How Bitcoin will become the dominant currency of the world

Bitcoin won't win everyone over. But it will win.

Today, the dollar is the currency of international trade. Even if you're Spain and trading with Saudi Arabia, you're using dollars. In the past, gold was the currency of international trade: the dollar co-opted gold's goodwill by being backed by gold, but pulling the rug on everyone in 1971.

International trade converges on one main currency because it's more efficient to use whatever the most people are using, and so naturally, one currency snowballs into the predominant one.

At some point, the dollar will cease to be the currency of international trade. I don't know when, and I don't know why, but history shows that it will happen. I think that a US debt crisis leading to massive devaluation is a possibility which may facilitate that, but I don't know for sure.

All I know is that when it does happen, a vacuum will form.

Europe will try to convince everyone else that the euro ought to be the new currency of international trade. And everyone else will say "No, why should everyone trust you? You have constant debt crises in your member states, your GDP is stagnant, and you will likely extract seigniorage from us to fund your ever-increasing social programs."

Russia will try to convince everyone else that the ruble ought to be the new currency of international trade. And everyone else will say "No, why should everyone trust you? You are invading your neighbors, you are actively printing more rubles to fund your wars, and your economy is tiny."

China will try to convince everyone else that the yuan ought to be the new currency. And everyone will say "No China, you're a communist dictatorship with crushing capital controls and a digital currency that you can restrict and program at will."

And so on, with other countries all trying to get everyone else to use their currency in international trade, but a consensus on any one national currency will be impossible. This is because none of the nations can put forward a neutral currency. There's baggage that comes along with bestowing any one country this privilege: the entire world is saddled with the results of their monetary policy, which can change on a whim, and for political reasons. You can bet that they will act in self-interest.

In the chaos, Bitcoin will emerge as a "temporary" workaround. Alright, fine, you won't use our ruble and we won't use your yen, but we need to trade, so let's just temporarily use Bitcoin. After all, it's already internationally valuable, it's quick to send, settlement is final, the liquidity is deeper than any other neutral digital asset...

Some countries are already settling some trades in Bitcoin today (Russia and China.)

Bitcoin isn't going to win because everybody will decide to use Bitcoin at the same time. No, Bitcoin will win by process of elimination. It will be the last man standing: the only currency that is credibly neutral. It will be used because getting consensus on any other currency is even more difficult. It will be used begrudgingly even by the haters, because even the haters cannot force all other nations to accept their money in international trade.

Then, it will be used more and more. And more. Soon it will become entrenched. After some time, it will be clear that it is not temporary, and it will emerge as the dominant currency for international trade. Soon after that, it will emerge as the dominant currency for domestic trade, in every country, following a similar path to victory.

Before we know it, everyone will be on a Bitcoin standard. We'll look back scratching our heads wondering how it unfolded so quickly. Once the process begins, it could be over within a geopolitical blink-of-an-eye (a few years.)