After becoming the first country in the world to adopt bitcoin as a legal tender in September this year, El Salvador is now said to be charting out the path to hyperbitcoinisation. The El Salvador President Nayib Bukele also announced a plan to build an oceanside 'Bitcoin City'.
Over the weekend, it announced tie-ups with Ifinex, which runs trading platform Bitfinex, and blockchain technology company Blockstream. While ifinex will help the government create and implement appropriate cryptocurrency regulations and guidelines, Blockstream will help them in issuing $1 billion worth bitcoin bonds to accelerate the adoption of bitcoin.
But what exactly is hyperbitcoinisation?
The term hyperbitcoinisation was reportedly coined in 2014 by Daniel Krawisz in his Satoshi Nakamoto Institute article, per an article by Nasscom.
Hyperbitcoinisation means the regular use of the digital asset as a transactional currency. It is held and used by individuals and businesses just like any other government-issued currency.
Simply put, the term hyperbitcoinisation means mass adoption of digital currency. An article in bitcoinmagazine explained it as the point when bitcoin becomes the world’s preferred currency, and the digital currency will no longer be priced in any currency equivalent i.e. one BTC will be worth one BTC, and BTC won’t regularly be exchanged (or sold) for any other currency. All goods and services will be available for BTC and, critically, this economy will be deflationary, as opposed to inflationary.
Blockworks quoted Kraken growth lead Dan Held describing the phenomenon as the point where the “entire world comes to see bitcoin’s value.” He was speaking at a panel discussion at the Bitcoin 2021 conference in Miami.
But a question that is widely discussed by experts around the world is whether hyperbitcoinisation will happen anytime soon.
A July 2021 article by Yahoo finance quoted a Finder survey of a panel of 42 cryptocurrency experts that suggested Bitcoin will replace fiat currency by 2050. An astonishing 54% of the panel believed hyperbitcoinisation — the moment that Bitcoin overtakes global finance — will happen by 2050.
Kraken's Dan Held said: “I would say at least a decade for hyperbitcoinization would be the most likely and actually conservative estimate."
"If we do have an event where there’s a rapid devaluation of fiat currency, bitcoin starts to surge or gets close to $1 million per bitcoin — a supercycle-esque moment — then we could see it much sooner, maybe five-six years or so, but that would be a very unlikely outcome,” he said.
However, Saifedean Ammous, author of “The Bitcoin Standard" has a more conservative approach and believes it could take a little over 15 years.
While it is difficult to estimate the time required to achieve hyperbitcoinisation, bitcoin as a transactional currency does seem like a distant reality to many. As Held pointed out, "For hyperbitcoinization to happen in the next ten years, billions of new users will have to be onboarded. There are a plethora of security and regulatory concerns stopping many retail and institutional investors today, but the landscape is starting to change."
(Edited by : Abhishek Jha)