In 2018 we saw more than $3.2 trillion of bitcoin payments that were processed on the public blockchain. Now that $3.2 trillion transaction volume did not include over-the-counter sales which probably accounted for a pretty decent amount as well but this is from the exchange market which is massive.
Gold for transactions: It is not very easy to send abroad, It is expensive to transport, It is not accepted almost anywhere, It is very easily confiscatable by governments and It is difficult to divide.
On the good part: It Cannot be counterfeited, It has a long tradition of the store of value, It has real-world practical use cases such as microchips, jewelry etc.
Gold may be good, but it is outdated in terms of technology considering the above-mentioned points. But interestingly, it does have amazing longevity. Gold that was mined 5000 years ago still has value today, it hasn’t diminished in its properties and is still worth whatever the price of gold is worth. So gold does remain rare and valuable.
Fiat currency does have its advantages when it comes down to it. It’s very widely accepted you can spend fiat currency anywhere within your country. It is very easy to send fiat currency especially within your own country or banking infrastructure but when it comes to things like international transfers then we start to talk about a different picture. If you are in the United States and want to send money to Germany for example, there might be some payment operators that make it not terribly expensive or slow but basically when it comes down to it, it is an expensive, slow and censorable process.
It is very easy to steal which is a big drawback of fiat currency and it has got an infinite supply, governments keep on printing it every single day. The real value of the dollar or euro that you have decreases a tiny little fraction everytime they print a new one. Fiat currency is relatively easy to counterfeit. When you actually look at fiat and understand what it is if it wasn’t for the fact that we all just accept this as being the thing that’s done, it would sound like one giant scam.
Of course, we have settlement systems such as SWIFT network for sending an international transaction which requires around 3 to 5 business days. Bitcoin and other cryptocurrencies can typically settle in seconds to a maximum of an hour which is very different from fiat currency.
To compare some of the numbers in terms of where bitcoin stands today. In 2018 we had $3.2 trillion in value done on bitcoin. Now that versus Western Union which sent $200 billion in remittance overseas, Paypal stands at $500 billion, Mastercard stands at $5.2 trillion, WeChat at $6 trillion, Alipay at $8.3 trillion and Visa at $10.2 trillion; that sounds really big at Bitcoin is kind of at the level of Mastercard in terms of value but we have to remember that this isn’t merchant value. A lot of this is exchange value with people buying more cryptocurrencies, exchanging bitcoin for ethereum or vice versa. What we really need to see with bitcoin is merchant value because when it becomes more than just buying other cryptocurrencies, when we actually have merchant adoption value happening that is the next level in terms of cryptocurrency adoption. People will be going down to their local shops, buying lunch, wine, house, etc. with bitcoin.
For merchants, there is a lot to like about bitcoin. For example, Visa charges merchants 1.51% + 10 cents, which is a lot of money which you see that they made 1.51% on $10.2 trillion last year which more than $15 billion and adding 10 cents on each transaction. Now there is a large amount of fee, the merchant needs to wait to get his money (sometimes around 30 to 60 days with credit cards) for the product that they just sold and there maybe chargebacks by the credit card company. In terms of Bitcoin, there are no chargebacks. You receive bitcoin, it’s yours. If merchants are afraid of accepting because of its volatility, there are services such as Coinbase Commerce that let them accept bitcoin and it can get changed straight into dollars for example.
The Paypal CEO recently threw a bit of shade on bitcoin saying that we are not seeing many retailers accepting cryptocurrencies. And he is right because if you look at the last year’s PayPal value of $500 billion dollars was all people buying stuff online which is actual retail acceptance. So he is not unjustified in the shade that he is throwing. Still, bitcoin merchant adoption is increasing all the time. Japan has made some huge moves in terms of bitcoin adoption. We have services like travelbybit which accept bitcoin for travel tickets, hotels etc.
Capital controls around the world make it very difficult for fiat and gold. Just imagine sending a billion dollars of gold. For example, if a person in Nigeria wants to send money to someone in France. The government is not going to let him send that money because of capital controls. But if the person has bitcoin, he can send the money within minutes without the permission of any authority. Bitcoin is highly divisible in comparison to gold which is not super easy to divide on the spot, however fiat can be. Merchant adoption is although very less for bitcoin but it is improving day by day.
Overall, Bitcoin remains above gold as well as fiat currency considering all the above-mentioned points. What are your thoughts on the same? Tell us in the comments section below.