9

1

The VISA network (VisaNet) supports 4.4 Trillion dollars of commerce per year (2009). If we assume (somewhat arbitrarily), that the Bitcoin Days Destroyed metric approaches 50% (half of all coins are used every day, on average, to facilitate transactions), then the value of the Bitcoin required to support 10% of the transactional volume in the VISA network (once all coins are minted) is $4.4T * 10% = $440B / 365 days/year / (21M BTC * 50%) = $114.80.

Does this approach seem valid? 50% BTCDD is arbitrary. 10% of the VISA network, is arbitrary but seems like a reasonable goal. What needs to be changed to improve this estimate, and what would a better way if any to compute the imputed value of the BTC based on its use as a transactional currency, rather than a speculative store of value?

1I do not get the assumptions that it could be doing 10% of the volume of visa, but that no one would be holding all their coins for more then a day. – osmosis – 2011-09-20T18:55:17.693

1@osmosis The 10% assumption is somewhat arbitrary, but is used to size the opportunity for Bitcoin relative to the largest payment process network that exists today (VISA). If you accept that assumption, then the next question is: how many of the total number of Bitcoins will be utilized daily to facilitate the assumed velocity? If the answer is only 10%, then the imputed value of the BTC actually needs to be 5x higher, or $574. Likewise, if we assume that the Bitcoin only ever supports 1% of the VISA network with just 5% of the coins in transition per day, the implied value is smaller. – Andrew Jones – 2011-09-20T20:28:37.407