These calculations are thanks to Arthur Britto:
AmazonAmazon grosses $38 billion per year. Assuming a 3% transaction fee, Amazon pays $1 billion a year in transactions fees. Amazon nets $1 billion per year. Amazon could double their profits by doing all transactions in Bitcoin. If the market cap for bitcoin was $38 billion, each bitcoin would be worth $5,400.
GamblingThe online poker market is $4.8 billion a year industry. Online gambling will follow poker and is a $30 billion a year industry If the market cap for bitcoin was $30 billion, each bitcoin would be worth $4,300.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747646Gas stationsCredit card companies charge gas stations a 2% transaction fee. By eliminating credit card transaction fees, gas station owners could double their profits. The US consumes 65 billion gallons of gasoline per year. At $3.60 per gallon, this could be a $234 billion dollars going through the bitcoin economy's per year. If the market cap for bitcoin was $234 billion, each bitcoin would be worth $34,400 dollars.
International RemittanceInternational remittance is the transfer of money by a foreign worker to their home country. In 2007, remittance worldwide transferred $300 billion dollars. Western Union fees for remittance can run from about 4 percent to 20 percent or more. If the market cap for Bitcoin was $300 billion, each bitcoin would be worth $42,000.
These estimates equate transaction volume with the total value of outstanding bitcoin, which is incorrect. The missing factor is velocity of money, I.e. the rate at which it flows. The same money can take part in multiple transactions over a given timeframe. Specifically, V is defined as T/M where T is the nominal transaction volume over a given period, and M is the monetary base. For example, the current velocity of US dollar M1 is about 7, measured on a quarterly basis (
http://research.stlouisfed.org/fred2/series/M1V). This means the entire monetary base of M1 turns over 7 times a quarter or 28 times a year. It's hard to estimate velocity of bitcoin very accurately, but based on blockchain.info estimated daily transaction vol of 229,000 on a base of 9M, that gives V=2.3 on a quarterly basis, or 9.2 on a yearly basis. It's hard to know how v will change in the future, but based on the current velocity, Arthur's estimates for bitcoin market cap are probably too high by a factor of 10 or so (with a large margin of error, however). Note that if more bitcoin is hoarded, then the portion that is used transactionally either must move faster, or the value must be higher to support a given level of commerce.
The internet would probably also collapse... We would probably need much more capacity, hard drives would be too small, processing power too slow, and we would need like a few hundred different crypto currencies...
