Hyperbitcoinization is a term that was first coined in 2014 by Daniel Krawisz in a Satoshi Nakamoto Institute article. The term, somewhat overblown, refers to a state where bitcoin takes off and effectively replaces legacy currencies. It is contrasted to hyperinflation, where people abandon the old currency after it becomes worthless.
“Hyperbitcoinization is a voluntary transition from an inferior currency to a superior one… its adoption is a series of individual acts of entrepreneurship rather than a single monopolist that games the system.”
Is Hyperbitcoinization a Possibility?
A recent medium post has investigated the possibility of hyperbitcoinization. The concept is not quite as far flung or unrealistic as it would first appear. The article examines how bitcoin can become the first global cryptocurrency. However, it posits that hyperbitcoinization can occur naturally and organically. Instead of cataclysmic events which force people towards cryptocurrency, people will naturally gravitate towards superior technology.
After a phase of initial adoption, a tipping point is reached. This marks the end of the early adopter phase and the start of exponential growth. Once a technology reaches a certain phase, its growth becomes nearly unstoppable, such as the tablet, smartphone, and social media around 2005. At this point, the cost of rejection becomes more than the cost of adoption. Imagine a company refusing to use a website or a restaurant which does not accept credit cards.
The article also mentions steeper adoption curves as a consequence of an increasingly connected society. This can be seen towards the end of 2017, where the price of bitcoin reached highs of nearly $20,000. The launch of bitcoin futures then sent the price on a downward spiral. Still, another bull run like this could see bitcoin past the tipping point where adoption for all becomes a necessity.
Bitcoin has inherent characteristics which make it more desirable as a global cryptocurrency. It is decentralized, transparent and borderless. Bitcoin could be the default global cryptocurrency by social decree. With the network effect coming into play, bitcoin would establish default market dominance the more users join its network. It is perfectly positioned, despite all its technical shortcomings.
The post further indicates that bitcoin is currently valued at roughly .01% of its theoretical value (at BTC = $10,000) if it was to displace fiat currency completely. This is taking into account the derivatives market, with high-end estimates of $1.2 quadrillion. It also takes into account debt, real estate, money, and stock. The total value of all money is estimated at $1.8 quadrillion. Divided by the total number of bitcoins (16.8 million – 20% of BTC are estimated inaccessible for the purpose of this calculation) puts a value of around $100,000,000 on each BTC (one hundred million).
Of course, this is a very basic and rough estimate. There are numerous confounding variables to take into account. Finding true value and worth in a land of money printing and derivatives is practically impossible.
And in many ways, it is a meaningless comparison. By the time a bitcoin is worth $100,000,000, the USD would be worth as much as the German Reichsmark. So after a certain point, bitcoin would not be compared to the USD at all. People would think in bitcoin terms, not dollar terms. Additionally, it is far more likely that we will see industry-specific coins and a second layer solution. A straight swap of bitcoin for fiat is not going to take place.
However, it does give a good sense of where bitcoin stands relative to legacy fiat. While figures may vary, bitcoin has significant upside potential, whether it’s by a multiplier of 5, 10, 100 or 1000. Many notable investors have arrived at this conclusion, including Peter Thiel, Tim Draper, Michael Novogratz, Barry Silbert and Blythe Masters.
We could soon reach a point of hyperbitcoinization, and this will likely be pushed forward by institutional investors. At this stage, the dollar would be left behind, and we would have a socially voted global cryptocurrency through voluntary adoption.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.