Bitcoin Forum

I've seen idle speculation here about how much bitcoin would be worth if it achieved mass acceptance - usually assuming everyone would have some bitcoin and calculating that 1 bitcoin today would be worth some insane value equivalent to todays USD.

The only way I could see bitcoin working as a mainstream currency would be as a reserve currency used in international or bank to bank transactions, much like gold would have done a century ago. The protocol in its current form just does not seem to be designed for mass use, but could have many advantages for lower frequency - high value transactions like this. The bitcoin protocol seems to be more of a competitor to SWIFT than to Visa or Paypal.

But while I could imagine a bitcoin-like currency acting as a reserve currency I don't see why the organisations involved would not just start their own blockchain and impose their own restrictions on who can participate in the network. I can see a continued future for todays Bitcoins continuing as an almost unregulated grey market currency, but find it difficult to imagine them going into mainstream use in its current form.

Any other opinions on this? Now that bitcoin has widespread recognition if not yet acceptance is there a vision about how to get from the current experimental model to a stable mainstream medium of exchange?

 edit:  changed the title

Why gets the newly mined GovCoins??

bank.com.

Banks,  central banks,  governments,   large corporations probably.  it would be a closed network  so while anyone could mine they would  have  to do so through a  controlled mining pool  and get paid in local currency.  Most world currencies  would be pegged to govcoins  though,  like gold after the Bretton woods agreement. transaction blocks could still be made public,  and the owners of addresses would be on public record.
 
This is not a desirable scenario obviously, but  I'm wondering is  this likely,  or what the better alternatives are. How could the current version of bitcoin be made suitable and desirable for mass use by banks and governments,  or their future replacements.

You need to be more precise with your terms.

Systems such as Target2, CHAPS, Fedwire, etc., exist to allow governments and large companies to settle EUR/GBP/USD transactions in real-time, with finality, on the books of the respective currency's central bank.     To that extent, the Bitcoin network can be seen as the Real-Time Gross Settlement system of the Bitcoin currency.    But it's important to realise that the currency and the RTGS come as a pair.  Target2 for EUR, Bitcoin network for BTC, Fedwire for USD.  The concept of a "reserve currency" doesn't come in to it.

(It's also worth pointing out that SWIFT doesn't really come into this discussion - it's just a messaging network.....  payments are ultimately settled by the underlying RTGS.)


Following the logic above, then, what do you mean by a reserve currency?   Typical definitions encompass the notion that a reserve currency is one that governments hold a lot of, either as an asset or as a way of settling obligations -- and/or the notion that it is a currency in such widespread usage that major commodities are priced relative to it.

In both cases, the currency needs to be widely adopted -- so it's not obvious that a government-bootstrapped currency, with strict usage/membership rules would really take off.

Your point about the scalability of the Bitcoin network is a good one, though...  I'm still not persuaded that it is appropriate for mainstream use, even if the scalability limits were removed.   Just as most Brits wouldn't use CHAPS for every payment even if they were granted direct access (they would prefer the easier/cheaper/safer Faster Payments system), I expect most users of BTC in the future to do so intermediated by a bank-like entity and a collection of off-chain deferred net settlement systems.   Purists might not like it of course....

Fair enough - I'm not that familiar with these topics so any corrections are welcome. The system would act as an RTGS and currency, and would probably run over the SWIFT network rather than the internet.


I mean the IMF could replace the SDR basket of currencies with "govcoins". It would require an international agreement along the lines of Bretton Woods (probably involving the G20) where countries agree to a specific exchange rate against govcoins, and to hold a particular quantity as reserves. IMF have already floated the idea of replacing USD with SDR as a global reserve currency, the transparency a system like bitcoin could provide might make them more acceptable to some countries.

Thinking about it the main advantage for governments of adopting bitcoins rather than starting their own equivalent would be the amount of work in developing a sufficient pool of coins. Would it be cheaper for them to start mining from scratch or to buy out a sufficient quantity of bitcoins on the market? The fact that bitcoins already have a perceived value would favour their use, on the other hand they may not be keen on rewarding the current bitcoin holders.