There’s this question I keep coming back to: “If Bitcoin had been able to match Visa’s transactions per second from the start, what would its value be now, today?”
Bitcoin can handle about 7 transactions per second. For comparison, Visa can handle somewhere in the region of up to about 25,000 transactions per second.
Clearly with just 7 transactions per second, Bitcoin never stood a chance of being used as a form of every-day money — and as a result: by how much has its value been held down for the last fifteen years?
Wait, what? Held down you say? But the value of one bitcoin has gone from a fraction of a cent to around $30,000, how is that ‘held down’?
Well, what if by now, fifteen years after its creation, it was worth say $1,000,000 instead of just $30,000? That’s the kind of ‘held down’ I sometimes wonder about.
When we buy things, whatever they may be, we use dollars, or pounds, or euros, or yen or won or yuan. But what if we didn’t? What if we were all using Bitcoin instead?
There’s an estimated global money supply of around $50 trillion in circulation, which includes all the money in circulation plus travelers checks and demand deposits like checking and savings accounts; although if you also include mutual funds, smaller time deposits, money market securities and other types of time deposits, then the figure comes out as around $85 trillion dollars. Note: there’s actually even more money than this if you also include various forms of additional derivatives etc, but let’s not get into any of that here.
For comparison: all of the gold in the world is worth around $12 trillion, the US national debt is currently over $30 trillion, and all of the world’s real estate, which isn’t money of course, is estimated to be worth a whopping $325 trillion.
Let’s just stick with the smaller figure of $50 trillion dollars for our purposes though. What if Bitcoin had replaced all of that by now?
Well, if it had, then the world would probably be quite the mess, and all kinds of incredibly important things would have changed (some for better, but many likely for worse too no doubt), but again: let’s not get into any of that here either.
If Bitcoin had a marketcap of $50 trillion dollars, rather than the $0.5 trillion dollars it has now, then one bitcoin would be worth around 100 times the amount it is now, i.e. one bitcoin would be worth the equivalent of (in today’s dollars) about $3,000,000 (note: it would actually be quite a bit more than this due to various liquidity and market considerations, but for this post let’s just keep things simple).
Including even more of the world’s money (the above-mentioned $85 trillion figure) would make one bitcoin worth about $5,000,000.
If Bitcoin had been able to match Visa’s transactions per second from the start — if it had been launched with a fair chance of ever being adopted as real-life useable money from the start — what would its value be now?
Who knows? More than it currently is now? Or maybe actually less? Perhaps such a rapid rise would have resulted in governments all over the world fearing hyperinflation of their currencies so much that they all collaborated to make owning Bitcoin illegal — and as such Bitcoin’s value plummeted down to near zero. Or maybe something entirely different would have happened.
Would we have adopted Bitcoin as money by now? And if so, to what extent?
The fact of the matter is, of course, that, at the time of writing, Bitcoin can still only manage about the same 7 transactions per second it could when it was created way back in 2009.
It’s still nowhere near being able to compete with — and therefore can’t yet capture any of the marketshare of — any of the actual real-life currencies used in daily life.
Perhaps The Lightning Network (the most promising Bitcoin-scaling solution proposed so far) will slowly begin to change all this.
It’s important to note that for Bitcoin to become a global currency used by everyone, for all of their daily transactions, it would actually need to process a lot more transactions that the 25,000 a second or so that Visa can do, but hey: 25,000 would at least be a good start!
Oh, and for anyone screaming ‘What about Litecoin or Bitcoin Cash etc?’ — two things: 1. they aren’t Bitcoin, and 2. they really aren’t Bitcoin: most people have still never even heard of them. Plus 3. Actually those can still only handle about 50-150 transactions per second (so still not nearly enough anyhow).