Why I think Bitcoin will not become an national currency

[🏰 TradeFortress 🏰]

Bitcoin will be the de facto decentralized currency. Bitcoin's value will rise over time, but I don't think BTC will be an national currency. Why?

Half of the 22 mil coins have being distributed, to something like 0.001% of the population? That's just not going to work. People who do not own BTC will not want to get on board for it to be an official currency as it means their wealth will decrease.

[DeathAndTaxes]

1) Bitcoin will never be a national currency for the same reason that no country will return to the Gold standard.  It is for a completely different reason

2) As the value of BTC rises it will be held by more and more people.  By your logic nobody should buy/trade/acquire any more BTC.  Half of them are already held by a tiny (globally speaking) number of people and thus outside would be better off not buying them and insider would be better off just selling them.  Of course there will never be a scenario where Bitcoin goes to being held by thousands to being held by billions.  The thousands will sell to tens of thousands who will sell to hundreds of thousands who will sell to millions.  At the point where BTC had a large enough coinsupply to be useful for even a small nation the coins wouldn't be held by thousands they would be held by tens of millions.

3) Money isn't wealth, money is an accounting system.  The rich hold a negligible rounding error of their total wealth in cash.  The poor would benefit from a currency which isn't continually debased.

Of course I don't think Bitcoin will ever become a national currency however I don't think that provides any meaningful limit on adoption.  Bitcoin could be used someday (in theory) by nation states as a strategic reserve (like Gold Bullion).

[ElectricMucus]

I don't think that bitcoin and nations go well together in the first place.

[xxjs]

It is conceivable. Some small nations have given up having their own currency, and use some other nations currency instead. Example: Ecuador uses USD. With trade becoming more and more international, this phenomenon could increase. So why not bitcoin?

Not now obviously. Think of for example a national referendum to decide what currency to use. A new local currency 5 million votes, USD 6 millon votes, Euro 3 million votes, bitcoin 1 vote. You have to think a few years ahead.

[Lethn]

You forget as well that Bitcoin can be divided up into a lot of decimals, people are still figuring out what Bitcoins are worth etc. so in the future we might see 0.0001 bitcoins worth as much as 1 bitcoin now and someone getting 1 bitcoin will have the equivalent of billionaire status, it's all going to depend on what the markets do in the next couple of years and I suspect a depression will happen for those in conventional currencies. I do agree that it probably won't ever be a national currency, but I'd say that's in our favour since you don't want a decentralised currency to become centralised but I do think there will be a few countries who will be more friendly to the idea of Bitcoin and maybe trade it openly or at least acknowledge it, because lets face it, they'd be fools to stick entirely with the U.S reserve currency with the way things are now.

[DannyHamilton]

. . . in the future we might see 0.0001 bitcoins worth as much as 1 bitcoin now and someone getting 1 bitcoin will have the equivalent of billionaire status . . .

Sorry, mathematics doesn't support that proposition.

Right now 1 bitcoin is approximately equivalent to 13.5 USD worth of buying power.

If 0.0001 bitcoins were worth as much as 1 bitcoin now, then 0.0001 bitcoin would be approximately equivalent to 13.5 USD worth of buying power.

Division tells us that if 0.0001 bitcoin is approximately equivalent to 13.5 USD worth of buying power, then 1 bitcoin is worth 135,000 USD worth of buying power.

135,000 is a looong way off from billionaire status 1,000,000,000.

[Lethn]

Talk to me again in a years time after America has devalued the dollar some more yes it's an exaggeration what I proposed, it might be more like 0.1 BTC realistically but that's the ridiculous amount that the federal reserve is printing.

[justusranvier]

Talk to me again in a years time after America has devalued the dollar some more yes it's an exaggeration what I proposed, it might be more like 0.1 BTC realistically but that's the ridiculous amount that the federal reserve is printing.

A more plausible prediction is that 1 bitcoin could be worth about $1 million in an optimistic scenario in which Bitcoin becomes a universal global currency.

[Lethn]

I suck at maths so I'll happily leave it you guys to figure it out lol

[nobbynobbynoob]

Some of us probably share Lethn's optimism, but cautiously. Somebody did some kind of basic pro-rata analysis and concluded that, on such a pro-rata basis, a global bitcoin-trading economy roughly the size of Salt Lake City (!) could justify an exchange rate of several thousand dollars per BTC. So the idea is not pie in sky but it would be a question of:

- Will Bitcoin mature sufficiently and gain enough respect as a secure, mature technology to scale to this price? Will the network/blockchain cope with the volume of transactions?
- How long will this expansion process take?
- How important is the difference between a justified exchange rate of >$1k/BTC and an actual spot/daily price on a major exchange, e.g. Mt Gox?

As I see it, should Bitcoin mature enough for the price per BTC to scale to thousands of dollars (or several dollars per BTM), it won't matter that much whether the price is $5k or $10k, because the Bitcoin economy won't price link most things to dollars the way it seems to today. So the difference between a $5k and a $10k bitcoin seems less significant than the difference between a $5 and $10 bitcoin, IMHO.

[DeathAndTaxes]

As I see it, should Bitcoin mature enough for the price per BTC to scale to thousands of dollars (or several dollars per BTM), it won't matter that much whether the price is $5k or $10k, because the Bitcoin economy won't price link most things to dollars the way it seems to today. So the difference between a $5k and a $10k bitcoin seems less significant than the difference between a $5 and $10 bitcoin, IMHO.

