How does a country fully adopt Bitcoin?

[crumbs]

A government will never accept or promote any other currency besides their own. This is why it can only be done by the people themselves. Bitcoin was created by the people, so it should be promoted, used and adopted by the people and only the people. A government shouldn't have any say in this.

I completely agree.  In the USA, I like to think that we would never allow Congress to establish an official religion.  In fact, our Constitution expressly forbids it.  The same concept should apply to money/currency.  We should each be free to individually choose what we are willing to accept in exchange for our labor, time, services, etc.  Forcing us to accept their fiat is tantamount to involuntary servitude.

You don't have to accept their fiat, as long as you render it.  Buy only enough to pay taxes, like you'd buy any other commodity.  Problem solved.

It's true that right now we are free to use bitcoins and aren't legally obligated to accept fiat, but will that continue to be the case in the future?  In the past, when an alternative like e-gold or Liberty Reserve began to emerge, they found a way to shut it down.  Fortunately, it won't be that easy with Bitcoin.  In response, I suspect they will resort to more drastic measures in an effort to force us into their debt-based fiat currency.  After all, their survival will depend on it.

You have a point.  If bitcoin is seen as a real threat, all hell will break loose.  It *is* their survival we're talking about.  I suspect that's why Satoshi was so against people flexing bitcoin muscle with wikileaks & putting bitcoin in the spotlight.  Tough revolutionary talk on this forum only validates bitcoin as a real threat, playing right in the hands of the opposition.

[shawshankinmate37927]

It's true that right now we are free to use bitcoins and aren't legally obligated to accept fiat, but will that continue to be the case in the future?  In the past, when an alternative like e-gold or Liberty Reserve began to emerge, they found a way to shut it down.  Fortunately, it won't be that easy with Bitcoin.  In response, I suspect they will resort to more drastic measures in an effort to force us into their debt-based fiat currency.  After all, their survival will depend on it.

You have a point.  If bitcoin is seen as a real threat, all hell will break loose.  It *is* their survival we're talking about.  I suspect that's why Satoshi was so against people flexing bitcoin muscle with wikileaks & putting bitcoin in the spotlight.  Tough revolutionary talk on this forum only validates bitcoin as a real threat, playing right in the hands of the opposition.

Maybe.  It's also possible that Satoshi just thought that it was too soon to be so vocal and just wanted to keep Bitcoin under the radar until it had gained wider acceptance.  We can't bite our tongues forever.  Now that the bankers and politicians are coming out with the predictable red herrings of money laundering, tax evasion, funding terrorism, drug trafficking, etc., it's important that we all understand the real issue at hand.

[NewLiberty]

It's true that right now we are free to use bitcoins and aren't legally obligated to accept fiat, but will that continue to be the case in the future?  In the past, when an alternative like e-gold or Liberty Reserve began to emerge, they found a way to shut it down.  Fortunately, it won't be that easy with Bitcoin.  In response, I suspect they will resort to more drastic measures in an effort to force us into their debt-based fiat currency.  After all, their survival will depend on it.

You have a point.  If bitcoin is seen as a real threat, all hell will break loose.  It *is* their survival we're talking about.  I suspect that's why Satoshi was so against people flexing bitcoin muscle with wikileaks & putting bitcoin in the spotlight.  Tough revolutionary talk on this forum only validates bitcoin as a real threat, playing right in the hands of the opposition.

Maybe.  It's also possible that Satoshi just thought that it was too soon to be so vocal and just wanted to keep Bitcoin under the radar until it had gained wider acceptance.  We can't bite our tongues forever.  Now that the bankers and politicians are coming out with the predictable red herrings of money laundering, tax evasion, funding terrorism, drug trafficking, etc., it's important that we all understand the real issue at hand.

Bitcoin has a total valuation of around 1 Billion is not a threat to anything close to even a small bank, much less a central bank of a small country, much less to anyone that has any real power.  Just the QE buying of the US Fed is 85x that per month.
We are still a speck on the windshield of the bullet train.  We remain a couple orders of magnitude away from having a significant impact.

