Bitcoin Forum

If you understand bitcoin, you have to acknowlege it's possible that one day national currencies will become a thing of the past, and the world will run on bitcoin.

So I found myself wondering how many bitcoin I would need tucked away in cold store to be wealthy in such a scenario.
There are different ways of calculating this:

BTC21,000,000  Issued (eventually) / 7,200,000,000 people in the world = BTC0.002916 average per head

But the world is not equal, the top 18% of the world currently own 82% of it, so what would I need to be in that top 18%?

21000000/(7200000000*.18) = BTC0.016

I'm sure I can find BTC0.016 to tuck away as a hedge for the distant future!

However, before this switch happens we are going to get degrees of moving away from  fiat currency to bitcoin, so what might the value of bitcoin
be at different points on that ladder? Well if we base out calculations on M3 (broad money) of which there is currently about $100 trillion, we can peg out that ladder, and also infer by the current BTC price where we are currently on the ladder:

Transition
100% = (M3)100,000,000,000,000/21,000,000 = $4,761,904 = BTC1
10%   = $476,190 = BTC1
1%     = $47,619   = BTC1
0.1%  = $4,619     = BTC1
   PASSED NOV 2013
0.01% = $476       = BTC1
   PASSED JUNE 2013
0.001% = $47       = BTC 1

So with:

i.    About 30 of the worlds currencies having serious inflation problems (out of 180 ish) driving people to exchange their local currency for BTC to protect themselves from inflation.
ii.   About 60,000 retailers accepting bitcoin now.
iii.  VC Funds have already invested more than double they did last year in BTC projects (5 months in to year!)
iv.  Legislaters starting to react to BTC

Who thinks it will take more than 12 months to reach the next level? $4619

I certainly don't!

My Systems Engineering gut says Q5 2015 we will see the 1% shift...hedging 6BTC over the next 3 months towards that shift.

I reckon one day those BTC6 will put you in the worlds top 1%

Yeah, I don't want to be in just the top 18%. That's barley comfortable by western standards. I''d like top 5% :)
 

My liberal arts college education says I need more bit coin and a better education.  :D

Still need a few years to go. Not easy to become the world currency!  When the price is down to a low level, I will buy more to save for the future.

I fear the recent slump to ~$400 will be the last of the 3 digit regions. If you cant buy a chunk, do what I am, purchase  using dollar averaging over the next few months.

I actually budget a set amount of fiat each month to buy BTC regardless of price. Once I close my mortgage I plan to up it rather dramatically. 

i wish this coin will be good in the future.

You and me both. Wealth, peace, and freedom. I believe it will happen.   

Great job dev Team! your hard work is reflected in the recent price. I will keep waiting.

i think bitcoin or a derivative of bitcoin will be the worlds reserve currency in the future
fiat is too slow and clumbsy and untrustworthy for nations
if you hold other nations fiat... u dont know how much they are inflating your holdings
plus by holding their currency you are supporting their government/policies

<raising Hand> Much more if ever.

I wasn't speculating when it would become the worlds currency, I was simply speculating when we take the next factor of 10 climb up the ladder to 0.1% of m3

The banksters will shake us HODLERS as hard as they can in the coming years to ensure they continue to be at the top.

HODL FOR FREEDOM MEN!

You are deluding yourself if you think you are going to get them much cheaper than today. Yes volatility will remain really high in coming years, but the drops will be from much higher bases, I seriously doubt we will ever see $450 again!

Totally agree, this is going to be the greatest wealth inversion the world has ever seen, and all those 'old white men' (The Oracle of Omaha) who are in denial will be on the wrong side of it.

if bitcoin becomes the world currency, we wouldnt pay that:

http://s7.directupload.net/images/140610/7mtj2mf8.jpg (http://www.directupload.net)

Does not need to become the world currency for that to occur, simply to have enough credibility with the majority of people. We are not  there yet, but I doubt we are more than a couple of years away from that. Then, all hell will break loose, we reach tipping point where the price starts rising suddenly, and all those that are noty on board start realising fiat is dead and they scramble to get on board too. The tipping point (collapse of fiat) will not only play out in bitcoin but in any hard assets/commodities etc. So gold is a good second hedge especially if you want to trade the peaks of bitcoin on the way up but don't want to be exposed to fiat.

Bitcoin won't ever become a world currency. Go look at places below or at the poverty line. They can't afford to own a Bitcoin wallet or have access to one.

they'd be significantly less then 21 mil btc surviving in a usable fashion. and any large mainstream take on would pretty much kill the blockchain.

I beg (no pun intended) to differ, even in places like kenya people like poor farmers are doing bitcoin transactions using SMS services on old (non-smart) 2g phones! ( CoinPip ) And yes ok, not all the world has a phone, but that too is changing very fast.

If it became the world currency, I would personally fund all the "poor countries" for Internet access and computers.

Yes, less that 21 mil would be usable (because of losses), but that just means less availability so higher bitcoin price. As for killing the blockchain, care to put an argument behind that? It's already widely recognised that not every device is going to be able to carry the blockchain in future as it scales, but that limitation is/has already being addressed by the coders to allow devices to only carry relevant (to them) portions of the blockchain.

