Bitcoin maximalists have a way of annoying people that seems to bring out the worst in its critics. But it would be a shame if these regrettable social dynamics denied the world serious debate about a technology that could change the world.

The latest example of poor argumentation comes from Dror Goldberg, an economics professor from Israel who writes up the weakness of “bitcoinism” in the Chicago Tribune.

I take his orientation against bitcoinism (which I hadn’t heard of before) as a sign that a group of people has offended him. By assigning them to an ideology even less well-defined than most, he can go mano a mano against these wretches. It’s more exciting than confronting mere ideas. I’ll stop doing the same now and address the arguments.

Part of bitcoinism, evidently, is opposition to inflation. Many bitcoin supporters do argue that its falling rate of production, reaching zero over the next 100 years, is an important virtue. They often deride the continuous loss of value suffered by holders of fiat currency, even when central banks manage inflation well.

To defeat this point, Goldberg derisively points to the anti-inflationary virtues of the Croatian kuna. As that country moves to the euro, production of kuna will stop, making the remaining notes and coins as good an anti-inflationary investment as bitcoin.

We all can see the likely true path for the kuna. Notes’ value will fall dramatically relative to other goods, held slightly above zero value by mild interest among currency collectors, Croatian nationalists, and European history buffs.

Are bitcoin’s hopes dashed by that parallel to the kuna? No.

Inflation resistance is but one of bitcoin’s potentially attractive dimensions. Others include easy transferability, growing worldwide acceptance, low costs for storage and transfer, surveillance resistance, seizure resistance, and security. Bitcoin is presently stronger on some dimensions, weaker on others. I discussed these factors in a blog post published 10 years ago that holds up pretty well, though not perfectly.

That ancient post starts with a white whale of mine: monetary economists’ misuse of the word “intrinsic.”

No major currency has intrinsic value. Indeed, there isn’t much of anything that has intrinsic value. The value of a thing depends on other people’s demand for it. This is as true of bitcoin as it is of dollars, sandwiches, and sand. So the intrinsic value question, which seems to cut in favor of traditional currencies, is actually a wash. (Emphasis in original.)

Here’s how Goldberg misuses it:

Bitcoiners presented with the problem that bitcoin has no intrinsic value like gold or the medieval marten furs for which the kuna is named respond by saying that the network itself is the intrinsic value. Well, the kuna already has a full-fledged 28-year-old nationwide network, one that as of 2022 bitcoiners can only dream of.

Ah, the intrinsic value of marten fur. You can’t look at a marten fur without wanting it, because part of its essence is that you value it. I’m being obtuse, of course.

Apparently, among monetary economists there is a stipulated meaning to the word intrinsic. They call it intrinsic value when something has use value apart from any role the item might play as money. Gold has intrinsic value because gold is sometimes used in jewelry. But that is not intrinsic value in natural language. That value is subjective and contingent. We seem to have a problem where an economics education renders one less able to debate a category-busting technology like cryptocurrency.

There are good arguments against bitcoin. The collapse of FTX is not one of them, unless Bernie Madoff’s Ponzi scheme is an argument against the dollar.

During the period from August 2015 to November 2017, the bitcoin community chose a technical path that reduces throughput and increases the cost of using that network. Taken to increase the security of the bitcoin network against certain types of attacks, the decision to maintain a limit on the amount of data included in each bitcoin block sharply reduces the number of transactions and drives up the price of adding transactions to the bitcoin blockchain. A “second layer” solution called “Lightning“ that would make bitcoin transactions inexpensive and fast remains always over the horizon.

That has reduced the cost and transferability of bitcoin and curtailed its acceptance. That—not inflation resistance—makes it like the Croatian kuna in a more relevant sense. A good bitcoin critic could land some punches making an argument like that.

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