[Changu]

I was hoping to read his thoughts on Bitcoins market cap of about 200 Billion Dollar.

I have the theory, that the value of a cryptocurrency is equal to the sum of transaction fees people will spend in the future, discounted for inflation.

Currently Bitcoin users pay about $5m per day on transaction fees. That is $1.82B per year. At this rate, it would take 109 years to reach those $200B.

So by that logic, the market predicts a strong future for BTC. Either it will be around for very long or its usage will grow.

Personally, I am skeptical. I think there will be too much competition. It might be hard to replicate the BTC ecosystem but I don't think it is $200B hard. Especially since there will be rapid changes to the whole crypto space in the coming years (offchain transactions, alternative mining forms etc).

I expect we will end up with a currency that does not need mining at all. I think we will end up with a currency that uses signed transactions that are simply broadcasted. The receiver asks a bunch of trusted nodes "Is this a double spend?" and if they reply "no" then the payment is accepted.

That is simple, instantaneous and free. And has almost no real life downsides compared to Bitcoin.

[matthewbauer]

Interesting thoughts but I think "the sum of transaction fees people will spend in the future" is better as a value for mining (after rewards go to 0). "Holders" really aren't wanting anything to do with transactions.

My Bitcoin valuation:

Bitcoin is worth as much as it costs to move to another blockchain.

That's the "first-mover advantage" basically and I'm afraid it's much closer to $200 million than $200 billion.

[Changu]

That seems to imply that the BTC market cap is the result of speculation. Of people holding BTC because they think some greater fool will buy them later.

Personally I believe in efficient markets. I think the $200B is the best guess the market came up for the intrinsic value of BTC. Independent of speculation.

My feeling is similar to yours though. That BTCs value is closer to $200m then to $200B.

[digi_owl]

That sounds oddly similar to the notion that a national currency gets its value from having to pay taxes with it.

[jstanley]

> I have the theory, that the value of a cryptocurrency is equal to the sum of transaction fees people will spend in the future, discounted for inflation.

How does that follow, at all?

Is the total value of all the USD in the world equivalent to the total transaction fees paid on USD in the future, discounted for inflation?

[Changu]

The approach I use here is to not see Bitcoin as a currency, but as a money sending service like Visa. The incentive to buy BTC is that one wants to use the system. How much is the usage of the system worth? It is the transaction fees. They reflect what people are willing to pay to use the system.

[jsutton]

Non-mining cryptocurrencies are already here, thankfully. Ethereum will be moving from mining to a Proof of Stake model; others like Dash have been successful with it for years.