Hyperbitcoinization: What Is It & Is it (Even) Possible?
Read on to learn what hyperbitcoinization is and whether living in a “hyperbitcoinized” world could really become a reality in the future.
What is Hyperbitcoinization?
Hyperbitcoinization is the point in time where Bitcoin becomes the default value system of the world.
It’s a state where, as more people around the world see the benefits of a borderless, transparent, and natively digital system for making financial transactions, a huge number of people will eventually fuel the replacement of traditional fiat currency with sound money, i.e., bitcoin.
Daniel Krawisz of the Satoshi Nakamoto Institute defines hyperbitcoinization in an article as follows:
“Hyperbitcoinization is a voluntary transition from an inferior currency to a superior one, and its adoption is a series of individual acts of entrepreneurship rather than a single monopolist that games the system.”
People across the globe have started to understand and appreciate the digital currency as a store of value, calling it “digital gold” and using it to hedge against the devaluation of traditional fiat currencies.
For example, runaway inflation in Zimbabwe, Argentina, and Venezuela has led to many people holding bitcoin as a hedge against economic instability, broken payment systems, a weakening currency, and monetary controls by the government.
Unlike fiat currency like the US dollar or euro, bitcoin has a finite supply of 21 million units, which means more bitcoin cannot be printed or mined to dilute its value. That’s a stark opposite to fiat currencies that central banks have been printing aggressively in an attempt to boost economic activity, leading to high inflation and making fiat currencies worth less.
With increasing bitcoin adoption, the growth of bitcoin could become exponential, and the cost of rejecting bitcoin could exceed the cost of adopting it. Because of this, bitcoin has the potential to assume the traditional roles of fiat currencies and gain broader mainstream, institutional, and government support.
Essentially, advocates of hyperbitcoinization believe that Bitcoin’s superior value proposition will lead to the replacement of fiat currencies with the cryptocurrency.
The Unbeaten Path to Hyperbitcoinization
Satoshi Nakamoto, the creator of Bitcoin, envisioned the technology as a more robust monetary system with a distributed structure, making it possible for every single individual to have full control over their money.
Money has evolved over the last centuries, from cowries to gold and to government-backed fiat money. Fiat currency has value because the government claims that it has value. There is essentially no other intrinsic value to fiat money than that.
Hyperbitcoinization advocates believe that the next step of the evolution of money is to have digitized money that’s a better store of value, borderless, and more efficient, enabling a better global monetary and financial system.
So far, bitcoin is primarily used as a speculative asset, but bitcoiners argue this is only the first few steps to hyperbitcoinization.
As bitcoin marches towards monetization, it will have to absorb a huge amount of wealth from fiat-backed assets, until the potential collapse of fiat currencies. This process implies that Bitcoin will reach an almost unfathomable market value, and asset classes such as real estate and equities will be repriced against bitcoin.
Living in a Hyperbitcoinized World: What It Could Look Like
A hyperbitcoinized world will be different from what we know today. Money accounts for over 50 percent of the value of all transactions globally. Therefore, having sound money can create a foundational change to our most important social systems.
Speculating about the future is never an exact science, but it can help us to understand some things we can expect tomorrow.
Imagine 50 years from now. Bitcoin is the global currency and every country is on a Bitcoin Standard. Individuals make payments with their bitcoin wallets on one of the several layer-2 solutions on Bitcoin, like the Lightning Network at almost no cost. Every eCommerce platform and local shop accepts bitcoin. You can also pay taxes in bitcoin. Many banks and other financial institutions have been replaced by decentralized applications, powered by Bitcoin. BTC has become the unit of account for assets and new distributed infrastructures of computing and identities, etc.
Numerous countries are now making good use of the abundance of renewable, green energy to mine bitcoin, establishing gargantuan mining farms. Of course, there’s already a wide use of renewable energy across the world.
Will Hyperbitcoinization Really Occur?
Bitcoin adoption is growing rapidly. Fiat currencies are crashing.
One country has already led the way by making bitcoin a legal tender and institutions are buying large amounts of bitcoin on their balance sheet. At this point, the possibility of hyperbitcoinization is looking like a matter of “when” not “If.”
However, for hyperbitcoinization to happen, billions of new users will have to start using bitcoin. There also has to be a plethora of retailers and merchants that accept bitcoin.
Right now, high inflation in some countries is driving people to bitcoin. The worse inflation gets, the better it can be for bitcoin adoption. Also, it’s getting harder for governments to prevent bitcoin from being used within their borders, and the Bitcoin economy has gone global and now reaches almost all corners of the world. Therefore, people will be able to access bitcoin more easily once they are ready to make the switch.
Dan Held, a leading Bitcoin advocate, estimates that a decade to the actualization of hyperbitcoinization would be a conservative estimate, explaining that rapid devaluation of fiat currency and worsening global economies could force people to choose better money alternatives.
No one can tell exactly when (or if) hyperbitcoinization will happen, as more and more people lose trust in today’s financial system, more and more of them will switch to Bitcoin.
- Hyperbitcoinization is the point in time where Bitcoin becomes the default value system of the world.
- Advocates of hyperbitcoinization believe that Bitcoin’s superior value proposition will replace fiat currencies with the cryptocurrency.
- No one can predict the future, so we will have to see how the adoption of Bitcoin will play out.