This is not true and if you read this forum and / or news you would know it. Even in most undeveloped countries, ppl use OLD mobile phones that can send sms messages, and to use Bitcoin, SMS is all you need. Little bit of electricity, and connectivity and BTC can go to any place where Banks can go. Places that have absolutely zero electricity and connectivity to rest of the world AND are inhabitated arn't really in large percentage.
And there are movements (google) that are working on tech that would enable wifi access to any place in the world. All someone needs is little bit of electricity (one single small solar panel) and low poerd device like old phone, and there you go...BTC access.

Right now there are almost 200 different types of fiat currency circulating in the world. Why we need this much different currencies? A single currency will be good, and it will be even better if that currency is Bitcoin.  ;D

Also, we are cutting down a lot of forest trees, to print the currency bills. If Bitcoin is adopted worldwide, then the deforestation rates can be reduced as well. Bitcoin is the most environmentally friendly currency.

Your bitcoins are stored for free on the blockchain. The problem is getting poor people to access them. There are cheap solutions. We just need to develop them.

This is exactly WHY Bitcoin is destined to become the currency of Earth...

...capitalism leaves the world with no choice! Bitcoin is a cheaper, faster, more secure, more sensible, more scientific way of doing money!

Middle-men parasites of the finance world, good riddance!

OP's math looks solid, btw.

I would change the heading to "If Bitcoin became the world RESERVE currency"

Sovereign nations will probably choose to premine a POS cryptocoin you can exchange for bitcoins on their exchanges.

http://en.wikipedia.org/wiki/History_of_the_Internet

It took 7 years for the internet to go from handling 1% to 51% of all two-way information.
Another 7 years it went from 51% to 97%.

It only took that long because the internet didn't already exist.

The world's transition from fiat to crypto will be at least one order of magnitude faster. Meaning we're looking at 3-5 years for massive global adoption similar to what happened with the internet itself.

What I'm saying to you, dear reader, is that you should melt as much of your fiat into crypto as possible ASAP.

My house has a For Sale sign in front. Just sayin.

If my wife would let me (sell), I would! £700,000 of asset doing 5% ish!! Just sayin :)

I cannot see every single person in the world wanting to hold bitcoin in its current form. It is really difficult to make a bitcoin transaction for the non-techical person at the moment. A debit card in bitcoin will be nice.

Debit card is already there, look at bitplastic

It's also worth noting that as mass adoption happens, then we see a slow down in the requirement to change back and forth with fiat, people will simply be paid in, and pay in bitcoin, that is close to tipping point when friction starts to disappear.

mastercard/visa don't allow this ... even Paypal don't allow this now (that it have "plastic card" associate to a credit revolving system ... and not to use the sold of the paypal account).

I'm sorry, you are wrong, at least two suppliers doing BTC denominated debit cards now (MasterCard):

https://bitplastic.com/
https://xapo.com/

the first step to become a reserve currency, is to stop  being measured and valued to the dollar.

this is simple. instead of saying bitcoin is $600 £400 we need to say:

bitcoin is 2 weeks minimum living costs of all countries

and as the demand for bitcoin increases, it will become 3weeks, 4 weeks.. which people can then translate to their native currency value, commodity prices of oil, gas, livestock, etc.

again we need to stop pegging bitcoin to the US dollar. and instead peg it to actual peoples lives.

Why? Isn't gold and other reserve stuff valued in USD?

People compare to the dollar because it currently IS the world reserve currency (Even though Euro is in fact the biggest currency).
But comparing is not the same as pegging! In fact, you could just as validly argue we are comparing the $ to bitcoin not vice versa.

Is the dollar sliding or bitcoin gaining? until bitcoin goes into trade weighted baskets there is no valid comparison.

This will never happen. What will happen, is people will flip the equation.

In the near future people will go from thinking about how many dollars a Bitcoin is worth, to thinking about what fraction of a Bitcoin a thousand dollars is worth.

When this shift in collective consciousness occurs, you'll know it.

Both. It's all relative.

Your perspective depends on whether you think primarily in terms of dollars or in terms of BTC. No matter how you look at it, though, the trend is clear.

My point exactly, though investors have typically used trade weighted baskets in the past to calculate how each currency was doing. That will probably be impractical with  bitcoin, so a new paradigm will be needed.

exactly my point.
if today bitcoin is worth 2 weeks of average living costs (poverty line) then people can calculate the dollar, euro, yen price of that.

the 'comparitive' needs to move away from the dollar and put against something stable EG
if bitcoins for the next 2 years stayed at 2 weeks of living costs. people can always buy 2 weeks of food, bills with bitcoin, even if the cost of bread went from £$1 to £$1.50 bitcoin will remain stable and people will see that its the dollar that is moving.

people will see that bitcoin moved from $600 to $900. people will also see that a loaf of bread for bitcoin was 0.00166667btc. and in 2 years is still 0.00166667btc thus they will see how much inflation the dollar has.

the only time bitcoin vs living cost would change is from the demand of bitcoin. EG this year 1 bitcoin would buy 2 weks of living costs. next year bitcoin would buy 3 weeks of living costs. which again if the price of bread in dollars also went from $1 to $1.50 not only shows a bigger dollar gap between usd and bitcoin it would calculate that bitcoin would be $1350.

and instead of being 0.00166667 for a loaf of bread it would be nearer 0.00111111 for a loaf of bread

I take your point, but do not see it as being practical. Perhaps a commodity like gold would be the next best comparison, thats been relativly stable compared to cost of living over the decades, so is a good proxy for it. When people see at todays prices 1 bitcoin or $1200 buying an ounce of gold and in a year that same bitcoin buys 10 ounces but $1200 still only buys 1 oz, it will sink in...

