The current
total market cap of Bitcoins is around 250 million Dollars. This number
is relatively meaningless however and a much more important number is the number
of times that a currency turns over.
The number
of Bitcoins in circulation cannot be altered like with fiat currencies; the
growth of the number of Bitcoins is mathematically determined by the mining
algorithm. Since the gross domestic product equals the money supply times its
rate of turnover — something economists call velocity — this means that if the
money supply is unchanged the G.D.P. can only grow with a higher velocity.
Because of
the rising value of Bitcoins, without a rising velocity, the risk grows of
Bitcoins being treated as an investment object instead of a transaction
enabler. If the number of transactions with the real economy doesn’t grow, the
G.D.P. of Bitcoins doesn’t either, and does the system indeed represents a
pyramid scheme.
In October
2012 the European Central Bank published a report concluding that the true
impact of Bitcoins will largely depend on the number of active users, as well
as the number of merchants willing to accept the virtual currency for real
transactions. Here they are hitting the nail on the head. The breakthrough of
Bitcoins will be the day when the mainstream web-shops add Bitcoin as a
standard payment option next to the credit and the debit cards.
There are
only a limited number of payment service providers that service the web-shops
with secure payment solutions. The service costs for the merchant are typically
a fixed fee and a percentage of the transaction. These fees are for most part
based on the transaction fees the payment service provider has to pay to the
banks or to global players like Visa or Mastercard.
In
comparison, Bitcoin transactions have an extremely low cost level
combined with a very secure technology. On top of that Bitcoin transactions
have a zero risk of chargeback – normally a pain point for the merchants – as
with traditional credit card payment methods. This makes Bitcoins a very attractive
payment method for web-shops. It also enables the possibility for
micro-payments on digital services, which are not possible with the cost level
of the traditional payment methods.
The day may
come when the first major payment service provider is offering Bitcoins as
one of the online payment option – with a much lower fee than the traditional
methods – to their clients, the web-shops. It will be a rather brave
move, as there may be resistance from their traditional financial partners. But
it could be the start of a game-changing trend. This is how the Bitcoins may
get moving.
After that the use of Bitcoins in the real economy could grow rapidly, increasing the economic velocity of the Bitcoins. With it the G.D.P. of the Bitcoin economy will grow, diminishing the risk of Bitcoins being an investment pyramid, but instead becoming the preferred online transaction currency.
After that the use of Bitcoins in the real economy could grow rapidly, increasing the economic velocity of the Bitcoins. With it the G.D.P. of the Bitcoin economy will grow, diminishing the risk of Bitcoins being an investment pyramid, but instead becoming the preferred online transaction currency.
Inge
http://www.ecb.int/pub/pdf/other/virtualcurrencyschemes201210en.pdf
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