For a little background please read Bitcoin: A New Commodity Created To Serve Market Demand. In this post I take it a little further.
In short, Mises’ Regression Theorem is wrong – I know this is heresy to the Austrian Religionists but think through this a little:
Bitcoin was primarily created to be used (100% DIRECT USE) as money (a store of value, medium of exchange, unit of account) not to mention its many other potential uses such as smart property and smart contracts. There was never the intent for it to have a prior use.
It was created to serve the market demand for a better medium of exchange specifically in the hampered market. I believe Mises’ Regression Theorem assumed an unhampered market. [updated for emphasis & clarification]
Another way to look at the bitcoin protocol is that it is a publicly auditable accounting mechanism which works extremely well for hawala-type transactions.
Two trading partners can voluntarily agree on an exchange rate (price discovery) and then trade using the trusted bitcoin accounting mechanism as a medium of exchange.
In another sense, you can look at bitcoin as an “opt-in” community currency (much like Ithaca Hours or any other community currency) where trading partners can opt-in or out at any time. People are “opting in” because it is trusted, decentralized, and better than gold in many respects (you can smuggle bitcoin across borders much easier than you can gold).
Economics and Liberty 
I don’t think Bitcoin contradicts the Regression Theorem. Accounting systems and electronic payment systems are goods/services in current use and Bitcoin is just using these already-valued services as money.
Yes, but those systems did not exist in the current format. Satoshi Nakamoto took those, changed them, and made them better – hence the “new invention.”
The regression theory as stated by Mises is a narrow explanation of how money (the media of indirect exchange) can possibly arise from a primitive system of barter (direct exchange.) Most importantly, Mises does not make the stronger claim that money can only arise in this one specific fashion. (It is interesting to note that Mises also contemplated that money could arise from a gift-giving system.)
Rothbard on the other hand (and I think incorrectly) broadened the RT, by stating it as a stronger claim- “money can only arise from a previous system of barter”.
It is Rothbard’s restatement of the RT that some people including David Graeber have been objecting to (since they don’t think that money emerged from barter).
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Mises’ regression theorem is not wrong. Like Einstein’s general relativity, it is simply misunderstood.
Mises is not wrong, you just need to understand the terms. Money is defined here as the most marketable commodity. Money means precisely the commodity solution to the problem of barter. That’s what he’s addressing. Today we use “money” to mean anything used as a medium of exchange – which is merely one of the qualities of money.
You can test what I’m saying by thinking about it for a second. Ask yourself whether a note (IOU) is money proper. The answer is no. It is a promise to pay (usually money). Yet it may be used in exchange. But it’s use in exchange doesn’t make it money. Get it? There are all kinds of derivatives of money that might be used for exchange, but they don’t represent final payment. There are financial instruments, money substitutes, etc. Money is that which is used for final payment. There is no counter-party risk with money. It simply changes hands and the transaction is complete. That’s how it solves the barter problem – because it is a highly liquid tradable object that most people will accept in trade. Money is tit-for-tat. It’s not I’ll-pay-you-later or take-this-to-Bob-and-he’ll-give-you-candy.
Bitcoin is therefore not technically a money. People accept it only because it can then be converted to their national currency through an exchange service. It has no known market value apart from existing currencies, which in turn have no known market value apart from their historic connection to gold and its historic price system. The dollar and other national currencies used force and fraud to hijack the natural money system. Bitcoin takes its value from existing currencies through offering benefits other currencies don’t have. But no one would know what to trade for 1 BTC if that unit could not be exchanged for fiat currencies, and the same goes for fiat if it weren’t “backed” by the force of the state.
Yes, you can say that the market value of 1 BTC is $100, but then this is your “hampered market” at work. Fiat derives its value from men with guns, and Bitcoin derives its value from fiat. But Mises is talking about how money arose from free markets as the natural solution to the problem of barter. When you understand what he’s saying, he really can’t be wrong since it’s a bit of a tautology. Money is just the term for the commodity solution to barter. Another solution would be an IOU system, but we wouldn’t call that money except in a colloquial sense. Mises is not addressing colloquialisms, but making a scholarly inquiry into the origin of the commodity solution.
Once you had “Mises” and “wrong,” nothing further needed to be said.
You make the logical fallacy of appealing to authority. As great as Mises was, could it be possible that he could not foresee the invention of a new type of money?