Hyperbitcoinization and its Origin
By Wes Carlson on ALTCOIN MAGAZINE
One of my favourite terms in the Bitcoin space is “Hyperbitcoinization”. It was dreamt up by Daniel Krawisz and explained in his 2014 article published by nakamotoinstitute.org. Krawisz described the new term as a gradual process by which bitcoin would become the dominant global currency. Basically, fiat currencies, which have historically lost their value are expected to gradually become less valuable in comparison with bitcoin. Consequently, individuals will gradually opt out of using state-controlled currencies and adopt bitcoin as their currency of choice. Should hyperbitcoinization occur, the end result would be a world with bitcoin as the global currency.
Hyperbitcoinization is expected to cause demonetization when the use of fiat currencies fizzle out as a result of people using bitcoin instead. In this case, bitcoin is chosen over time because of its superiority over fiat currencies.
The future expectation of bitcoin dominance as espoused by Krawisz is in sync with the ideologies of bitcoin maximalism. Bitcoin maximalists are of the view that bitcoin would be the only existing useful cryptocurrency in the future. Backing the argument is bitcoin’s secure, decentralized and censorship-resistant nature. These features of the cryptocurrency, as well as the network effect it already has, is expected to lead to a future where it is the only useful cryptocurrency. However, with hyperbitcoinization, we go a step further and envision bitcoin dominating fiat currencies as well.
Characteristics of Bitcoin Making Hyperbitcoinization Plausible
Being decentralized means control of bitcoin is not in the hands of any individual or single organization. The alternative is fiat currencies being constantly inflated by the governments and central banks that control them. It makes sense to anticipate that citizens of countries with currencies growing weaker with time would gradually let go of such currencies and use bitcoin.
Another advantage bitcoin has over fiat currencies is that it is censorship-resistant. The simple fact that wealth stored in bitcoin cannot be confiscated or frozen is enough to attract new users in droves.
Bitcoin is also borderless. The ability to transact with parties all over the world without any restrictions, delays or unnecessarily long procedures is also a function of bitcoin that fiat currencies cannot provide users. People from different parts of the world are free to join the bitcoin community and use the technology.
Is Hyperbitcoinization Taking Place?
Hyperbitcoinization does seem far-fetched when the bitcoin market exhibits extremely bearish tendencies. This is because it is a time when most community members sell a large percentage or all of their bitcoins and want less to with the cryptocurrency space. This notwithstanding, the characteristics of bitcoin have not changed. The signs of hyperbitcoinization are also still visible.
Following the invention of Bitcoin, an ecosystem of related businesses and organizations eventually came to life. This ecosystem, which uses mainly bitcoin as a currency for transactions, continues to grow rapidly in spite of the bull and bear market cycles. Adoption is increased as newcomers in the industry are introduced to bitcoin once they get involved with the space. The continuation of this trend can also eventually lead to global dominance for bitcoin.
The improvements being made to the bitcoin technology are key when discussing hyperbitcoinization. This is because it is the utility users will derive from using bitcoin that will encourage them to continue to use it in place of fiat currencies. Bitcoin continues to see several improvements from the talented developers that work on the project.
The Lightning network and confidential transactions are examples of such improvements. Whilst the Lightning network increases network speed and reduces transaction fees to near zero, it will also usher in a new concept called “Streaming of Money” and “Micro-Transactions” which I believe will revolutionize the way we consume and spend, this opens up a whole new world of possibilities much like when the internet was first invented it took time to get to the VIdeo Streaming is a reality stage.
Confidential Transactions and other similar additions are expected to bring privacy to the bitcoin network. Continuous improvements make bitcoin easier and more convenient to use while maintaining its key features.
There is already evidence of citizens of countries experiencing hyperinflation dumping their national currencies and using cryptocurrencies to store their wealth and make daily transactions. Iran, Venezuela, Zimbabwe, and Pakistan are all places where bitcoin is sold at a premium as a result of weak national currencies. Venezuelans are reported to have switched to the use of cryptocurrencies for trade as the value of the Bolivar continued to fall.
The mass media attention Bitcoin garnered in 2017 will also play a key role in the hyperbitcoinization process. Coverage of bitcoin-related news on mainstream media no longer comes as a surprise. The exposure this gives the cryptocurrency contributes immensely to the adoption process since it is a great way to get the general public aware of the technology.
Also, as blockchain and cryptocurrency courses make their way into the lecture halls of colleges, it is expected that future generations would be aware of the differences and what makes bitcoin unique. The decision to hold and use bitcoin for students currently learning about bitcoin would be an easy one.
Understandably, hyperbitcoinization is often discussed when prices are going through the roof. It is probably not very fashionable to broach the topic during a bear market. However, it is important to note that the process would not necessarily be an obvious or chaotic one. Upward price movement definitely helps in the adoption process but is not the main driving factor. Regardless of the price of bitcoin, as more people learn about its unique and advantageous features, individuals will gradually adopt the technology and use their frequently debased fiat currencies less.
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