[vokain]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

[xxjs]

It's true that right now we are free to use bitcoins and aren't legally obligated to accept fiat, but will that continue to be the case in the future?  In the past, when an alternative like e-gold or Liberty Reserve began to emerge, they found a way to shut it down.  Fortunately, it won't be that easy with Bitcoin.  In response, I suspect they will resort to more drastic measures in an effort to force us into their debt-based fiat currency.  After all, their survival will depend on it.

You have a point.  If bitcoin is seen as a real threat, all hell will break loose.  It *is* their survival we're talking about.  I suspect that's why Satoshi was so against people flexing bitcoin muscle with wikileaks & putting bitcoin in the spotlight.  Tough revolutionary talk on this forum only validates bitcoin as a real threat, playing right in the hands of the opposition.

Maybe.  It's also possible that Satoshi just thought that it was too soon to be so vocal and just wanted to keep Bitcoin under the radar until it had gained wider acceptance.  We can't bite our tongues forever.  Now that the bankers and politicians are coming out with the predictable red herrings of money laundering, tax evasion, funding terrorism, drug trafficking, etc., it's important that we all understand the real issue at hand.

Bitcoin has a total valuation of around 1 Billion is not a threat to anything close to even a small bank, much less a central bank of a small country, much less to anyone that has any real power.  Just the QE buying of the US Fed is 85x that per month.
We are still a speck on the windshield of the bullet train.  We remain a couple orders of magnitude away from having a significant impact.

Supposedly some of the bankers would have the knowledge to see the potential of bitcoins well before the value of the sum of bitcoins passes the value of the sum of all dollars.

[crumbs]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

Lol, sell 11.5 mil BTC at market?  In the unlikely event that every single person holding BTC decided to sell at once, the price of BTC would drop to sub-single digits, that's slippage
As far as buying up all the coinz?  What idiot would try that with a single buy order?  

[NewLiberty]

It's true that right now we are free to use bitcoins and aren't legally obligated to accept fiat, but will that continue to be the case in the future?  In the past, when an alternative like e-gold or Liberty Reserve began to emerge, they found a way to shut it down.  Fortunately, it won't be that easy with Bitcoin.  In response, I suspect they will resort to more drastic measures in an effort to force us into their debt-based fiat currency.  After all, their survival will depend on it.

You have a point.  If bitcoin is seen as a real threat, all hell will break loose.  It *is* their survival we're talking about.  I suspect that's why Satoshi was so against people flexing bitcoin muscle with wikileaks & putting bitcoin in the spotlight.  Tough revolutionary talk on this forum only validates bitcoin as a real threat, playing right in the hands of the opposition.

Maybe.  It's also possible that Satoshi just thought that it was too soon to be so vocal and just wanted to keep Bitcoin under the radar until it had gained wider acceptance.  We can't bite our tongues forever.  Now that the bankers and politicians are coming out with the predictable red herrings of money laundering, tax evasion, funding terrorism, drug trafficking, etc., it's important that we all understand the real issue at hand.

Bitcoin has a total valuation of around 1 Billion is not a threat to anything close to even a small bank, much less a central bank of a small country, much less to anyone that has any real power.  Just the QE buying of the US Fed is 85x that per month.
We are still a speck on the windshield of the bullet train.  We remain a couple orders of magnitude away from having a significant impact.

Supposedly some of the bankers would have the knowledge to see the potential of bitcoins well before the value of the sum of bitcoins passes the value of the sum of all dollars.

Guaranteed.  There was approximately $1.2 trillion USD in circulation as of August 14, 2013, of which $1.16 trillion was in Federal Reserve notes.
http://www.federalreserve.gov/faqs/currency_12773.htm

So presumably if some banker sees the potential prior to bitcoin being worth >US$100,000 each...(and some may already)  but by then, now many FRN will there be?

[vokain]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

Lol, sell 11.5 mil BTC at market?  In the unlikely event that every single person holding BTC decided to sell at once, the price of BTC would drop to sub-single digits, that's slippage
As far as buying up all the coinz?  What idiot would try that with a single buy order?  

It's a thought exercise, maybe you should try it sometime.

[J603]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

In that case, the market cap is far more than the actual value (hence the term "cap). If there was a major sell, the price would drop. So realistically, the BTC economy is worth less than the 1.3 billion that it is valued at.

