Category Archives: currency

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Hyperbitcoinization: The End Of Fiat Currency, $100M Bitcoin?

Hyperbitcoinization is defined Bitcoin commentator ObiWan Kenobit as “a theoretical state wherein Bitcoin displaces legacy currencies and becomes the dominant if not only method to exchange value”. Hyperbitcoinization was first discussed by Nakamoto Institute founder Daniel Kraswisz in 2014, and ObiWan Kenobit thinks it could lead to Bitcoin prices as high as USD 100 million per coin.

Essentially, hyperbitcoinization believers argue that Bitcoin is superior to fiat currency, and the demonetization of fiat as Bitcoin rises to dominance is inevitable. This is because Bitcoin is non-inflationary: it has a fixed maximum supply of 21 million coins, unlike fiat currencies which can be printed at will by central banks. Money printing and the associated hyperinflation has led to the collapse of Zimbabwe’s native fiat currency and currently, Venezuela and Iran are on track to similar fiat currency collapses. Even the most powerful fiat currency, the USD, experiences constant inflation from money printing.

Also, Bitcoin gives power over money back to the people. Bitcoin is decentralized, so no centralized authority can stop Bitcoin transactions. This is much more ideal than the current fiat system where money can easily be frozen and confiscated by banks and the government. Additionally, Bitcoin is borderless, breaking the current paradigm where citizens use their local government-backed fiat currency. Bitcoin is designed to work seamlessly as a global currency.

Due to these advantages, hyperbitcoinization believers think that Bitcoin adoption will steadily grow and eventually, it will cost people more money to reject Bitcoin than to accept Bitcoin. This will be the tipping point that leads to rapid adoption and the replacement of fiat with Bitcoin.

ObiWan Kenobit describes the evolution towards hyperbitcoinization in three phases: equilibration, nucleation, and crystallization, which is the same theory behind the growth of crystals. Equilibration was during the early days of Bitcoin when it first gained monetary value, and innovators and miners dominated the field. Currently, we are in the nucleation phase, which involves engineers, exchanges, wallets, and mining pools. Nucleation has a high energy barrier and many factors are needed for crystallization.

The latter parts of nucleation are defined by increasing trading activity, increasing practical uses, fiat onramps, and custodial solutions. During crystallization, Bitcoin will grow exponentially until it becomes the dominant global currency, and this phase will be defined by institutions, banks, and governments adopting Bitcoin. It can be argued that crystallization has already begun.

ObiWan Kenobit argues that Bitcoin will hit USD 100 million, based on a rough calculation that total money supply is USD 1.8 quadrillion and there are a total of 16.8 million accessible Bitcoins, since millions of Bitcoins have been presumed lost. In a recent article on BitcoinNews, this topic was explored, and it was found that there is roughly USD 90 trillion of real money in the world, which would lead to a Bitcoin price near USD 5 million in the event of fiat being extinguished. The 1.8 quadrillion figure is from including government debts, real-estate, and derivatives in the total amount of money, which isn’t accurate.

If hyperbitcoinization does occur then fiat would lose most of its value, so perhaps Bitcoin would hit USD 100 million or even orders of magnitude more than that. If fixed relative to 2018 valuations and ignoring all future fiat inflation, then Bitcoin is unlikely to get much higher than USD 5 million, since at that point Bitcoin’s market cap would include all of the real money in the world.

 

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Bitcoin Predicted to Dominate Future of Online Marketplaces

Bitcoin is becoming the world’s number one internet currency. This is according to Jack Dorsey, the owner of Square. He says that Bitcoin will emerge with time to become the Internet’s “native currency”, with the increasing popularity of the currency to overrun other internet currencies and become a preferred medium of exchange.

Bitcoin’s predicted future dominance

Jack Dorsey predicted the future dominance of Bitcoin back in March 2018 during an interview with Elizabeth Stark of Lightning Labs, where he expressed belief that when native internet currency emerged, Bitcoin would be at the fore..

Speaking during the Consensus 2018 Conference in New York, he said that the internet deserved a native digital currency that would become the mode of all payments for all transactions running across the web.

The digital marketplace

The concept of digital currency is entrenched in the world of online trade. In many instances, new digital currency such as Bitcoin has been the subject of discussion.

“Similarly, a day never lapses at Square without people discussing the idea of Bitcoin dominating the future of all internet transactions,” added Dorsey. Despite some people being skeptical about the digital currency, the open access policy will inspire its quest for dominance in all internet payments.

Payments solutions boosting the rise of Bitcoin

Additionally, the payment solutions developed for blockchain recognizes the significance of Bitcoin.

“At Square, any payment that comes across our table, the seller should be able to accept it,” remarked Dorsey. Square is in the payment industry and applauds Bitcoin’s role in ensuring swift and safe payments through the internet.

Square has a system that accepts Bitcoin payments. According to Mike Brock, an engineer at Square, the reason why they settled on Bitcoin is because of its simplicity.

Simple payments

Mike and Dorsey were eyeing simple internet payments that would work like any other common dollar payments. With Bitcoin, simple transactions like coffee purchases would not look any different as a transaction, so much so that cashiers might not even notice that the payment was in Bitcoin.

Square will build systems that will accommodate the payments for consumers and merchants. It wants to push for the acceptance and the dominance of Bitcoin payments by developing payment solutions. However, according to Dorsey, the goal for all these payment solutions must remain the same – just like walking into a coffee shop and making payments with Bitcoin.

 

Image Source: Max Pixel

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Bitcoin like a Regular Currency, Says St Louis Federal Reserve

In a blog entry posted 25 April, the Federal Reserve Bank of St. Louis likened Bitcoin to fiat currencies in a validation of one of the core premises of the currency.

The post, titled Three Ways Bitcoin Is Like Regular Currency, is based on research previously conducted by the reserve bank. While the study found that ”Bitcoin units have no intrinsic value”, it also acknowledged that currencies “such as the US dollar, the euro, and the Swiss franc… have no intrinsic value either”.

This provides a valid counter-argument to the misguided criticism that claims Bitcoin has a monetary value of zero because it is not tied to any real-world commodity. As the research points at, since the dismantling of the gold standard in the 1970s, the vast majority of national reserves rely on trust as a medium of value exchange.

The US dollar, for example, relies on a trust in the government and economy for their transactions to be facilitated. Bitcoin and cryptocurrencies, on the other hand, rely on computer coding and for the majority, the blockchain to facilitate transactions.

Libertarian proponents of cryptocurrencies have also argued a similar case to that of the Fed’s new study, but with an entirely different conclusion reached. They believe that cryptocurrencies are in fact a better alternative to national currencies, as they are not at risk of devaluation via inflation.

Bitcoin instead has a strictly fixed supply, as opposed to the Fed that has the ability to expand the money supply, even if not directly through printing more bank notes.

While the post does not directly endorse the use of Bitcoin or other cryptocurrencies, it does provide a certain amount of credibility, and authority as the comments come from an American federal agency.

However, the reserve bank of St Louis has previously been skeptical of Bitcoin, posting an entry in February 2015 that demeans the currency as inefficient. Some of the reasons cited in this post include the inefficiency of requiring mining as a proof-of-work model and the energy wasteful nature of this process.

 

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