Bitcoin will eventually replace the U.S. dollar and all other fiat currencies. When this will happen, nobody knows. However, a recent UBS study concludes that for Bitcoin to replace the U.S. currency, it has to reach a value of about $213,000 USD.
Money and Traditional Banking Systems Are Obsolete
Fiat money and traditional banking are a three-thousand-year-old concept and technology, which cannot efficiently support today’s economic model. Therefore, they have to be replaced by a neutral, borderless, and frictionless system, such as a decentralized peer-to-peer electronic cash system: Bitcoin.
According to the UBS report, Bitcoin needs to have a value of USD 213,000 to replace the U.S. dollar. In addition, Bitcoin needs to be “considered money or even a viable asset class.”
Granted, Bitcoin is not yet mature enough. It still requires a greater capacity for speedily processing high volumes of micropayments. In this regard, the UBS study states:
Our findings suggest that Bitcoin, in its current form, is too unstable and limited to become a viable means of payment for global transactions or a mainstream asset class.
Bitcoin is Money
However, contradicting the UBS report, there is the fact that Bitcoin is already an asset class, and it is being taxed as such.
Moreover, several financial experts and academics concur that Bitcoin is money. Wall Street giant Goldman Sachs told its clients so in a report entitled “Bitcoin is Money.”
On the other hand, new research from The Imperial College London and eToro confirms that Bitcoin fulfills the “store of value” role. This is one of the three main roles that cryptocurrencies must satisfy to function as money. Thus, the research paper notes, cryptocurrencies such as Bitcoin could be widely adopted as a form of payment within the decade.
The research paper entitled Cryptocurrencies: Overcoming Barriers to Trust and Adoption, specifies that cryptocurrencies need to fulfill three key roles to perform the inherent functions of money and achieve wide adoption: store of value, medium of exchange, and unit of account.
In this regard, Professor William Knottenbelt from Imperial College London and Dr. Zeynep Gurguc from Imperial College Business School, affirm,
Cryptocurrencies are already equipped to fulfill one of the three fundamental roles of traditional fiat money: acting as a store of value.
But to satisfy the remaining two roles, cryptocurrencies must first solve issues of scalability, design, and regulation. If cryptocurrencies can successfully address these issues, researchers say,
Given the speed of adoption, we believe that we could see Bitcoin and other cryptocurrencies on the high street within the decade.
The good news is that Bitcoin is already addressing its technical limitations, in areas such as scalability, fungibility, financial confidentiality, and privacy.
Specifically, technological improvements such as SegWit, Bulletproof, Lightning Network, and Atomic Multi-Path Payments over Lightning, and Bitcoin Core 0.16.0, are helping to solve Bitcoin’s scalability and security problems while reducing transaction fees.
Due to these advances in Bitcoin and other payment solutions, many predict the death of cash by 2020.
What are your thoughts about Bitcoin replacing fiat currencies as the primary cash system? Let us know in the comments below! _________________________________________________________________________
Images courtesy of Pixabay, UBS, Imperial College London.