Will Bitcoin Take Over The World?

Advocates will tell you that bitcoin will take over the world because of its low, often zero, transaction costs. But this argument is flawed.

Suppose you want to pay an online retailer in bitcoin. First you have to transfer some real money to a bitcoin exchange - your bank or credit card will charge you for that. Then you convert the money to bitcoin - your bitcoin exchange will charge you for that. Then you transfer bitcoin to the retailer - at zero cost. Then the retailer converts the bitcoin back to real money - for which he will be charged. A zero cost transaction? Hardly.

Cost vs price. The cost to a bank of electronically transferring money from one place to another is approximately zero - just like a bitcoin transfer. The price the customer pays for that transaction is a quite different thing and includes other services, not to mention a profit. If the bank transfer goes wrong, or money is fraudulently transferred out of your account, the bank will sort it out.

There are, at the very most, a few million people worldwide who own bitcoin. In the Americas, Europe, India, Russia and China there are over 2 billion adults who hold dollars, euros, yuan, rupees or pounds (so-called fiat currencies) - 99.9% of them do not hold bitcoin.

The world's un-bitcoined 99.9% are, by and large, not champing at the bit to rid themselves of their fiat money. Those who want to hedge against currency devaluation will buy gold, not some here today maybe gone tomorrow computer money (hard though that may be for the nerdy to understand). Bitcoin mania aside, of course.