22 September 2014 by Guy Halford-Thompson

What will it take to bring Bitcoin Mainstream?

To take Bitcoin the technology, or bitcoin the currency mainstream could provide true value to society by breaking down the banking monopolies and offering entirely new ways for people to interact and do business together. Many proponents see the end goal of bitcoin to be a currency for the third world. Unfortunately a lot of the benefits of Bitcoin technology only come once it is mainstream, so the question is what will take Bitcoin mainstream?

Bitcoin is often compared to the internet with the blockchain providing the platform on top of which apps can be launched, and bitcoin the currency the first app to run on this decentralised platform. Initially the network was small and its uses very limited with only a select group of cryptographers keeping it running. Early adopters grabbed the interest of the darknet and Silk Road was born giving bitcoin its first big use case as a currency.

The numbers here are rough estimates but it is safe to say that Silk Road and other dark markets took bitcoin from a small but ambitious experiment to around a $1billion market cap. From here the interests of speculators took hold and pumped bitcoin to over $10 billion and back to $6billion again. For bitcoin to be used as a currency throughout the third world it would need to have at least $1trillion market cap (or 1/2 the GDP of india) from where it can start competing with other economies. This is a 100x increase from where we are now and would put the price of bitcoin at around $50k/btc.

I believe stepping stones are needed to push the price up to the next use case, of which there are several which alone are worth more than the current market cap. For example, according to the world bank migrants send a total of $581 billion home at an average cost of 8.4% - that is a profit of almost $50 billion - or 5x the market cap of bitcoin. In 2009 chargebacks on credit cards in the US alone accounted for $12billion - about the same as the market cap of bitcoin. Financial speculation from regulated Wall Street firms could eclipse all of this and take it to a whole new level from what we have seen so far.

New concepts to be built on platforms such as Ethereum could have an even bigger impact. Using the distributed web it is already possible to make websites that can't be DDOSed - this alone is worth the market cap of bitcoin. Corruption and fraud could be greatly reduced in large coorperations and governments through fully transparent accounting. As with all new technologies though, the most successful apps have not even been thought of yet.

So how will Bitcoin go mainstream? All the use cases I have talked about are already being built into user friendly applications and I believe they will act as stepping stones which will enable even bigger apps to gain value. Although it is a slow thing to get started once Bitcoin takes off I believe there is no stopping it. Will it become the world currency libertarians talk about? I doubt it. But Bitcoin based technology will underpin many activities of our daily lives much in the way the internet does already.

comments powered by Disqus