Do we gain anything by using Bitcoin as a digital currency.
A simple exercise and some questions, presented as food for thought and discussion
Lets begin
Jim and Dave are brothers, Jim is into Bitcoins and tries to get Dave involved also. Dave doesn't believe in Bitcoins, but proposes an experiment! In January 2018 both men will charge up VISA debt cards with $50,000 each, they will use the VISA cards for all of their purchases, including a holiday!
They plan to go on holidays to Barbados at the end of the year, at that time they will compare results
Jim
- Jim purchases 10 Bitcoins, each worth $5,000 on January 2018
- He charges a VISA Bitcoin wallet with those 10 Bitcoins.
- During the year goods and services are subject to normal market variations
- The value of the Bitcoin is also subject to cryptocurrency market variations!
- During the first 6 months Jim purchases $25,000 worth of goods and services.
- In late July the Chinese government declares all Bitcoin trading illegal, the Bitcoin market slumps
- Within a few weeks the Bitcoin is worth just $2000 each
- Jim is left with just $10,000 worth of Bitcoins to keep him going till years end
- At the end of the year Jim has lost $15,000 worth of buying power
Dave
- Dave charges his VISA card with $50,000 on January 2018
- During the year goods and services are subject to normal market variations
- The $50,000 on the VISA card doesn't change in value.
- During the first 6 months Dave purchases $25,000 worth of goods and services.
- In late July the Chinese government declares all Bitcoin trading illegal, the Bitcoin market slumps
- Dave is totally unaffected by the slump
- Dave has $25,000 and 6 months of spending left and a holiday to fund.
The end result
- Jim's investment into 10 Bitcoins was affected mid year and he lost money
- Dave's $50,000 kept its value, as a dollar is a dollar
- Bitcoin is subject to two market variances
- Using Bitcoin to purchase goods and services has no advantage, only disadvantage
- Jim couldn't afford to go on holiday and asked Dave for a loan! :)
Questions and my answers
- What is the point of having Bitcoin as currency? No point really, its value is too volatile.
- Is there a future for Bitcoin as a real currency? Only if its value is fixed
- Who are the big winners? The Bitcoin founder the early adapters and miners
- Who are the big losers? Potentially, the investors
- So why is Bitcoin so popular? Because it offers an opportunity to make money
Am I missing something, have I got it right?
Please feel free to comment..
Cheers Jim!
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