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Comment by hackinthebochs | Hacker News Reader

Can you explain to me exactly why BTC would need to increase in value at all for it to be the basis for an economy? BTC is for all practically infinitely divisible, so you could theoretically run the world's economy on a fraction of the bitcoins we have today. So where is the upward price pressure coming from aside from speculation/greater-fools?

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Market capitalization. Basically the amount of outstanding shares (bitcoins) multiplied by the value of each share. The current bitcoin market cap is around 10 billion USD. The reason why this is not enough is pretty simple; first of all it won't allow you to make BIG payments (if you need to transfer more than 10 billion dollars you can't do that), second of all: no company is going to like having half the total amount of 'money' of the entire economy, it's only useful when everyone has some. If one or a few players control the majority of the bitcoins, nobody else is going to want it. We're not talking about gold which has intrinsic value, we're talking about bits and bytes that only have value because some people agreed that it has value. But it will only have value as long as it's somewhat distributed, if only Satoshi would have had bitcoins, nobody would have been interested.

To use some real numbers, let's assume Bitcoin replaces US dollars.

Once they've all been mined there will be 21 million Bitcoins (and assume none have been lost)

There are approximately $10.5 trillion US dollars in the world (http://money.howstuffworks.com/how-much-money-is-in-the-worl...)

10,500,000,000,000 USD / 21,000,000 BTC = $500,000 per Bitcoin

Recalculate that in Satoshis :)

Thanks. My question was ill-conceived in my head. Market cap was the concept I was missing. For a fixed amount of bitcoin, the value of each goes up as the total share of the economy of BTC increases.

I'm confused by your question. It's true that Bitcoin can be infinitely divided, but that doesn't help unless the original unit is valuable enough to make those divisions useful. The current market capital of Bitcoin is pretty big, but no where near enough to run a real economy.

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