While many Austrian economists disagree on various topics regarding the origin of money, the most notable and agreed-upon theory on the origin of money is Carl Menger’s theory of salability.
Bitcoin arose in a world that was long past the barter phase. Since bitcoin was never used for barter, it did not face the problems that barter economies had, namely the problem of double coincidence of wants. While it might not be helpful to compare the emergence of bitcoin to the emergence of money in a barter economy, it is still the same market dynamics described by Carl Menger that dictate how new money emerges. These market dynamics, which also apply to bitcoin, are explained by the theory of salability:
Salability (liquidity) is the extent of how much economic sacrifice is required for disposing of or acquiring a good, i.e., how easy it is to sell a good at a market at any time, and at any economic price. The sacrifice usually comes in the form of a discount on the price, or in the cost of delaying the exchange resulting in the seller having to wait until the exchange can take place. The more salable a good is, the easier it is for the owner to exchange it for other goods for a reasonable economic price, i.e., prices corresponding to the general economic situation. Another way of thinking about salability is that it is the narrowness of the gap in which an individual can immediately buy and sell a good. The theory of salability describes how goods compete with each other for becoming money based on the difference in their relative salability.
The Early Days: An Illiquid Good
In the early days of bitcoin, it had no price, no purchasing power and no salability. On October 31, 2008, the pseudonymous creator Satoshi Nakamoto published the Bitcoin white paper on the cryptography mailing list. At this point, bitcoin can’t be considered a good as it does not exist yet.
On January 3, 2009, the first block was produced on the network and thus the Bitcoin blockchain…