"“Digital currency won’t topple traditional, government-sanctioned money from its central role in the economy in the foreseeable future.”
Scaling will come in the "foreseeable future". That aside. There are 133 Trillion reasons why we will soon impulse higher to a whole new set of levels aside from BTCUSD trading over the ice wall of 1163 - 1180.
Worldwide coins, banknotes and checking deposits in circulation = 28T.
28T/21M btc = 1.3 million btc/usd. 1 Satoshi = 1.0E-08. 1.3M/1.0E-08 = 133T $ equivalent in circulation.
Plenty of room for inflation at the price of 1.3 million. Especially given 7.5Bln in population showing signs of cresting.
Does this mean that the world currencies go away....maybe not. Isn't life grand?
The $1.2 quadrillion in derivatives is a another chapter. I am just not sure if it is the final chapter or the first :-).
Comments
bagofXMR
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All these are fair questions, don't take me wrong. If i offend you in anyway, consider it a language issue, not a real intention to do so.
Do you really think btc has any option to replace even 1% of those 28T in circulation?
It might reach that value (1% of worlwide coins/banknotes/checking deposits in circulation aka 13k per bitcoin) but i'm pretty sure it won't be because 1% of the money transfers happen in bitcoin, it will be pure speculation on this happening, and as it'll never happen, it'll be a textbook bubble.
I strongly agree with the fact that the FED,ECB or whatever central authority should have no power to decide what token/coin inflation we should have, i'm also sure the total lack of token/coin inflation is a big mistake and it would avoid any currency based on that from being a worldwide money form.
Do you realize that as per your analisys, if it was going to come true, suddenly, the best risk/reward investment you could ever do would be doing nothing but just sitting on your new 0% inflation cash aka bitcoin? Do you think world could progress if the most used store of value/money form does increase its purchasing power by doing nothing? Who would invest in anything? who would risk its wealth in any venture if by doing nothing and leting others risk i'm going to be rewarded anyways?
Bitcoin is a great idea, but it is a great idea as censorship resistance payment method and a speculative asset. It cannot replace money. It can coexist with it, but it cannot replace it.
Thanks for your thoughts. As per the above, it could coexist or replace. It is the people's choice. The 8th decimal point allows for this in the context of of a set in place amount. The basic math above is what it is. Bitcoin does not own the option to replace 1% or 100%. That option is owned by you and me and anyone else because btc has come to be.
FED, ECB etc. does have that power. That is fact. This power has been abused - as it has throughout history.
Not everyone buys into or believes in the best risk/reward asset. Did you believe in Apple's comeback? Did you believe that Google would achieve the status that it has? Are you set financially for life because of Apple or Google?
How would I be rewarded for doing nothing? I have taken huge risk in owning and mining btc. How is your purchasing power increased if you decided btc was a stupid idea and waited until 13k or 53k to purchase. How are you being rewarded if you do nothing as you stuff gobs of your fiat in a bag to buy a hot dog? Remember, the FED and ECB HAVE that power. You are only rewarded because you saw the potential and you bought early.
As per the simple math above shows, btc can have inflation as allowed by the combination of 1.0E-08, price paid and number of users. It is embedded in the structure but is elusive to understand. Most people think it is deflationary. It is not. Also, Bitcoin is no longer censorship resistant. If you really think that is the case, have fun with that. I wish you the best.
Yes, you are correct, it is currently a speculative asset. Do I really think btc has any option to replace even 1% of those 28T in circulation? I don't know. But I do know that it has the structure and potential to do so. If this were easy for everyone to understand then I would say hold on to your socks and plan on long wait times.
bagofXMR
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@oaksacorn, Thanks for your answer. You certainly have some good points.
But i think i didn't express myself properly when i meant that with a 0 "coin/bill/token" inflation (that it is not the same as price inflation, though they are partly connected) you are rewarded by saving and NOT investing, is the next:
Let's assume we are in 2200, in a world where the only and worldwide currency is bitcoin, that has replaced those 28T in actual money, and even more: the stock markets, the derivatives markets... Now bitcoin (in 2200) has a 0 token inflation (that is to say, no more tokens/coins are printed/created).
Now we'll have to agree in the next issue: wealth increases overtime. 200 years ago, full (or almost) salary of average workers was spent in food. Now, 200 years later, average workers have a car, go on holidays, pay an internet/phone bill, pay for gas and a lot of things that didn't exist in the past or were considered a luxury and they are not a luxury anymore. So that is a proof that wealth, aka purchasing power, is growing overtime.
In a world were bitcoin (or any other 0 inflation currency) has replaced any other form of currency, it'd be the wisest investment not to invest. That is to say, if i have the certainity with the same amount of "currency" my son will be able to buy more things than i can buy right now, why would i invest my money in a fund, and risk it, when i know for sure that i'll be wealthier just by doing nothing?
Did i express myself properly?