On a lighter note, I noticed in a documentary the other night economists have reached the conclusion that one of the most stable forms of measuring value over hundreds of years has been the relative cost of different types of sex purchased in brothels! Apparently the Romans paid pretty much the same as modern man! So should that be the new comparison?  :P

no your missing the point. you are again putting a dollar price on the cost of living FIRST and then attributing it to a bitcoin price.

imagine it this way, imagine that it averages out that the cost of living was
2 loaves of bread, 6 litres of milk, a couple joints of beef, a large sack of potato's 5kg of veg, 7 tins of baked beans etc
for a weeks average stable diet.

where for instance no matter the dollar or yen price of these items people still need on average the same nutritional ingredients week in week out. so this is a better fixed value, than the dollar.

so today people can pay their rent (fixed) taxes (fixed) and all those ingrediants for 2 weeks with just 1 bitcoin.. in any country, because bitcoin is the reserve currency to measure against th poverty line, commodities and fair tax/rent.

obviously with demand for bitcoin increases people can afford more food or get more luxurious apartments for the same single bitcoin, as its true reserve value has increased due to demand.

and all of this can be measured without even mentioning FIAT

Franky, I GET IT! honestly, perhaps i'm not conveying how I get it, but I do!
We have an index in the UK called the Retail Price Index (RPI) which is basically a measure of the cost of living for average jo. That index is currently measured in pounds sterling but could equally be done in BTC should we choose.

no, your not getting it

imagine we had a unit.. (1)

now lets say basic fair value rent should be 20% of unit
now lets say basic income tax should be 20% of unit
now lets say a loaf of bread should be 0.25% of unit
now lets say a 6 pints of milk should be 0.37% of unit
now lets say a joint of beef should be 3% of unit

now if someone in america was to buy all the items listed.. one whole unit might cost them $300 in detroit, but would cost $500 in california because california charges more for rent and food and has stupid tax costs.

but no matter what if you use bitcoin it would be the same 0.2btc to rent an apartment. even if the $$ rent was higher in california. but also the $$ cost to get a bitcoin in california (minimum wage) was higher
lets get more local.

calculations AFTER unit establishment
Lidl/Aldi milk=£1(current actual price) so a full 100% unit = £400
ASDA milk=£1.16
Tesco milk=£1.40


so imagine 4 pints of milk in the UK was 0.25% of unit (bitcoin). in ASDA milk would be 0.25%+0.04% Lidl/Aldi milk would be 0.25%+0% and tesco would be 0.25%+0.1%.

yes imagine it like gold, with a variance of local spot prices depending on which pawn shop you go to

i think you will find if you looked at the american cost of living index you will see what i mean. http://www.coli.org/

if bitcoin becomes a reserve currency. the bitcoin reserve stays the same. and its the FIAT / local prices of different places that always change.
this is where states, councils, governments work out local minimum wage by the unit index

please realise the true end result of being a reserve currency

Cost of living indexes don't work that way. your list of lets says will vary from region to region.

the FIAT VALUE of cost of living does vary, so does the spot price of gold. and also the price of car fuel.. i see many car fuel station have a variety of prices. but PLEASE i beg of you for the 4th time, will all readers stop thinking about the FIAT value
http://www.coli.org/ <- check it out and see that prices vary dependent on state/country
yet the individual items have a fixed value of the INDEX
http://i60.tinypic.com/23tpmkh.png

half a gallon of milk is ALWAYS FIXED to be 0.034522 of the unit index of cost of living. so yet again.. forget the FIAT price. imagine bitcoin was measured against the INDEX (1) and milk was 0.034522 of (1)

now as i said in an earlier post on this topic imagine that bitcoin this year is 2 weeks of cost of living INDEX(1)

we have now got rid of the reliance of FIAT measurements. fiat measurements do not come first when using the cost of living index, they come last.

so again before we even look at what bitcoin is worth in fiat. lets stick with the bitcoin is worth 2 COL indexes
meaning milk is 0.017261btc.

meaning if a retailer increased the FIAT price of milk. milk via bitcoin would still be 0.017261btc.

put simply while the fiat prices of the world go crazy, and the dollar inflation explodes where it costs $1000 for a loaf of bread ( research zimbabwe dollars for examples of inflation explosion) a loaf of bread will still be 0.017261btc. and people can still do 2 weeks of labour for 1btc minimum wage.

where as in FIAT LAND employers are giving employees wheelbarrows of bank notes and new bank notes are getting printed by the milisecond, while the dollar collapses. those in bitcoin land have a stable measure of cost of living.

so forget FIAT prices!!!! PLEASE.. the bases of reserve currency is not about the FIAT price. please get the sheeple mindset out of your heads, a reserve currency is not based on dollars

There are more people with a cellphone connected with the internet than there are people who have a bank account.

Banking is ridicously expensive compared to owning an internet phone, especially for poor people. Bitcoin is much more accesable to the poor than banking is. And that's one of the reasons it will catch on.

The poor might even come out ahead of the slackers who still believe in fiat, just because it works for them now. By the time they realize the fiat system is failing they will be poor in bitcoin terms, and their fiat will be quite worthless.

