First, really nice job on the breakdown.
Interesting that BTC has nothing to really compare itself to. We are comparing it to payment forms using specific currencies. Where as BTC is it's own currency, which leads me to my point:
BTC as it's own currency throughout the world is going to impact potentially all currencies as it becomes both a store of value AND easily convertible. It is in another class of
currencies - a decentralized and Stateless entity that is DEFLATIONARY. Wow, imagine that. Something that doesn't get inflated out of value. Go down that rabbit hole with some deep thinking and you will come up with some interesting possibilities (to put it mildly). This alone has got to make banks watch their backs regarding the current 0% interest experiment.
I really think the convertibility is going to catch the world by surprise. Imagine people in 3rd world countries, countries with currency problems, etc. who can
just easily keep track of BTC's value in their own land. The dollar is currently the worlds currency, but has some limitations (e.g. - See Argentina banning it's use) and so BTC can easily be
used around any walls on an Android phone (until Apple takes it's bank out of it's...). It will take a bit more time and some more infrastructure but that really looks like it is on the way.
It's about sharing
The convertibility issue (Crypto/Fiat interface) is the unresolved issue that I see. What kind of functional market mechanism do you anticipate people using convert their Crypto to Fiat to make use of their funds "in-country?"
Perhaps I am ignorant but I think it is quite simple. Until stability is reached in BTC, they are going to have to have something in the way of an app on their android cell that converts their currency into BTC. I just see the solution being smart phone based for customers and store keepers alike (though the latter can of course use something larger if possible - but maybe a phone is enough? After all, we are talking 3rd world and countries with currency issues.) Just scanning QR codes as a means of exchange. Going from BTC back to their own currency, I guess that would have to be online, except for those people who wish to have some cash (for whatever reason) and then they can act as exchangers. I really see the local markets finding their own way, but it is in a sense already there. Due to the deflationary aspect it seems that most people would benefit from having BTC and not local currencies, at least once some stability is reached.
Is this what you meant? The mechanism is just some smart phones and apps.
Not really. You are proposing a technology for a transfer but you are not answering the basic questions about how the Fiat side of an exchange plays out. In your example (third world hyper inflationary economies):
A. Commercial Issues1. Who will "buy" the local currency for Bitcoin knowing that it is rapidly depreciating?
2. Won't everyone want Bitcoin except for their immediate day to day needs -- for which they can use their paychecks or business cash flow?
3. How will they get bitcoin if no one wants to trade for the local currency at scale?
4. In essence, isn't this going to be a one-sided market?
B. Regulatory Issues: 1. Wouldn't you expect the Government of said country to place immediate restrictions on the use of bitcoins as they don't control it -- the same way they do on USD transactions?
2. Won't that choke off the flow of funds as well?
3. At the grass roots level, can't they can basically arrest merchants for having the "app" on their machines, randomly check phones, etc... this is third world after all?
4. Do you view the Mt. Gox/Dwolla shutdown as a paperwork oversight or a shot across the bow?
5. Isn't the need to obtain money transmitter approvals state by state enough to stop bitcoin exchangers temporarily while more permanent regulations are promulgated?
These are just off the top of my head, and I am certain that I am missing many more important economic issues surrounding the Crypto/Fiat interface. But it's a start. In the absence of significant market share, I still don't understand how Crypto really gets off the ground for Mom and Pop and those wanting to do regulated business.
great!
