt-out from which has been to be “unbanked.” That is considered a quite unenviable status because it puts up so many obstacles to participation in society, so it is not much of an opt-out path. This shows how one has effectively been unable to opt out of banks, per se, but could only switch from one to another. Bitcoin shows how this situation could change.

I appreciate the thoughtful questions, thank you. would like to thank you, Konrad, for speaking with us and informing our readers of these interesting subjects. We look forward to reading your work in the future.

Follow @KonradSGraf on Twitter. Links to articles and book mentioned are at

What do you think about Bitcoin being ownable? Let us know in the comments below!

Images courtesy of Redmemes, Konrad S. Graf, and Shutterstock

This content is released under a Creative Commons Attribution 4.0 International License.



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