I do agree FED/ECB do not deserve and should not have the right to decide the coin/token/bill inflation, but i disagree with the idea of any form of worldwide currency having 0 coin/token/bill inflation. Wealth does increase overtime, and to guarantee the needed incentives to invest money to create value/progress, some kind of inflation is needed.
And about bitcoin not being censorship resistance anymore, i think it is partly wrong. I can send bitcoin to my fellows in venezuela, but i can't send them euros or usd, as the goverment would take a huge cut with an artificial exchange rate. I can send bitcoin to WikiLeaks, while i couldn't use my bank, or visa or mastercard, as they all banned them. So right now, as it works, miners process every transaction that pay enough fees, while that doesn't happen with paypal, visa or any other conventional payment method. And it is certainly easier to link banks/paypal/cc accounts to real entities/person, than it is with bitcoin addresses.
I do not understand, and i would love further explanation, your statement that bitcoin is not deflationary.
oaksacorn
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@bagofXMR, Great points. Thank you for engaging at this level.
On censorship, if you send btc to friends in Venezula, you will have to discuss with the IRS that this was in the gift category. Even if you send from your Trezor wallet. If you buy or mine btc and then purchase something, you will have a cost basis and you will discuss with the IRS. The huge cut in fiat comes into play only because of the current banking structure. Bitcoin is helping to move past that.
Keep in mind that... "Now we'll have to agree in the next issue: wealth increases overtime. 200 years ago, full (or almost) salary of average workers was spent in food. Now, 200 years later, average workers have a car, go on holidays, pay an internet/phone bill, pay for gas and a lot of things that didn't exist in the past or were considered a luxury and they are not a luxury anymore. So that is a proof that wealth, aka purchasing power, is growing overtime.".... has nothing to do with inflation and everything to do do with production efficiency and real growth. All of this could be achieved with 0 inflation and real growth but not to same extent. That difference in extent is paid for by someone over time. If it happens in too short of a period of time, you get disparity in wealth and that causes social problems. Inflation does not create wealth. Saving helps to create wealth by enabling you to create investment opportunity. ROI comes from real growth - not inflation! We are taught to believe that some inflation is good because as long as it is over time and more a generational thing we don't feel it and our country or currency issuer can get away with waging more war or spending more money on things you may not agree with. It all still comes out of your hide at some point.
What is a 'Real Rate Of Return'
A real rate of return is the annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. This method expresses the nominal rate of return in real terms, which keeps the purchasing power of a given level of capital constant over time. Adjusting the nominal return to compensate for factors such as inflation allows you to determine how much of your nominal return is actually real return.
It is always about real return.
That said, I am not in the Bitcoin to buy coffee camp. I am more in the Bitcoin as a digital gold camp. I do feel, however, that it does have the potential and my post was to express that potenetial. Given human nature, we will always have trouble resisting the temptations of "reasonable inflation". So I am more in the coexist camp than in the replace camp. Also, I believe in local and sustainable. I believe in the concept of the living Kohonen Network. I am not a One World Government type of person. Cultural differences and different approaches to the Rule of Law are healthy..... in the context of peace and love of neighbor even if they are a bit of a pain in the ass. This goes hand in hand with having different currencies and approaches to fiscal prudence. I do feel that we are fortunate to have a nimble digital gold to hedge those differences :-).
@bagofXMR, The concept of of inflation is different in Bitcoin. The combination of 21M cap, 1.0E-08 and price along for real holistic growth to Currency in Circulation levels far in excess of what we have now. The concept of inflation/deflation will come into play differently as it will manifest itself in terms of price given number of users at any given time versus purchase price of a given item to buy. Once again, as per below, the power is in your hands.
bagofXMR
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@oaksacorn, Okay i understand your point here. but i'm talking about actual token/coin/bill inflation.
The fed printing usd bills inflates the amount of usd in circulation. Miners minting bitcoin tokens, inflate the amount fo bitcoin in circulation. That's the inflation i'm talking about.
Do you really think btc has any option to replace even 1% of those 28T in circulation?
It might reach that value (1% of worlwide coins/banknotes/checking deposits in circulation aka 13k per bitcoin) but i'm pretty sure it won't be because 1% of the money transfers happen in bitcoin, it will be pure speculation on this happening, and as it'll never happen, it'll be a textbook bubble.
I strongly agree with the fact that the FED,ECB or whatever central authority should have no power to decide what token/coin inflation we should have, i'm also sure the total lack of token/coin inflation is a big mistake and it would avoid any currency based on that from being a worldwide money form.
Do you realize that as per your analisys, if it was going to come true, suddenly, the best risk/reward investment you could ever do would be doing nothing but just sitting on your new 0% inflation cash aka bitcoin? Do you think world could progress if the most used store of value/money form does increase its purchasing power by doing nothing? Who would invest in anything? who would risk its wealth in any venture if by doing nothing and leting others risk i'm going to be rewarded anyways?
Bitcoin is a great idea, but it is a great idea as censorship resistance payment method and a speculative asset. It cannot replace money. It can coexist with it, but it cannot replace it.