Will Bitcoin Replace Fiat Currency in the Future? Everything you need to know
The financial market has lately witnessed heated debates as to whether cryptocurrencies such as bitcoin will sometime see mainstream adoption and supplant or completely replace fiat currencies. Although this issue is too speculative to give a decisive opinion, many crypto enthusiasts and mainstream economists have come up to defend their side of the story.
Although many of those aboard the cryptocurrency bandwagon are hopeful, and sometimes surprisingly confident that digital currencies will elbow fiat money out of the financial market, mainstream economists have a rather pessimistic view.
Tim Draper, a renowned venture capitalist and Founder of Draper Associates, is one of those who believes that bitcoin is ready for a take-over. In fact, he predicts that by the year 2022, Bitcoin will hit $250,000 and enjoy a significant market cap.
You might wonder why Mr. Draper’s opinion, in this case, hold any weight. But that is only because you don’t know him very well. Back in 2014, he predicted that by 2017, Bitcoin would be worth $10,000. That prediction came out to be true. In fact, by December 2017, it was far much more than that.
Draper’s confidence in the digital money stems from the fact that he believes Bitcoin would be so much easy to use it would be laughable to continue using fiat currencies.
“In five years, if you try to use fiat currency they will laugh at you. . . Bitcoin and other cryptocurrencies will be so relevant … there will be no reason to have the fiat currencies.” He says.
What Does Bitcoin Need to Become Mainstream ‘Money’?
Although it would be imprudent to dismiss the opinion of a man who made himself $10,000 when Bitcoin was still a fairly alien concept, there are a few consideration we cannot afford to bypass. For instance, what criteria does Bitcoin needs to meet in order to be considered as ‘money’ in the global economy?
The USB (Union Bank of Switzerland) reports that for Bitcoin to be considered a viable asset class and replace the U.S dollar, it would need to have a value of USD 213,000. Currently, though, the USB believes that Bitcoin is still very unstable to qualify for a mainstream asset class or viable means of payment for global transactions.
However, there are a few findings that contradict the USB report. For instance, a report by Goldman Sachs titled “Bitcoin is Money” argues that the digital coin is already money and an asset class which is currently taxable. Additionally, a study by The Imperial College London and eToro titled Cryptocurrencies: Overcoming Barriers to Trust and Adoption, seems to concur with the Goldman Sachs one. According to the research paper, Bitcoin satisfies the “store of value” role which is one of three roles that digital currencies must meet to be considered as money. This makes it a favorable candidate for mainstream adoption within the decade.
However, it will still have to address issues of design, regulation and scalability in order to satisfy the two remaining roles.
Cryptocurrencies could supplant 25% of fiat currency by 2030
One of the reasons why most of those who have warmed to the idea of blockchain believe that cryptocurrencies will penetrate the mainstream business space is because of the perceived restrictions affiliated to the current currencies. For instance, most of the fiat money around the world are only valuable in certain jurisdictions. One notable example is the Nigerian Naira whose value plummets by about 30% when it crosses its native borders.
What is more, some financial gurus argue that the more than three-thousand-year-old banking system lacks pertinent technology to keep the current economic model afloat.
Because of this, Futurists like Thomas Frey believe that digital currencies will be the more favorable alternative and set to witness large scale adoption. In fact, according to Mr Frey, cryptocurrencies could replace roughly 25% of fiat money by 2030.
Although Bitcoin initially enjoyed a monopoly in the industry’s market capitalization, other cryptocurrencies such as Ethereum, Litecoin and Ripple have sprung up and seem to be braced for tough competition. However, Bitcoin still holds greater potential for mainstream adoption as compared to the other digital coins. For instance, according to Coin Telegraph, only two of the 54 major companies that accept cryptocurrencies do not accept Bitcoin.
This makes Bitcoin the most used digital coin in mainstream business and, therefore, when it comes to the question of which of these cryptocurrencies might replace fiat currency, Bitcoin comes up more often.
What to Expect
Opinions surrounding the question of whether digital currencies will take the place of fiat money seem to be highly subjective and speculative and therefore not easy to get a decisive answer. It is hard to tell whether the crypto-bubble will burst or keep floating as more people take interest in it.
Currently, none of the known cryptocurrencies or digital tokens has successfully replaced fiat currency in any party of the world. So we still have a lot to anticipate and should be ready for any future surprises.
About the Author
Nathan Laibuch is a cryptocurrency enthusiast and a freelance content writer. For more information about his writing services email him at firstname.lastname@example.org.