That is a silly concept.  Of course $5K vs $10K will matter just as much as $5 vs $10.  Other currencies is something you can buy with BTC.  Even if most trade is in BTC directly traded for goods and services it won't change the fact that prices will adjust to a change in the exchange rate.

Hypothetical example.  Say BTC exchange rate is $5K USD = 1 BTC.  You find a car dealership which sells cars in BTC.  You find a nice car you like and the dealer offers it to you for 10 BTC.  You shop around dollar based dealershps and find this is a relatively good dea  (most other USD based dealerships are selling same car for ~$50,000).  Fast forward 5 years and you decide to upgrade to a new XYZ model which most dealerships have for ~$70,000.  You go to your friendly BTC dealership and he wants 10 BTC.  But wait you could SELL the 10 BTC for $100,000 even with exchange fees, buy the car at a USD dealership and pocket the other $29K+.

As long as product xyz is offered in both USD & BTC the prices will fluctuate based on the exchange rate.  Otherwise one side or the other is getting a bad deal and the side getting the bad deal can simply opt to sell/buy on the exchange and trade in the more favorable currency.

Now with a price of $5K we are talking a coin supply worth ~$100B and thus it is likely the deep liquidity will make volatility much less.  Merchants may not have to adjust their prices very often because the daily exchange rate might only vary by say 0.2% or less.  Still a rise (over weeks, months, or even decades) from $5K to $10K will require adjusting prices it is illogical to think consumers would opt to (as an example) get a $70,000 car for 10BTC vs selling the coins and getting the same car for 7 BTC.

[nobbynobbynoob]

Fair enough, DeathAndTaxes, you probably owned me there just a bit. I was thinking more along the lines of, let's say I run a successful widget shop selling widgets for 1 BTM each. If the exchange rate rises from $5 per BTM to $6, in such a bitcoin-rich economy I won't necessarily automatically be lowering the sale price to 0,83334 BTM, which is what happens today because most bitcoin merchants link their prices to fiat (often US$). In such a market I might be able to sell my BTM widgets for a BTM, regardless of the exchange rate, just like a coffee shop in Dullsville USA might sell you a cappuccino for $3 regardless of whether one dollar is worth 70 yen or 150 yen, or perhaps more aptly 1/500 ozt Au or 1/2000 ozt Au.

For big-ticket items, yes, I can see how a form of arbitrage would kick in in the event of dramatic exchange rate adjustments.

[DannyHamilton]

. . . in the future we might see 0.0001 bitcoins worth as much as 1 bitcoin now and someone getting 1 bitcoin will have the equivalent of billionaire status . . .

Sorry, mathematics doesn't support that proposition . . . Division tells us that if 0.0001 bitcoin is approximately equivalent to 13.5 USD worth of buying power, then 1 bitcoin is worth 135,000 USD worth of buying power . . .

Talk to me again in a years time after America has devalued the dollar some more . . .

0.0001 bitcoin means 1 bitcoin divided by 10,000.  I don't care how much you devalue the dollar, you can't have 0.0001 bitcoin be worth $13.5 and also have 1 bitcoin worth more than $135,000.  The ONLY way you can have 1 bitcoin worth more than $1 billion is if 0.0001 bitcoin is worth more than $100,000.  I'm not saying that 1 bitcoin can't be worth $1 billion.  I'm just saying that if it is, then 0.0001 bitcoin can't be worth $13.5.

. . . A more plausible prediction is that 1 bitcoin could be worth about $1 million . . .

Any prediction on the long term value of 1 bitcoin is pure guessing.  It could be worth more, it could fail and collapse and not be worth anything.  I'm not saying that a prediction of $1 billion per bitcoin is not plausible, I'm just saying that it is impossible to have 1 bitcoin be worth $1 billion if 0.0001 bitcoin is worth $13.5.

Some of us probably share Lethn's optimism, but cautiously . . .

My problem with Lethn's post wasn't with his optimism.  It was with his math.

[CountSparkle]

Regarding OP:

About 1% of the population has a huge portion of all the government cash in the world. Does that stop you from accepting EUR/USD/Whatever for your salary, or as change at the supermarket, or using it to buy groceries in the first place? Most people don't care who owns how much of what money. They only care how much they themselves own, and how much they can buy with it.

[grondilu]

I don't think that bitcoin and nations go well together in the first place.

Agreed.

Bitcoin might very well bring anarchy to the world.  For better of worse.

[nobbynobbynoob]

I don't think that bitcoin and nations go well together in the first place.

Agreed.

Bitcoin might very well bring anarchy to the world.  For better of worse.

Given the way governments operate, it could hardly be worse.

[grondilu]

I don't think that bitcoin and nations go well together in the first place.

Agreed.

Bitcoin might very well bring anarchy to the world.  For better of worse.

Given the way governments operate, it could hardly be worse.

Well, anarchy is not always fun, to say the least.

[hanzac]

Just don't take so serious about money\currency\gold, these things are just for exchange. What is real fortune real property is the natural resource & the real estate. Just make profit when doing exchange between these currencies or buy some real thing you need.

[lophie]

Even if Bitcoin did not make it as a national currency. IMO it will be a huge success as a payment system. I don't really see any indicator of it failing, ever. 

[Nagato]

Half of the 22 mil coins have being distributed, to something like 0.001% of the population? That's just not going to work. People who do not own BTC will not want to get on board for it to be an official currency as it means their wealth will decrease.

Thats like saying in 2010 that Bitcoin is not going to work since a quarter of the coins are owned by Satoshi and the dozen of users on the crypto mailing list.