In The Currency Paradox, I wrote about why Bitcoin is unsuitable as a currency. I included mercifully little math in my essay but, for the purposes of this post, I’m going to have to resort to a little basic math to make my point:
21,000,000 / 7,200,000,000 =
This is the amount of Bitcoin each person on Earth would own if the full allotment of units were divided equally.
21,000,000 / 2,400,000,000 =
This is the amount of Bitcoin each working age person on Earth would own if the full allotment of units were divided equally.
21,000,000 / 120,000,000 =
This is the amount of Bitcoin each working age person in the U.S. would own if the full allotment of units were divided equally.
Right about now it should be dawning on you that there is absolutely no practical way Bitcoin can operate as a currency in its own right. Ever.
So what is the real reason behind the Bitcoin hype? It’s simple: speculation. The Bitcoin scene is more or less a cartel which is selling the convenience of Bitcoin as an exchange and payment mechanism to enrich those who got in on the ground floor.
The math clearly shows that there are far too few units to manage even the most basic economy. However, that scarcity is extremely valuable if Bitcoin is really designed to be a speculative vehicle.
It’s also clear that the only real value in Bitcoin is its exchange rate. Without the ability to exchange it for fiat currency, there is pretty much no true advantage in using Bitcoin as a common currency, at least not if you aren’t exceptionally gifted in fractional accounting.
Don’t get me wrong, I think the blockchain technology on which Bitcoin is built has revolutionary potential. But Bitcoin as a currency is just another exercise in the “greater sucker” theory. Buying Bitcoin won’t make you rich but it will make anyone who already controls a large amount of units very rich.