Market IntelligenceVote: Will Bitcoin and Other Digital Currencies Be Here in 5 Years?Jeff John RobertsBitcoin is the world's most famous crypto-currency but, these days, you barely hear about it.Instead, the buzz has shifted to blockchain, the underlying technology for bitcoin, which banks are now using for day-to-day business.Meanwhile, newer and more versatile types of digital currency are overshadowing bitcoin.This raises the question of whether bitcoin even has a long-term future.I recently spoke with Faisal Husain, the CEO of Synechron, which advises banks about blockchain, and asked him if he thought bitcoin and two other well-known crypto-currencies—Ripple and Ethereum—will still be around in five years.His answer: two of the three currencies will survive, but he wouldn't say which ones.You can weigh in yourself by taking our poll below, but I confess I don't see an obvious candidate for failure—or success.RelatedBiotechWhy Cancer Biotech Clovis Oncology’s Stock Is SoaringBiotechWhy Cancer Biotech Clovis Oncology’s Stock Is SoaringIn the case of bitcoin, it's by far the biggest with a market cap of around $11 billion, but its core use case is still for sketchy stuff, such as ransomware payments or buying drugs on the Internet.

Meanwhile, mainstream bitcoin companies like Coinbase and Circle are pivoting as fast as they can towards more general forms of Internet money transfers.Ripple has the advantage of being both a currency and a transport protocol, and the company that bears its name has recently locked up a number of high profile partnerships with major banking institutions.This bodes well for the company, though it's less clear the currency (known as XRP) has a long-term role.Bankers like using Ripple's infrastructure to move money around, but several have told me the currency is unnecessary, and that banks do not want to be forced to use it in the course of foreign exchange transactions.Get Data Sheet, Fortune’s technology newsletter.As for Ethereum, it's attracting the most enthusiasm right now among developers (see my colleague Robert Hackett's recent profile in Fortune), appearing to be the most versatile and sophisticated form of crypto-currency.But it's market cap is less than a tenth of bitcoin.

(Ethereum is worth around $1 billion, while Ripple is third at around $250 million.)All this doesn't mean, of course, that all these crypto-currencies can't flourish in the future.According to Adam Ludwin, CEO of a well-respected blockchain company called Chain, the three currencies will still be around, and the financial ecosystem will even integrate newer ones like Zcash (in which he is an investor)."Idon’t think they’ll ever go away.One of their design principles is resiliency in a hostile environment," Ludwin says.ethereum 2017 price prediction"Bitcoin [especially] is a clear and sustainable project."Hebitcoin difficulty sharesadds that bitcoin and other crypto-currencies also have a place as a distinct asset class, like gold, for people who want a store of value outside conventional currencies and investments.So what do you think?bitcoin forum vbulletin

Take our poll and predict if the three most well-known crypto currencies will still be around in five years:And, of course, take whatever results you see with a grain of salt.Online polls are not known for being conclusive.Furthermore, in the case of crypto-currency, there tends to be a selection bias in terms of who will take such a poll (think crypto-geeks and speculators) in the first place.I personally think very few people grasp how to gauge the long term return potential of Bitcoin vs alt-coins.bitcoin per klickI often hear people say that Bitcoin is no longer cheap and that alt-coins have more return potential being in their earlier stages, while they chase returns similar to Bitcoin’s ungodly growth during its drug-induced SilkRoad euphoric climb to notoriety.ethereum tickerIn this article I’m going to apply some actual theory in order to get solid numerically based estimates on what the limits on returns are for Bitcoin and alt-coins.bitcoin mining video card table

To do this, I’ll be using The Quantity Theory of Money.In essence this is a pretty obvious equation that economists like to use to describe economies.The Quantity Theory of Money In plain english, this theory says that within an economy, the money that is spent must equal all the goods and services sold.This can be put down into an equation like this: On the left side we have the money spent: M – this is the monetary supply V – this is the velocity of money, or how many times the money supply is spent during the measured time period On the right we simply the value of goods and services: PT – price level multiplied by the transactions Okay, this is straight forward… Onwards, let’s run some numbers… Let’s value the size of the Bitcoin economy To value the Bitcoin economy, we’ll make some assumptions about our encompassed economy.buy bitcoin poloniex

