Where will Bitcoin be in 20 years' time?
If you ask a dozen people this question, you'll probably get a dozen different responses. While financial figures such as JP Morgan CEO Jamie Dimon criticize cryptocurrency and call Bitcoin a bubble, internet forums are full of true believers who are convinced that Bitcoin is yet to get anywhere near its eventual peak valuation.
Bitcoin was created in 2009 and has grown massively in both value and hype over the past decade. It's impossible to know yet exactly where Bitcoin's journey will end, but there are indications of at least five different directions Bitcoin could take.
1. Bitcoin replaces fiat currency
The original idea behind Bitcoin was to create a global currency beyond the control of any national government. With incredible price volatility and an enormous overall upward trend in value since its launch, Bitcoin has become much more of a speculative investment vehicle than an actual currency.
Early adopters of Bitcoin mostly believed in its potential as a replacement for fiat currency. Its skyrocketing value has made some early transactions seem crazy in hindsight.
Some notable stories include two pizzas being bought for 10,000 BTC, which today would be worth more than $80 million USD. Another wild anecdote is the story of a taxi driver in Seoul who held onto a fare paid in Bitcoin. The small sum he received has since made that taxi driver a millionaire.
These stories make it clear Bitcoin is still a long way from becoming a true currency, but amid all the hype about its investment potential, it should be remembered that this was the original intention.
2. Bitcoin becomes the new gold standard
It seems unlikely that Bitcoin will ever fully replace fiat currency. However, there are a lot of indications that it could play an important role in the global economy, becoming a modern replacement for the outdated gold standard.
Governments across the world have taken a strong interest in the potential of Bitcoin and cryptocurrencies. The United States is currently able to exert massive influence over the global economy due to the dollar's pre-eminence as a vehicle of international trade. Countries such as China and Russia have an obvious interest in any technology that could change that.
National banks have already started using blockchain technology to better keep track of gold. Cryptocurrency has a number of features that make it better suited to being a lynchpin of the global economy than shiny metal.
First, it is far easier to keep track of how much cryptocurrency exists and where it is stored. Current estimates of how much gold is stored within a given vault will always run the risk of being at least slightly inaccurate. This is something blockchain technology can help keep track of, but a better solution may be to completely underpin economies with cryptocurrency.
Another reason Bitcoin is suitable for this task is that it has many of the same qualities that once made gold a great facilitator of international trade. It is a finite resource that is difficult to "mine." It is also completely non-perishable and future-proof. In short, Bitcoin has all the advantages of gold while inherently fungible store of value.
Bitcoin is already showing signs of operating on a similar principle to gold. In times of geopolitical uncertainty, Bitcoin's value increases as investors see it as a commodity that's untied to any one national economy.
The world has been rocked by numerous geopolitical shocks and tensions in recent times, from Brexit and Trump's shock election win (and 2020 loss) to ongoing tension between the United States and North Korea.
Every time one of these issues hits the headlines, Bitcoin's exchange value rises against the currencies of the countries involved.
3. Bitcoin is supplanted by regional cryptocurrencies
When China announced in September 2017 that the country was shutting down all Bitcoin exchanges, it appeared to be an existential threat to Bitcoin's existence. China is by far the Bitcoin mining capital of the world and many speculated that the Chinese government's stance could lead to the cryptocurrency's downfall.
As with other past panics, Bitcoin's value weathered the storm, but this story is far from over. China has developed its own cryptocurrency as a national alternative to Bitcoin, in much the same way the country has replaced foreign social media networks with Chinese alternatives.
China isn't alone in pursuing this path. Regional rival Japan is another hotbed of cryptocurrency investment and the Japanese government has recently announced its intention to launch a government-run national cryptocurrency. Similar initiatives have been announced by governments across the world, from Uruguay to Estonia.
Whether these national cryptocurrencies will stifle Bitcoin's growth as a global currency is the subject of much debate.
As with most things related to cryptocurrency, these developments are completely unprecedented and therefore impossible to predict with any certainty.
4. Bitcoin loses out to a competitor
Bitcoin is the best-known and highest-valued cryptocurrency, consistently trading at around ten times the US dollar price of its nearest competitor, Ethereum. Bitcoin is a household name, with mainstream media buzz and brand recognition far beyond any other competitor. But this is no guarantee of future success.
Myspace launched long before Facebook and was the first social network to achieve household name status. Within months of Rupert Murdoch's News International paying $500 million for the brand, its popularity tumbled. Today Facebook is worth more than $780 billion, while Myspace is worth a fraction of what News International paid for it.
Similar fates have befallen market leaders in many other tech niches. Nokia seemed untouchable as the world's biggest cellphone company until Apple launched the iPhone. Bitcoin is in no way immune from suffering the same fate.
Myspace and Nokia lost out to Facebook and Apple because their competitors offered a better product. Facebook replaced the garish user-generated profile pages of Myspace with a streamlined design and an intuitive user interface. Apple completely revolutionized cellphones by producing the first smartphone.
In many ways, Ethereum is a superior product to Bitcoin. It already has greater practical value with its built-in ability to enable smart contracts and enable this past years innovation in decentralized finance. Microsoft is working on making it easier for companies and users to utilize Ethereum. Given how accessible Windows made personal computing, Microsoft have a fantastic track record in simplifying complex new technologies. Countless other major tech firms and financial institutions are plowing huge resources into further developing Ethereum.
Of course, Ethereum could also be supplanted by a newer and more innovative form of cryptocurrency. The recent history of tech innovation shows that Bitcoin's present dominance is no guarantee of future success.
5. Hard forks become a prelude to war
Bitcoin survived the drama surrounding the segwit fork that was aimed at improving the blockchain's transaction speed and Ethereum has endured through a similarly turbulent split that resulted in the creation of Ethereum Classic. If cryptocurrency keeps growing in global economic significance, future forks have the potential to be a lot messier.
A hard fork occurs when a cryptocurrency splits in two. The reason behind this is usually that users want to improve the cryptocurrency in a way that essentially requires remaking it. The new cryptocurrency produced in the hard fork picks up where the previous form left off, while the original currency continues to exist. Anyone who held the cryptocurrency prior to the fork will now own an equal amount of both versions.
Hard forks have so far produced a lot of internet drama and price volatility. In the future, these online tiffs might escalate into full-blown war.
Bitcoin and other cryptocurrencies are a finite resource that has to be mined. Controlling oil, diamonds and other valuable commodities have led to countless wars throughout human history. With controlling cryptocurrency production playing an ever-more important role in geopolitics, in a few decades we might see armies battling other alternative proposals for crypto development.
It's impossible to say at this point which of these five futures is most likely.
Cryptocurrency is a very new phenomenon and Bitcoin is still a little more than a decade old.
Whatever Bitcoin's fate, the blockchain genie is now out of the bottle. In one form or another, cryptocurrency will almost certainly play a massive role in the history of the 21st Century.