[vokain]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

In that case, the market cap is far more than the actual value (hence the term "cap). If there was a major sell, the price would drop. So realistically, the BTC economy is worth less than the 1.3 billion that it is valued at.

You're forgetting all the services, goods for sale, goods wanted, worth of the participation in the protocol, ongoing investments, etc. everything you can do with bitcoin is tied into its worth, but not its market cap. Market caps can be misleading and do not tell the whole picture

For instance, bitcoin allows me to send money, past borders, anywhere in the world, securely, for pennies. Is that reflected in the market cap? Could I not do the same thing when bitcoin was worth $10? What was its market cap then? I value the sort of network that can allow me to do that, but outstanding bitcoins*spot is not the way to value that.

Because ANYONE can use bitcoin to do the above, I value bitcoin much more than its market cap for that reason. If I could buy bitcoin outright for a billion I would

[J603]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

In that case, the market cap is far more than the actual value (hence the term "cap). If there was a major sell, the price would drop. So realistically, the BTC economy is worth less than the 1.3 billion that it is valued at.

You're forgetting all the services, goods for sale, goods wanted, worth of the participation in the protocol, ongoing investments, etc. everything you can do with bitcoin is tied into its worth, but not its market cap. Market caps can be misleading and do not tell the whole picture

For instance, bitcoin allows me to send money, past borders, anywhere in the world, securely, for pennies. Is that reflected in the market cap? Could I not do the same thing when bitcoin was worth $10? What was its market cap then? I value the sort of network that can allow me to do that, but outstanding bitcoins*spot is not the way to value that.

Because ANYONE can use bitcoin to do the above, I value bitcoin much more than its market cap for that reason. If I could buy bitcoin outright for a billion I would

I'm not forgetting anything. The market cap is simply the number of BTC * the average value. This should represent the maximum worth. If every bitcoin was spent (not realistic as the price would fluctuate) you could still only buy 1.3 billion dollars worth of services and goods.

"Everything you can do with bitcoin" is tied into its worth, and is represented by the market cap. A bitcoin is worth 118 at Gox because the majority of people believe that they can buy $118 of goods with one bitcoin. Multiplying this value (averaged) by the number of bitcoins should be a good estimate of the market cap.

You can say that low fees and easy transferability are an aspect of value, but that's simply your opinion. You can "value" bitcoin all you want but you still can't buy 1.4 billion worth of goods, It's impossible unless the number of bitcoins increases or their individual value increases.

That being said, your opinion is part of the market cap. If you're willing to pay say $130 for the technical aspects of bitcoin then the market cap will factor that in, and it will increase. But just you thinking that bitcoins are more valuable than they actually are does not change anything.

[NewLiberty]

^I'd say everything that comprises bitcoin right now is much more than 1B, ie the Network. Market cap (ie shares*$spot) does not equal valuation.

For one, you cannot sell 11.5M bitcoins for $1B at market.  Slippage. Same thing with buying $1B. You can't just raise the price 100% doing that, the price would be much much higher. Might be more cost effective to buy a mining monopoly instead.

Granted, the same could be said of other currency apparatus.
Which apple should we use to compare with which orange?  
The difference in M1 is more than 1:1000 so as order of magnitude, consider the threat Iceland poses to the USA as a world currency, except bitcoin would be about half of that.

[solex]

Interesting to see this subject generate immediate media interest:

"Winklevoss twins say Bitcoin could become a country's currency"
http://uk.reuters.com/article/2013/09/17/us-bitcoin-currency-idUKBRE98G0X320130917

No further detail unfortunately.

[ronimacarroni]

Well having bitcoin ATMs would be a start.

[byronbb]

I would expect a country adopting bitcoin as their economic backstop, would also be compelled to get into the mining game in a big way. Iceland has geothermal energy supply but their cost of kw/h is worse than the US, but not bad. Kuwait has the lowest electricity rates in the world by far at 1c a kw/hr. Someone should really start an exchange on the cayman islands actually.....

[NewLiberty]

I would expect a country adopting bitcoin as their economic backstop, would also be compelled to get into the mining game in a big way. Iceland has geothermal energy supply but their cost of kw/h is worse than the US, but not bad. Kuwait has the lowest electricity rates in the world by far at 1c a kw/hr. Someone should really start an exchange on the cayman islands actually.....