They will be extreme assumptions as we are after the maximum value for return: Bitcoin takes over all online retail sales by 2020 ($4.06t) [1] Bitcoin takes over all retail sales by 2020 ($27.2t) [1] Bitcoin takes over all GDP by 2020 ($93.6t) [2] [ [2] – source: Wikipedia In order to calculate results, we’ll need some details about the left side of the equation, the money supply and the velocity: Bitcoins in circulation by the end of 2020, we already know with great certainty will be 18.5M Bitcoin velocity?bitcoin to wmz exchangeSince Bitcoin is similar to a savings account, I’ll use US M2 velocity which represents cash and savings/cheque accounts.litecoin indonesiaIt varies, but historically has been around 1.7 quarterly, so 6.8 annually.To calculate growth potential I’ve used today’s price of $740USD per BTC.

Plugging this into the equation in our 3 scenarios gives these results: Market size Money supply (max market cap) M = PT/V Maximum price per coin Potential Growth All online retail sales, 2020 $4.06t $597b $32,300 44x All retail sales, 2020 $27.2t $4.0t $216,000 292x All GDP, 2020 $93.6t $13.8t $746,000 1010x Let’s value the size of the Safe Network economy Okay now that we’ve done Bitcoin let’s compare to an app-coin economy.For this example I’ll pick MAID.The MAID token is linked to the Safe Network which aims to replace cloud computing and storage services.Additionally it aims to use the token to run a SaaS economy within its decentralised network.When the network goes live, MAID tokens will be converted to Safecoins and used as the token of payment on this network.Again, I’ll make some wild assumptions to estimate the absolute maximum for this economy: The Safe Network gobbles up the entire cloud computing sector by 2020 Total market size of public cloud services reaches $423b in 2020.

Gartner estimates this as $204b in 2016, I’ve assumed a generous compounded growth of 20% per annum.For the velocity of Safecoins, I’m going to assume a similar value as M1V, or US velocity of hard cash which is around 6 quarterly or 24 annually, i.e.each token gets circulated 24x each year.One may make an argument that an app-token also represents a store of value and there will be holders of the currency for savings and speculation.So in this scenario M2 velocity, like I used for Bitcoin, may be more appropriate.I shall use M2 velocity as an alternative scenario.To calculate growth potential I’ve used today’s price of $0.07 USD per MAID.Here’s the results: Market size Money supply (max market cap) M = PT/V Max price per coin Potential Growth All public cloud services (2020) using US M1 velocity $403b $16.8b $3.92 56x All public cloud services (2020) using US M2 velocity $403b $59.3b $13.80 197x Some notes about the assumptions I made some large assumptions in this analysis: I’ve used 2020 as a date in the future to run these estimates.

Obviously it’s overly optimistic for adoption, but I wanted to use market size figures that are within our realms of predictability.If the markets grow roughly at the same rate over a longer term the results when comparing alt-coins to Bitcoin will be similar.We really don’t know what the velocity of money will be in these economies, so I used a best guess from US monetary velocities.If they deviate from my assumptions the results may vary substantially.In my last estimate of Bitcoin expressed in terms of World GDP, I used a simplistic calculation assuming all industries will be paid for in bitcoin.In a scenario where crypto currency takes over, you should deduct all market segments using alt-coin currencies as payment to arrive at the remainder which will be the M2 money supply for Bitcoin.Bitcoin in real life likely has a much lower velocity and a much higher return that this analysis suggests due to the hoarding nature of its environment.In a world of 2 competing currencies, say Bitcoin and fiat, people will spend the weaker one, the one that devalues, and hold the stronger one.