Some time in the (hopefully not too) distant future, Bitcoin could well rival payment card systems such as Visa and Mastercard - especially if simpler Bitcoin payment systems are developed. This means that we can produce estimates of what Bitcoin should be worth when mining rewards are reduced and the incentive to participate in the blockchain validation process is based more on transfer fees and less on the mining reward.
A quick search online shows that Visa, for example, made $2.73 billion last year in revenue. Presumably most of this came from the 2-3% payment charge they levy on each card transaction. If we make a few "back of an envelope" calculation assumptions - the sum of the 0.1% transaction charges for Bitcoin could be as much as $150 million a year at some point. At about 50,000 block verifications a year, that comes to an average of $3000 verification rewards per block, on $3 million's worth of transactions every block.
At the moment most Bitcoins appear to be being held, or traded on exchanges. If Bitcoin is to become adopted as a form of currency rather than a speculative asset, then lets make the modes assumption that 10% of Bitoins circulate in any one year, covering the same movement of cash as Visa currently does. That's about $150 billion a year according to my calculation. (There is a flaw in the assumption that follows) So 10% of Bitcoin could be worth $150 billion, making the total market cap of Bitcoin $1.5 trillion.
That would value one Bitcoin at about $70,000.
Yes but... one shouldn't compare Bitcoin to Visa, since Visa already operates with many currencies it could add Bitcoin to the others. They will jump on board if enough people start using it.
ReplyDeleteThings I would need to see before I would contemplate serious use of Bitcoin / things I like about Sterling:
(1) Prosecutability: If someone steals my paper money I call the police. They do not have a great record on IP theft, so I don't expect them to quickly develop the skills and systems to deal with Bitcoin theft.
(2) Banking: fractional reserve banking is a bugbear for many people. But a currency that can expand and contract with economic conditions (via loans and investment) results in fewer economic crises than a metal-backed one. The countries that abandoned the Gold Standard first were the first to leave the Great Depression.
(3) Central banking: If you have banking, you need a lender of last resort, and ideally a guarantee for (small) depositors. Wiping out depositors when a bank goes bust tends to undermine trust.
(4) State backing: The pound in my pocket is really a token of the trust between me, the rest of the UK population and the UK government. I know the government will accept the pound as payment of my taxes. And that provides the incentive for the rest of the UK population to continue to accept pounds as payment for goods. Why would I switch a significant chunk of my trade into Bitcoin? Because I don't want to pay tax? The government would take a pretty dim view of that...