I agree, but I think the original commenter was making the point that there are still a lot of people that are so poor they do not have even phone access let alone bank or internet.

https://i.imgur.com/5jWpCG3.jpg?1?6167
Prices vary by region. Texas has inexpensive steak, Portland has inexpensive lobster. These are percentages, not fiat prices.

Nice discussion going on :D

Fiat is an IOY for product it has no real value and should be rare and hard to obtain for it to work as an IOY.
The value of fiat is based on work that must be exerted to obtain it. (going to work)
The problem is that the supply is not limited thus creating inflation.
If fiat loses value you can get less product for it and visa versa.

The same can be said for bitcoin, it can also be an IOY for product. The same applies, it is rare and hard to obtain for it to work as an IOY.
The value of bitcoin is based on work that must be exerted to obtain it. (mining)
For bitcoin the value is truly limited and deflation will occur.
If bitcoin loses value you can get less product for it and visa versa.

etc. same applies for gold


Why can Bitcoin be an ideal reserve currency?

quote wikipedia "
A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves, and that is commonly used in international transactions. Persons who live in a country that issues a reserve currency can purchase imports and borrow across borders more cheaply than persons in other nations because they need not exchange their currency to do so. According to economists such as Valéry Giscard d'Estaing, a former French Minister of Finance and president, a reserve currency gets certain benefits called the exorbitant privilege.[1]
"

Bitcoin has sufficient quantities.
Bitcoin has international transactions.
Bitcoin makes nobody an issuer, all are equal.
Bitcoin can be trusted since nobody controls it.

The only problem is that bitcoin is not equaly distributed and thus wealth is not equally distributed. But then again neither is gold.

Nice summary!  I know everyone thinks the Chinese are against bitcoin, but they HAVE been making noises of late about seeking an alternative to the dollar as the world reserve currency (For exactly the reasons you outlined). The Euro was once on the cards for the title, but 2008 saw the end of that.
So it would not suprise me if the Chinese state were secretly accumulating bitcoin before becoming positive towards it as a new and fair alternative to the dollar.

I am not an expert, but m3 seems like a bad money supply to compare with to me.  Then you assume bitcoins couldn't be used in loans etc. (which they already are).

I'm not an economist, but I thought m3 was the broader supply that included loans etc??

+1 I'm not an expert too, but M3 and even M2 won't do, because they are the mix of existing money (MB) with promise of money - term and saving deposits i.e. money that bank have lended to somebody else. To compare apples with apples we should compare 21M of bitcoins with MB. Which is much smaller than M3.

You are assuming that banking functions would disappear completely, I doubt that very much.  Mortgages etc will still very much be around, so which particular components of M3 or 2 do you think will not be applicable to a bitcoin denominated economy?

We already have p2p lending on bifinex.  It's only a matter of time until Bitcoin loans are given by banks, backed by credit reporting to the major bureaus and collateral such a mortgage.

In the absense of a logical proposal of why m3 is a faulty comparison, i'll stand by it for now.

I don't agree that other assets will gain in value as much as bitcoin after bitcoin hits the tipping point (I like to call this phase hyperbitcoinization (http://nakamotoinstitute.org/mempool/hyperbitcoinization/)).

During the crisis, bitcoin will be rapidly increasing in value (from less than $1 million to over $3 million) and everyone will want to jump on board. Fiat prices will increase quickly (similar to hyperinflation) and people will see their fiat savings and fiat salaries made worthless practically overnight. Many people will be afraid that they "missed out" on owning bitcoin and will trade their stocks, property, precious metals, and anything else of value (especially unsavory investors caught up in the mania).

Mike Maloney makes a good case that when a market shifts from valuing one asset (gold, stocks, housing, etc) to another, the market overshoots its "fair value." Check out around the 55 minute mark of this video (http://www.youtube.com/watch?v=tj2s6vzErqY). I think bitcoin will go well beyond your $4.7 million dollar estimate, but it will come back down and level out around $4.7 million.

Quite to the contrary, this is your assumption, because you are saying that bitcoins 21M are all there is to "bitcoin's M3", thereby saying the loans fraction is essentially 0.  It would be much wiser to compare bitcoin's 21M coins to the USD MB in my opinion.

When a thread such as this one appears - this is always a bearish sign.

ok, we have probably moved beyond the envelope of my meagre economics understanding, to the degree that i'm not sure we are even having the same discussion. I'm arguing that the ledger debt portion of current m3 (lets call it unreal money) will still be around to some degree (minus fractional banking loans of course), just denominated in BTC. Oh I get it! so the 'unreal money' portion is not really divisible into the BTC21mm until it's called up/satisfied because it doesnt increase demand on the BTC pool to deliver it. Yeah makes total sense now, thanks :)

I'll drop a recalc in with MB, unless any budding economists have a better argument?

Edit: So it looks like MB is a harder number to pin down, but $9 trillion seems to be a consensus. So original calc is theoretically oversized by a factor of 10.

Transition
100% = (Money Base)9,000,000,000,000/21,000,000 = $428,571 = BTC1

Of course that deosn't account for the earlier argument about sudden changes causing large potential overshoots.

I don't. But if BTC will be used for fractional reserve banking, there would be much more of them than 21M, because you can promise any amount of bitcoins.