The title question presumes incentives for a country to fully adopt Bitcoin.  This question of "How" skips over quite a bit of what is discussed here. (Lots of why, whether, which, and when discussions).

To put an answer to the OP question, the howto, is by the people fully adopting it.  The government is just made up of some people (albeit people paid in fiat).  
This is the method of the modern revolution:  The model works when the leaders, at some point, call out the armed forces to "create peace" in their nation, and those armed forces instead do not take up arms against their fellows, this (or its monetary analog) can lead to full adoption.

But Bitcoin is not much a threat to any nations as it may be to some few institutions and national endeavors (such as central banking vs decentral banking, or wars of conquest funded by monetary easing).  Nations can do quite well without these institutions and endeavors as evidenced by the peaceful and prosperous period between the 2nd and 3rd central banks in the US.

In the mean time, Bitcoin is beneficial to people and businesses regardless of any greater purpose it may hold.  Focusing on those benefits, rather than what ends these means may bring, is the way to attain both.

[molecular]

NewLiberty: well said. I've come to respect you for the content of your posts quite a bit recently.

[Pumpkin]

Surely there are mechanisms how a country could back their currency by bitcoin, no problem. It's just not realistic at all.

Most realistic scenario:

1. Remove the guns - allow competing currencies.
2. Slowly destroy your old currency through inflation (already being done in all states).

Just let the best money win. We all of course know it would be bitcoin

[NewLiberty]

Surely there are mechanisms how a country could back their currency by bitcoin, no problem. It's just not realistic at all.

Most realistic scenario:

1. Remove the guns - allow competing currencies.
2. Slowly destroy your old currency through inflation (already being done in all states).

Just let the best money win. We all of course know it would be bitcoin

Then again... even if you could pay your taxes in bitcoin rather than fiat... would you be patriotic enough to do so?

[Cryddit]

What countries do when they want to convert to a different money system is to announce, first, that they will accept payment of taxes in the new money.   They set exchange rates (floating exchange but not quite free-floating) so that it is just a few percent cheaper for citizens to pay in the new money than in the old.

Citizens seeking to save on taxes acquire the new coin on their own by international trade or by local enterprise if it can be mined or manufactured.  In doing so they will create demand for it, driving its price (hence value) up.

The government begins to acquire the new coinage as a result of collecting taxes.  Gradually they begin using it to pay some fraction of the debts they owe, again at a floating but not quite free-floating exchange rate, so they don't go broke.   They begin to reduce the production of the bills constituting the older monetary system, while carefully keeping demand for the old notes about sufficient to supply so as to avoid making sudden shock or implosion of old economy.  This is difficult; it is probably must be accomplished by having different departments of the government demand particular currency types for payment in a way that responds in a very carefully measured way responding to current supply of both money types. Finally old bills are mainly curiosities; the government ceases to print them or accept them, and those that remain acquire value as collectors items.

Above process works for anything.  Doesn't have to be something people were thinking of as money at start.

Bitcoin owing to its small and highly inflexible supply would make this very difficult.  Its adoption by any national economy would require deflating it by thousands of percent, creating speculative firestorm that would further complicate process. 

Currency conversion is difficult enough when adopting widely-used money of powerful neighbor state which speaks for volume of a large economy, has high availability and denominates already sufficient value that it won't be noticeably affected when you start using.  But when your use would multiply value for which a very limited supply of money must trade by a factor of hundreds,  is very nearly impossible.  To do so would make the exchange market too unstable during the transition, and cause too many people to lose too much. 

Short version, they won't do it.  Far better from their POV to simply use protocol, create their own cryptocurrency with big enough premine to allow them to bring coins into circulation at a rate that permits control of the exchanges to avoid ridiculous speculative bubbles. 

Also Bitcoin as such is not suitable for a national economy.  No one has any incentive to invest Bitcoin in any productive business, because in Bitcoin economy, with constant finite money supply, an investor can always do at least as good as an average business - with no risk - by simply sitting on money instead.  So there is no rational investment in anything.  This makes it completely impossible to build businesses or infrastructure without nominal 5% inflation rate or so.  Mild inflation is sort of a tax on letting wealth lie around being useless to everyone.

Edward.

Beware false profits!