Experts believe that bitcoin still has a long way to go before it gains mainstream global acceptance – but believe that the token could become a global mainstay, and even eclipse the dollar by 2030.
Industry insiders call the phenomenon “hyperbitcoinization” – the widespread, global adoption of Bitcoin that will see it eventually surpass conventional fiats like the dollar, the euro or the yen.
But what do experts mean when they talk about hyperbitcoinization – and can industry players do anything to help speed it up?
What is Hyperbitcoinization?
Hyperbitcoinization is not just a matter of bitcoin becoming more popular. It actually refers to a scenario whereby the token becomes the world’s most dominant currency.
For that to occur, fiat currencies would need to devalue against digital alternatives, effectively pushing people to adopt and use Bitcoin instead.
The theory goes that the world’s leading fiat currencies would suffer hyperinflation and subsequent demonitization.
And if that were to happen, the mass adoption of bitcoin would provide the only viable alternative for individuals and companies the world over.
In 2014, Daniel Krawisz, Director of Research at the Satoshi Nakamoto Institute, explained the concept of hyperbitcoinization in a blog post. He wrote:
“Hyperbitcoinization is a voluntary transition from an inferior currency to a superior one, and its adoption is a series of individual acts of entrepreneurship rather than a single monopolist that games the system.”
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It might sound like a utopian concept, but some companies are confident enough to start laying the groundwork for a hyperbitcoinized future.
Neel Popat, CEO of Donut, an app that allows users to turn their spare change into bitcoin, told Cryptonews.com,
“We continue to build more and more infrastructure to support hyperbitcoinization but still have some work to do to reduce the entry barriers for the average consumer. The last decade was about establishing bitcoin as a credible alternative to centralized currencies. The next decade will be about facilitating bitcoin’s mass adoption.”
The power of proactivity
Others say that taking proactive measures could help speed up the process.
John Carvalho, COO at BitRefill, a platform that allows customers to spend bitcoin on a range of products and services, told Cryptonews.com that he believes that the world will continue to support bitcoin more as a store of value and as money for payments.
“It is undeniable that Bitcoin has made progress in the past 10 years, so it is mostly a question of how far it will go and how long it will take to get there. No one can predict the future, but we can all participate in accelerating its inevitability in various ways.”
Others, however, urge caution.
Alexander Leishman, the founder and CEO of crypto financial services company River Financial, noted,
“I believe the store of wealth narrative will continue to materialize over the next 10 years, and it will be even longer before bitcoin is widely used as a currency for a non-negligible percentage of the world’s economic transactions. However, it is important to remember that bitcoin is still an experiment and far from a sure thing. There is still a lot of work left for us to do if hyperbitcoinization is ever going to happen.”
Sound as a Pound
From an economic perspective, bitcoin will need to first become a “sound” currency if it is to succeed as a global token – and for hyperbitcoinization to finally kick in.
But what exactly constitutes sound money?
Economists are divided over the matter. The most widely accepted definition of sound money is a medium of exchange that is durable, divisible, portable, uniform, limited in supply, acceptable and fungible. Moreover, sound money should derive its value and stability from goods or commodities.
Bitcoin actually ticks most of these boxes. It is undoubtedly portable, divisible, uniform, durable and limited in supply. It is also backed by a blockchain protocol that deploys a proof-of-work algorithm, ensuring the network’s integrity.
But for bitcoin to truly become sound money, it will need to find two more pieces of the puzzle: acceptability and fungibility.
Toward wider acceptance
On the acceptance front, it will need to become a universally accepted method of payment at retail outlets, businesses and even public sector institutions. For that to happen, Bitcoin needs to become a better payment network.
Current Bitcoin network on-chain transaction fees are too high to process small payments, and confirmation times are still taking too long. Fortunately, thanks to the Lightning Network, these issues may soon become a thing of the past.
While the Lightning Network is not without its critics, this second-layer blockchain solution has demonstrated that small payments can be successfully handled off-chain through so-called payment channels with only the starting and ending balances being recorded on the Bitcoin blockchain.
The network has only been operating for a little under two years, and is still in its beta phase, but many enthusiasts are optimistic about its future. One day, perhaps, this scaling solution will allow millions or even billions of users to use bitcoin to buy coffee.
Learn more: How Adoption Will Look in 2020 and Beyond
The fight for fungibility
Fungibility is another conundrum. Many crypto enthusiasts are not aware of the fact that not all bitcoin tokens are equal. There are freshly mined “virgin” coins that have never been spent (which often sell at a premium), and considerably-less-attractive “tainted” coins that have been used by criminals and have been blacklisted by exchanges.
And there are plenty that fall into neither category – tokens that are neither brand new nor tainted by criminal hands.
One workaround could involve implementing privacy features into Bitcoin, making all coins fully fungible.
Litecoin founder Charlie Lee agrees with this notion. In January 2019, he tweeted,
“Fungibility is the only property of sound money that is missing from Bitcoin and Litecoin. Now that the scaling debate is behind us, the next battleground will be on fungibility and privacy.”
While Bitcoin is not quite ready for the mainstream limelight just yet, the stage is certainly being set. With scaling and privacy solutions in development, hyperbitcoinization may actually become a reality someday.
And the industry is nothing if not optimistic on the subject. As Leishman states,
“I think hyperbitcoinization is certainly a possibility. I don’t foresee government currencies ever disappearing completely, but I do think there is a good chance that we will see a world where bitcoin is used very widely as a store of wealth and a transactional currency.”
Learn more: Now That Bitcoin ‘is Digital Gold,’ Which Crypto is For Payments?