          ---------------------------------------------------
         | Real              | Fractional                                  |
----------------------------------------------------------
|  $    | MB (money)    |   M3 (money + promise of money)  |
|-----|---------------|-----------------------------------
|  BTC   | 21M (BTC)         |   ??   (BTC + promise of BTC)               |
----------------------------------------------------------

So I'm talking just of comparing apples with apples.  MB with 21MBTC or M3 with (21MBTC + promise BTC). But since we can't tell how much of fractional banking be used with bitcoins, it's better to use the first option, i.e. divide MB to 21M.  After all $428,571 for bitcoin isn't that bad  ;D

EDIT: adjusting the table.

FTFY

If bitcoin becomes a world reserve currency then its ok but dont try to ally it with fractionals systems.. is the last thing we want in bitcoin, debt , crisis and useless monetary system

Thanks. Pity  that BTC symbol isn't displayed this way.

No reason why BTC based fractional banking would not work in the new world order. The primary difference would be that if a bank could not deliver on it's obligations, it would be out of business, no government to print up a few more notes out of the ether. So I think in practice fractional reserve banking would happen (because it's good business to gear up from a banks point of view), but at a very low/sensible fraction 1/2->1/4 range. not the 1/10->1/20
banks are currently running at worldwide.

Also, since traditional 'current account' retail model of banking would be out of the window, then deposits would most likely be based on interest baring savings accounts with controlled withdrawal lockins, so the whole banking model would be less volatile because there are no current accounts to 'have a run on' and scaled down.

This is exactly right.

It is the FED's printing press, and only the FED's printing press, that enables banks to operate at the 1/10 to 1/30 ratios we see today. The reason is markets do not worry about a bank running out of capital because the FED can and will provide "liquidity" on demand.

If a bank operates at 1/30 and runs out of core capital, the bank can swap assets as collateral for dollar funds at face value with the FED. Because of this, banks could run on infinite leverage and it is only regulation which limits them. The system is designed to enable the FED to stop any and all bank runs in their tracks, and as a result there are no bank runs.

In a sense the leverage reported is just an fictitious accounting trick and is not real since the FED can and has simply created money "on demand" as needed for liquidity. If the FED took this away, every single bank would go under within 24 hours. That is exactly what happened to Bear Sterns in '08, the FED decided they needed to make an example of one IB that went too far, selected Bear and said they would not back them further, and Bear was bankrupt in hours.


Under a sound money system banks by necessity keep leverage less than 1/2, because otherwise they could not stop a run since there is no FED to provide "on demand" "liquidity". This was the banking system pre-FED. This would be the banking system under bitcoin. Leverage would be very low and fractional used money would be in line with base bitcoin money.

theoretically it will proportionally get more distributed as the price rises.

i think Bitcoin can be fractionally reserved but by preserving the fiat USD system as an overlay, just like it was supposed to be pre 1971.  levels below 10:1 seem reasonable to me.

this would be the least disruptive of a transition for the world on an ongoing basis and settlements could occur nightly.

of course, this would require a huge revaluation of BTC upwards to fill the huge debt hole the world has created.  this is the strategy many gold bugs have hoped for gold.

Bitcoin can be fractionally reserved, and will be. But we will see ratios closer to the ratios we saw on the gold standard which were closer to 2:1. Ratios around 10:1 are just not possible with there is no printing press to guarantee on demand liquidity.

For example even as recently as the 80s banks needed 20% capital for a 5:1 ratio. This was after 70 years of the FED existing. When there was talk of lowering the requirement below 20% several FED members commented that going past 20% was a red line, meaning beyond that the system was just not sound.

Entities will most definitely fractionally lend bitcoin, that is normal. But the market will learn without a bailout entity to not trust any but the most conservative lenders.

Yes, this is the vision of the gold bugs. What the gold bugs are missing (and I used to be one) is gold was used as money because it was the best construct humanity had access to that fulfilled all the properties of money. Bitcoin however can do better and the gold bug vision just might be realized in bitcoin.

I tend to agree more with rocks' vision than cypherdocs.

But I wonder, why would anyone want to borrow in a deflationary currency when there are loans available in an inflationary one? I think this will be another limiting factor on the fractionalization of BTC, and perhaps the same reason why fractionalization was limited when (indirectly) tied to gold?

they wouldn't which is why i make the argument i do.

borrowing would be more acceptable in the fiat system even tho the underlying reserve could be in Bitcoin.  we've already had decades of history where we know this works prior to the 1971 depeg.

Hey cypher can you explain what you mean as I don't think I understand. I thought you were arguing that we'd see 10:1 BTC-promises to RealBTC ratios in a fractional reserve BTC system.

i'm arguing that the least disruptive way for Bitcoin to mesh with the existing monetary system is for it to assume the function that gold did prior to 1971; as backing for the world reserve currency USD system. 

If Bitcoin was used as world resurve currency, it wouldn't even operate due to scalability issues. It would be too many transactions per block and might crash and the blockchain would grow to many terabytes or petabytes, not able to fit anything let alone be used by an end user. Large centralized corporate server farms would be needed to access the network and provide services to end users which would completely defeat the purpose. People would be hacking into apple, google, bitcoin distributions sites, and dns servers all the time to distribute infected wallets/apps that steal users private keys. Then someone would crack EC and steal all of the world's money.   And of course it would be banned by governments long before any of this was able to happen.

