A report released by Silicon Valley investment company Magister Advisors claims that Bitcoin will become the world's sixth largest global reserve currency by 2030. It also says over the next few years, banks are set to invest over $1 billion globally in associated blockchain technology which will become "the rails upon which finance runs in the future".
The report is based on interviews with 30 Bitcoin and blockchain startup companies.
Ever since the European Court's recent decision to recognize Bitcoin as a currency and make exchange transactions Valued Added Tax (VAT) exempt, Bitcoin has experienced a bull run.
The report’s lead author and Magister Advisors partner Jeremy Millar says, "Blockchain is without question the most significant advancement in enterprise IT in a decade, on a par with big data and machine learning. What JAVA is to the Internet, blockchain is to financial services. We have now reached a fork in the road with Bitcoin and blockchain. Bitcoin has proven itself as an established currency. Blockchain, more fundamentally, will become the default global standard distributed ledger for financial transactions."
Millar says his research found many leading banks already have portfolios of 10 to 20 Bitcoin-related projects underway. Typically the initial use of blockchain isn't to replace core infrastructure, like wire transfers, but to complement it by storing "metadata" in areas such as clearing and settlement. Millar says given its flexibility and robustness, blockchain technology in the future will be applied to most financial dealings ranging from direct payment to property registries to security infrastructure.
He says that although "banks will initially be unwilling to remove the core infrastructure that handles the process of clearance and settlement, they will increasingly run parallel blockchain processes - evidence by the spike in investment that our poll has identified."
"Blockchain technology will underpin a growing number of routine transactions globally as trust grows. Our interviews with thirty of the leading Bitcoin companies worldwide cement our view that the currency is gaining traction. Growing vendor acceptance and the adoption of bitcoin in developing markets are creating a pincer movement that will lead to widespread business and consumer acceptance and adoption over time."
The report estimates 90 percent of bitcoin transactions, by volume, are commercial transactions, typically in developing economies.
Millar says, "It is worth noting that futures trading volumes are three times or more the volumes on stock exchanges. Traders are addicted to volatility and we mustn't underestimate the significance of speculation."
"Two million smartphones are being activated per day, so the question arises in developing economies, especially those where corruption is a factor, why open a bank account?" he says
The report says there are 120,000 bitcoin transactions per day, but Millar says this numbers "does not factor in the 300,000 daily 'off-chain' transactions by large wallet/vault players such as Coinbase, Circle and Xapo, pushing the daily total number of transactions to around one million."