Cryptocurrency is still in its infancy.
While many people own some, few people take it seriously. I think most of the people who own it think of it as an investment and not a currency.
I know there are hundreds or thousands of cryptocurrencies, but right now it looks like Bitcoin is the de facto standard. But for Bitcoin to be taken seriously as a currency, more businesses need to accept it for payment.
How Google Can Replace the US Dollar
Cryptocurrencies benefit from the Network Effect (or Metcalfe’s law). When the Network Effect applies, the value of the product increases as the number of users increases. For example, a phone is useless if you’re the only one in the world who has one. If a million people have phones, your phone becomes a lot more useful. If everyone in the world gets a phone, your phone becomes one of your most useful possessions because you can potentially connect with anyone in the world.
Cryptocurrencies benefit the same way from the Network Effect as phones. If Jeff Bezos used his entire net worth and bought up every Bitcoin in existence, the value of Bitcoin would decrease to practically zero. But if everyone in the world received some Bitcoin, people would start trading it and it would become a legitimate currency.
How do we get to the point where everyone has Bitcoin and uses it for transactions? The catalyst for that would be the large corporations adopting it. Imagine if Google, Apple, and Microsoft each put default buttons on their web browsers allowing you to buy Bitcoins and use your Bitcoins to buy things online ubiquitously? I imagine Bitcoin may become more popular than US dollars!
Why Satoshi, Not Bitcoin May Be Our Future Currency
If Bitcoin became widely adopted as a common currency, it would run into another big problem. As of this writing (in May 2020), one Bitcoin is worth about $10,000. Imagine going to the store and trying to buy a banana with Bitcoin. The price tag would say something like “Bananas – 0.00002 BTC each.” You pick up a few other things and go to the register. The clerk scans your groceries and tells you, “your total will be 0.00288589 Bitcoins.”
Sheesh. I’ll stick to dollars and cents, thank you.
It would work out a lot better in our brains if each Bitcoin was only worth about a dollar. But then we’d run into the problem of not having enough Bitcoins to go around. The way the Bitcoin system is set up, only 21 million Bitcoins can exist, ever. Because of this problem, I don’t think Bitcoin will be the currency of the future. Instead, the currency of the future might be… Satoshis.
You see, each Bitcoin can be divided into a hundred million Satoshis. If the cap on Bitcoins is 21 million, that means the cap on Satoshis is 2,100,000,000,000,000 (or 2.1 quadrillion, or 2,100 trillion). While there aren’t enough Bitcoins to run the world economy using whole numbers, there are more than enough Satoshis to do so.
One dollar is about 0.0001 Bitcoins (again, as of May 2020). 0.0001 Bitcoins is equal to 10,000 Satoshis. Put another way, 10,000 Satoshis is worth about a dollar.
Now here comes some very massive speculation. If we’re facing a future where one Satoshi is worth a penny, 100 Satoshis would be worth a dollar. To reach this future, the value of Bitcoin would have to increase a hundred-fold so that one Bitcoin would be worth a million dollars. At that point, a Satoshi would be worth a penny and 100 Satoshis would be worth a dollar. Our brains would be able to comprehend the currency.
How the Future of Money May Look
I made two big speculative predictions in this article. Putting them together, I see a future where more than half of all transactions in the world are done digitally through smartphones using Satoshi as the standard currency. Dollars would still be useful, but people would only use dollars for offline transactions like at the grocery store.
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