And you wonder why people think you're a bear :D

This may not be true by the way - being a reserve currency doesn't necessarily mean that transaction volumes need be insanely high. Gold doesn't exactly come with low transaction costs/high velocity but it survived as a reserve currency for a long time. I realise this isn't such a useful example now as technology has moved far forward, but we can envision a world where perhaps Bitcoin is a global reserve currency used of large transfers, fulfilling the settlement/clearing role that central bank reserves now do, and there are lots of sidechains being used for more frequent/consumer-grade transactions. Bitcoin in its current form is already not very good for bricks-and-mortar purchases, so I am hopeful that the dev changes to allow side chains will occur.

But to be honest, I also don't think it likely that BTC ever ends up as the world reserve currency. There are too many structural, technological and political problems along the way.

The limited quantity is one, I know Austrians love this characteristic but most economists don't. As Tera points out, the current transaction limit is another. Finally, I don;t see why the people that really have the power in the current order would ever allow a new order with BTC as a reserve to emerge, and they certainly have the power to stop this outcome (though I think killing Bitcoin is near impossible).

I'm a bull (At present) because long term I think it may end up at $20,000 or so  (that's over 3000% of today's prices) , but I don't think it will become the world reserve currency.

the main problem as i see it is the sustainability of the current fiat system.

with the spread of info the internet has allowed, more and more ppl are aware of the inequities in the business of money production by central banks worldwide and especially here at home by our Fed.  if one is to believe Piketty's work (i do), income inequality is at all time highs as a result and inflation in certain parts of our economy are at ridiculous highs.  as a father of 2 private university students and payer of our families health insurance, i am acutely aware of this.

of course, today's version of our TPTB don't want to change things.  but i think that is more a function of the American TPTB.  elsewhere in the world, i'm seeing an increasing willingness to abandon the USD world reserve currency system with Russia and China being the most visible examples.  so i do think we have a problem that most Americans don't want to acknowledge mainly b/c of our privileged position.

is gold $45 skyrocket today a warning of things to come?  economies always cycle and we are about due for another conflagration as tvbcof likes to say.  depending on how bad this one is will determine alot of what's to come with our monetary system.  assuming Bitcoin's technical worries can be overcome (and this may just be a matter of time vs. a protocol change) along with increasing confidence that it has long term longevity, i don't see any reason why it couldn't become a reserve for the USD system.  if the US wants to stay on top, this may be it's best move to allow this to occur.

technically a reserve currency doesn't have to have a large volume of tx's; only enough to settle international balance of payment deficiencies on a daily basis or even realtime.  this would be a major improvement over using gold where these imbalances were of necessity allowed to build up to unworkable levels culminating with the French calling on Nixon to cough up their gold only to be too late with Nixon saying f*this.  the advantage to the Bitcoin protocol is we could keep 1MB block sizes and the market would drive up the tx fees and tx amounts to levels too high for everyday tx's by individuals.  i know this isn't the vision most Bitcoiner's have and i'm not even sure it's my vision but this scenario would fit with Bitcoin becoming the backing for the current USD system.  the other thing i like about this is that it shouldn't cause a huge disruption to the current system if everything goes well.  but surely the value of Bitcoin would have to rise significantly to be able to back all the USD denominated debt out there plus minus all the derivatives.

the only problem i see is that Bitcoin's distribution curve has not yet completed itself which would be a problem for price volatility.  not sure how to solve that one.

a way to do this might be to have an official fixed market price of Bitcoin at a level that fills the debt hole (quadrillions if you include derivatives) similar to the $20 pre 1933 or $35 post.  that obviously would be at a much higher price than where we're at now and would be used for settling balance of payments btwn countries.

then, acknowledge that there will be an unofficial price used for everyday tx's by individuals that would fulfill the great capabilities of Bitcoin.

i think it is in the interest of the US TPTB to consider backing the USD with Bitcoin once it has proven itself with a few more years of longevity.  they need to consider that we may be at the end of an empire.  they need to acknowledge that printing money but preferentially giving it to banks is not fair and is not helping the real economy or the average American.  they need to consider that we're at the end of a multi-decade cycle for suppressing interest rates.  sure we could go to negative rates like the ECB but i don't think that will fly in the US.  they need to acknowledge that the rise of the broadband internet is analogous to the Gutenberg press and will not be suppressed.  the curtain has been pulled back and even Americans don't like what we see despite being in the enviable possession of the world's reserve currency.  oil is back over $100 and at least historically once above that level economic activity grinds to a halt.  they need to consider that America's power abroad is waning, imo.  our influence is becoming anemic and the world looks at the Middle East and what's happening in Iraq and sees the waste and hypocrisy of spending trillions of USD to fight that war.  even our long term alliance with Saudi Arabia is at risk given today's threat by their ambassador.  China has made huge strides in Africa and with Iran and in fact has accumulated a huge gold war chest. 

btw, i'm an optimist about the future.  i think Bitcoin has the potential to really supercharge the world economy if done right.  and despite the heretofore obstructionist activities of the US gov't towards Bitcoin, we still have the chance to perpetuate US prosperity and stay on top if we choose to demonstrate to the rest of the world that we will back our USD with some discipline.  we're in a unique position right now to do this as most of the core devs are American, we have the most full nodes, and the great majority of VC investment and companies has come from here.

