Hyperbitcoinization: The Path to Total World Demonetization
The term hyperbitcoinization is used to describe a utopian (theoretical) state of the world economy where Bitcoin is accepted as a legal tender worldwide while all fiat currencies have become devalued and replaced by the digital coin.
Simply put, hyperbitcoinization is the demonetization of a national fiat currency in favor of Bitcoin. Believers think people will abandon their local fiat currencies because of mismanagement by the central banks, the most likely result of poor stewardship being hyperinflation. People will be forced to demonetize their currency, that is, revoke its status as a legal tender. The most extreme belief is that fiat money will completely die, and all the wealth in the world will transition to Bitcoin.
To put it another way, hyperbitcoinization is a Bitcoin-induced currency demonetization. It would happen to any country that mismanages its national currency. In the event of this happening, a national currency will quickly lose value as the new Bitcoin currency occupies its place.
The term was coined by Daniel Krawisz, who used it in a paper published in 2014. His creation has been gaining traction ever since and is widely used by Bitcoin maximalists.
Hyperbitcoinization is a voluntary transition of the world economy towards using Bitcoin as a form of money. The cryptocurrency has the potential to be adapted anywhere in the world. The basic premise of hyperbitcoinization is that it will happen naturally (organically), a common presumption being that as global acceptance increases, the cost of rejecting Bitcoin will exceed the cost of adopting it. Over time, Bitcoin will gain traction and secure the support of governments, thus becoming the backbone of a new global economy. At the point of hyperbitcoinization, the price of the cryptocurrency is projected to be $100 million per coin, which could happen within 20 years. Bitcoin price bubbles will continue to happen until a plateau is reached and the value stabilizes.
The process of demonetization usually involves withdrawing from circulation and replacing a country’s current notes and coins with new ones. However, a country can sometimes completely replace its current currency with a new one. The reasons for demonetizing include fighting inflation, crime (counterfeiting, tax evasion, etc.), and encouraging trade.
A famous example is the 1873 Coinage Act in the United States through which silver was demonetized as the legal tender of the country in favor of the gold standard. The withdrawal of silver coins from the economy resulted in a five-year economic depression because of a money supply contraction. In 1878, the Bland-Allison Act remonetized silver as a legal tender in the United States.
Another famous instance of demonetization was the introduction of the euro currency, with physical euro coins and notes replacing the old German mark, the French franc, and the Italian lira. For a while, those currencies were convertible at a fixed rate to ensure a smooth transition. In 2015, the hyperinflated Zimbabwean dollar was demonetized in favor of the US dollar, the Botswana pula, and the South African rand, which are more stable currencies.
Hyperinflation and hyperbitcoinization are forms of demonetization, the main difference being that a currency hyperinflates with little to no competition from other currencies. In the case of Bitcoin, it represents competition to all currencies because it can easily cross borders. So, hyperbitcoinization is far more dangerous for national currencies as a form of demonetization than hyperinflation.