Editor’s note: Joshua Seims is an angel investor and entrepreneur based in San Francisco.He is currently building a company that provides secure storage of bitcoins.Follow him on Twitter @jseims.A big question that’s debated in the Bitcoin community is “How much will Bitcoins be worth in the long term”.Here’s how I approach this question.First, I agree with the common sentiment that in 10 years, bitcoins will either be worth nothing, or a lot more than they are now — there is no middle ground.Arguments on the side that Bitcoin will succeed include: it’s incredibly viral — once you start using it, you want to use it as much as possible; you can use it to protect your wealth from government seizure, which is a big deal in many parts of the world; it has lots of great properties — negligible transaction fees, no regulatory contraints, anonymity (sort of), and the convenience of a pure digital construct; and government will have a hard time banning it due to its decentralized nature.

However, there are various scenarios that could lead to Bitcoin’s failure.Governments could effectively ban it if they tried hard enough.And given that anonymous payments threaten government’s ability to tax money, they may have enough motivation to try hard enough.In addition, a different crypto currency could succeed in its place.The Bitcoin protocol has some fatal structural fault, as well, that manifests at larger scale.tieu luan bitcoinAnd finally, Bitcoin will remain too nerdy and too uncool to break into the mainstream.bitcoin graph phpAssuming Bitcoin does succeed, what will it then be worth?vat on bitcoinLet’s look at what specific markets Bitcoin might capture.litecoin internet usage

There are three markets that are commonly discussed: Store of Value.Bitcoin has many gold-like properties (limited supply, divisible, fungible) plus more (don’t have to carry it with you physically, can’t be seized, highly deflationary while its popularity increases).According to Wikipedia, the world’s gold reserve is valued at $7.65 trillion.According to this study, black markets comprise 22 percent of the world’s economy (for a total currency value of $650 billion, assuming the same velocity of money as the wider economy).bitcoin rainbow tableBitcoin is an almost perfect currency for the black market, but not totally perfect in that it’s only pseudo-anonymous.aws bitcoin paymentAll transactions are publicly visible, so the flow of tainted coins could be followed.bitcoin price by 2020

While unlikely, Bitcoin could replace the world’s $3 trillion of currency value (gross world product/velocity of money).I’m not sure that would be a good thing (insert Austrian vs.Keynesian debate here), but it’s a possibility.Finally, if we assume 17 million bitcoins in circulation 10 years from now, we can put all this together in an interactive calculator (if you have trouble viewing the calculator, click here): For example, if I assume there’s only a 10 percent chance that bitcoins will succeed long term, and that if it does succeed, the total market value of bitcoins will be 30 percent of the current gold market, then each bitcoin is worth $13,500.bitcoin baliGiven that the current price of a bitcoin is $129, that’s a really good (albeit really risky) investment.bitcoin 30 gh/sIf you plug in your assumptions, what value do you get?Is it greater than the current price for bitcoins?

If so, you should buy some.Will Bitcoin ever become a major competitor to the world’s more conventional currencies?It certainly has some advantages over existing payment networks, thanks partly to its technical structure and partly to the fact that it’s largely free of regulation.But Henry Farrell argues that its freedom from regulation is a chimera: Up to this point, regulators have largely tolerated Bitcoin as a curiosity and experiment….But if Bitcoin were ever to threaten to become a truly decentralized payments network, owned by no one, and with no one e.g.capable of implementing Know Your Customer rules, regulators would know very well what to do with it.They’d introduce regulatory guidances and pass laws to freeze it off from the regular financial system.Very possibly, Bitcoin could still survive at the margins (as the Hawala system has survived).However, it would be isolated, and in no position to threaten Visa or Mastercard, let alone the underlying payment and messaging services that really underpin the world financial system.

If Tim Lee and other Bitcoin fans want to make the case that Bitcoin can become a major payment network, they need to do one of two things.First, they could show that the U.S.and other major states would not feel threatened by a well-established payment system that they couldn’t control.Second, they could show that a Bitcoin financial network would survive the opposition of hostile states that have enormous control over the actually-existing financial systems that Bitcoin needs to connect to, as well as regulators, police, etc. I don’t see any very plausible arguments that would support either claim.It’s perfectly possible that the underlying technologies of Bitcoin (which help solve some interesting problems of trust and exchange) can be deployed to other valuable uses.But Bitcoin is doomed as a payments network — the very point at which it looks as though it is likely to be widely deployed is the point at which governments, like that of the United States, will crack down on it.

This is almost certainly correct, and the interesting question, I think, is whether Bitcoin and its ilk can figure out ways to operate on a large scale without being effectively shut down by real-world governments.At the moment, I don’t see any way they can do that, but it’s not impossible that this will change in the future.The evolution of the internet itself provides conflicting guidance as an analogy.Generally speaking, national governments have had considerable difficulty regulating internet content.It’s just too distributed and fast moving.So perhaps digital payment networks similar to Bitcoin will eventually thrive because they pose similar problems to would-be regulators.Like kudzu, they’ll simply be impossible to contain.On the other hand, countries like China have shown that internet content can be regulated.It merely requires sufficient motivation.And even less authoritarian governments have managed to throw a lot of sand in the gears when they rouse themselves to action.

Given that regulating commerce and money is easier than regulating content, this bodes ill for the future of Bitcoin.There’s not much question that it can harried into uselessness if national governments decide to do it.Still, there are lots of currencies in the world, and it’s possible that a medium-scale version of Bitcoin could stay alive by remaining fairly modest in its connection to any one currency, but fairly large when all of its connections to all the world’s currencies are added up.This might cause problems of coordinated action that would end up defeating national regulators, especially if there were dozens or hundreds of different digital currencies to deal with.I’m not sure if the arithmetic here would ever add up to anything significant, but I’m also not sure it’s impossible.But if I had to put money on it?I’d say Bitcoin is doomed in the medium-term future.Farrell is right: it can be a bit of a curiosity, but if it ever enjoys wider success, that very success will kill it.