TPTB shouldn't see Bitcoin as a threat but as an opportunity.

we already see that Second Market is trying to move to a once or twice daily fixed spot price revolving around Wall St bidders.  Barry has specifically stated this will be an attempt to dampen volatility.  i've been vocally against this but if it meant establishing an official fixed price that could be used as the basis for Bitcoin acting as the backing to the USD system like we had with gold i'd change my mind.

My housecleaner in China made $3/hr and had a phone with texting and pictures. Pretty sure a lot of the world can afford a phone.

TERA a bull, quoted for reference. As far as $20,000 goes, I think that is a very, very low goal if we look 3-4 years in the future. The USD is going to hell, central banking countries are going bankrupt and when the shit hits the fan, I know exactly what type of currency will take center stage.

Yes I know too. It will be food, water, guns, and ammo.

Bitcoin will probably become worthless once people can't even afford internet access or devices and service providers shut down. Before that phase, people wil be dumping as much btc as possible so they can buy survival supplies and metals.

LOL, bitcoin has at least 2 or 3 years of wild volatility ahead of it. If Second Market think they can make a market now and fix/set the price they are going to get a severe lesson and a short haircut.  Like trying to tell a bull where to stand while you ride it's back!  :-\

Can't believe all the überbears in here...  >:(  >:(  >:(

Bitcoin becoming the global reserve currency?

Only?


Bitcoin will definitely become the intergalactic reserve currency in ~20 years. Once the SS Rothbard connects us to far away alien civilizations (Alcubierre drive, baby!), they will surely see the light of Bitcoin and become adopters, and of course HODLERS :D

In this certain future, if you own half a satoshi, you will be considered a millionaire by today's terms! (Yes. "half a satoshi". We had to add extra decimal places at some point.)

This is great news. That means we can all plan for retirement now by simply by opening a bitcoin faucet and collecting some satoshi. Don't even bother buying any btc.

what do you mean by bitcoin's distribution curve?  If you mean the rate of introduction of newly miined coins that drops by 50% every 4 years, how would that be a problem for price volatility?

well, we've seen plenty of volatility over the last 5 yrs and part of it has to do with the ongoing issuance/distribution of new coins.  that will probably continue going forward but at a decreasing rate as the curve flattens out.  thus, the supply is constantly changing, whereas with gold it for the most part (except for new finds) has stayed steady for hundreds of years and provided a stable supply backing for various fiat currencies.

but like i said above, perhaps if there was an official fixed exchange rate that was high enough to fill up the huge debt hole of USD that the Fed has helped build up, perhaps that would give worldwide investors confidence that the US will finally exert some discipline on what heretofore has been pretty reckless and aggressive expansion of the money supply for hegemonic purposes.

Finally some good sense around!
I offer to draw a picture of a naked lady for one satoshi (my way of guaranteeing my retirement...) ;D

We have a deal! I'll even make it 1 MILLION satoshis!

(but it has to be an original drawing of a naked lady!)

I'm amazed with people who can draw porn. That's one hell of a talent ;D

The commodities you named make poor money, because they are burdensome, short lived, have not enough high supply/demand ratio (gold is at 70 years now, silver 15 years, oil a lot less than a year).
Bitcoin have a S/demand around infinity (because the demand for consumption is practically zero).

Make peace with your mind, even if civilization took a step back of 200 years (like 1815 - Napoleon was just around) there would be world commerce and with it the need of technology.
It cost less to bring stuff from Shanghai to San Francisca than to bring stuff from New York to San Francisco (or Chicago).

cypherdoc, I think we are mostly in agreement on the big picture and agree a lot with what you've said. Regarding an official fixed exchange rate, I think that could only happen once bitcoin's value was realized and settled down. Once that happens then nations with x amount of bitcoins can fix an exchange rate to y amount of fiat, but that's largely the only way it can happen.

For example when the US fixed the gold to currency price, it also had enough stored gold to back all of the dollar claims in gold and as a result there was little reason to exchange dollars for physical gold (which you could do at any bank). However once the FED was created and they started to print more and more dollars, entities which could exchange dollars for gold did so in very significant amounts. In the 60s US citizens could not exchange dollars for gold, but foreign nations could, and they started to withdraw significant amounts of gold because it was well known that there was not enough gold to back all the new dollar at the "official" exchange rate. Nixon only closed the gold window because otherwise within less than 10 years the US would have zero gold left and would have gone bust.

That is the problem with fixed official exchange rates, they only work if the fixer sets and honest exchange rate to match the ratio of both assets. The FED could fix an exchange rate, but they then could not print new dollars because doing so would throw off the ratio and start an exit from dollars as more and more people exchange out until the FED ran out of bitcoins. This is exactly what happens every time Argentina or a similar country fixes a dollar exchange rate and then has a currency crisis.

Yes, sounds like we are in agreement.

But do we really have to wait until 2140 before we can get this plan implemented? Which is why I recommend at least trying to set an official exchange rate in the meantime that is high enough to prevent a run on the reserve bitcoin while allowing reasonable levels of fiat lending.

Why would you talk about a time like 2140? Bitcoin will be ancient history by then,EC will be broken, and there will all kinds of technologies 1,000,000 times better. the internet itself will probably be much much different.

If Bitcoin survives that long, surely it will look different than it does today.

But my point is that I believe its volatility is related to the issuance curve as miners scramble to mine as many coins as possible especially as the reward is still relatively high. As the curve flattens out so should volatility. Are they related? I can't say for sure but I think so. Therefore the reference to 2140,  when the last Satoshi will be mined.  

The current inflation rate of Bitcoin is around 10% year. The miners could, increasing the mining power, increase the number of coin mined by 10-20%. But this would require an increase of 10-20% of the hashing power every two weeks. So, the inflation rate could go from 10% to 11% or 12% for a time. But faster they mine, faster the next halving will come. Also, faster the obsolete miners will go out of the mining bitcoin business.

It do not matter when the last Satoshi will be mined. It matter when the inflation rate will be so small to do not really matter to people and investors in their economic calculations.

The first threshold we will get over will be the next halving. The central banks can not inflate less than 5% every year for a long time without crashing this debt based system of fiat currencies. Probably they can not really stop inflating at the current rate, just play with numbers and use external actors to inflate when they pretend are not. The next halving will make bitcoin one of the less inflating or the less inflating currency of the world. The stronger currency of the world probably. Why does keep money in other fiat when bitcoin will anyway lose less value and probably increase its value in the same time period?

The second threshold will be around february 2020 (the successive halving).
This will put the inflation rate of bitcoin around 2-2.5% per year. Lower than the economic growth of the global economy.
You will be able to save bitcoins and they will increase their purchasing power over time without doing anything (it will be a paltry 0.5-1% year risk free).
The interest rate will be around 5-20% year depending on the risks and time.

absolutely.  thanks for running thru the numbers.

which is why it may be viable to use an official price of Bitcoin after 2020 for backing the USD system at a high enough price to fill the debt hole while not encouraging a run on the reserve Bitcoin.  with that low of an inflation rate plus what hopefully will be significantly reduced volatility, the unofficial price might not vary too much from the official price which would make implementing such a system more credible.

Sorry Howard. i'm from Kenya and I can confirm that this is false. Farmers don't even know Bitcoin exist. Maybe Old white oligarch farmers with huge tracts of land and of European descent.

Thanks for the insight. You have heard of m-pesa though right?? pretty ubiquotous in Kenya, well the bitcoin derivative bitPesa is taking it's place http://www.ihavebitcoins.com/featured/kenyan-farmer-may-start-using-bitcoin/

May be a work in progress, so would be interesting to see what actual contact you have with bitPesa  over there. btw, Kenya was my all time favourite holiday destination in the 60's used to go to Silversands, Whispering Palms & Mombassa.

With a market capitalization of ~$6 billion, bitcoin is very much a baby in terms of companies let alone countries.

This may be a fact today, but tomorrow and in the future this will likely change. There was an article in the WSJ last week that talked about how, in Africa use their mobile phones as their primary way of spending and holding/saving money. The penetration rate of banking via mobile is several times the rate it is in the rest of the world. Using mobile phones for storing and spending money is something that has bitcoin written all over it.

How bout we... how do I say this?? Maybe give all of the normals a 24-hour reprieve from the $10k, world currency magic bean story. Bitcoin should increase in value given the number of users and the number of transactions it can support. Apart from that, these predictions are sheer shenanigans.

You are more than welcome to dispute any facts/provide counter arguments, but just calling the discussion 'shenanigans' as if that's a point of view we should take seriously, is somewhat adolescent.

I am not sure what part of my argument you are disputing. There is not a single response in this quote pyramid that talks about a specific price that bitcoin would reach. This is a valid and likely way that bitcoin will grow (via mobile payments in 3rd world countries).

top 5 just means you own a house(not a nice house) have 2 cars, and any kind of hobby that requires some equipment, or like even a nice lawn mower and snowblower would count. thats top 5% on the planet. two cars, check, equipment intensive 'hobbies'(I'm a DJ, hobbyist music producer and a bench jeweler, as well as having a bunch of tools for messing with my porsche) check. own my own house? eerrrr not quite yet lol hopefully within the next 3 years. my sights are set on top 3%.

Doh!!  How about $390

Yeah, I was wrong, i'll admit it! Looks like the retail adoption model is running way ahead of public adoption, so thats putting downward pressure on BTC price. I still believe this will balance out though and we will see
the next massive bubble late 2015.

If bitcoin became the world reserve currency, price of a single bitcoin will be more than 1 million dollar, maybe 10-20 million dollar :) But this will never happen, there are strong interest to some people to avoid bitcoin use.

I agree, but the question you have to ask yourself is to what degree are the people who have an interest in this not happening, have control of bitcoins expansion? I believe the best they can do is slow it down hugely, but it only needs generalised adoption in ONE country, and I really do not believe the "New World Order" are that organised or diverse.

Even governments that one would expect to support BTC over USD (Venezuela, Iran etc.) seem to prefer fiat over Bitcoin. The benefit from enslaving people with paper money is so great that it exceeds the benefits from escaping USD domination and sanctions.  :-\

Hopefully that changes at some point.

I don't know, and I could be wrong, but I really think we are ahead of, and maybe even surfing a Tsunami.

https://goldswitzerland.com/swiss-gold-initiative-2014/

http://www.zerohedge.com/news/2014-10-28/things-make-you-go-hmmm-swiss-gold-status-quo-showdown
November 30, 2014 is the date.  Check back and be prepared, because this could set it off...