Is there an intrinsic value to ecoins?

There has been a lot of talk recently about the underlying value of Bitcoins and ecoins.  People are comparing them to tulips and other famous bubbles from days past.  Is there an intrinsic value to ecoins?   Ecoins are not the same thing as gold, silver, tulips or other investments. There is something real and extra with ecoins.

What are you really buying when you buy Bitcoins?

When you buy ecoins you also buy the vault to store the ecoins and the tool to send or receive the ecoin. For almost all other types of currency or investments you need to buy those two items separately.  One way to think of Bitcoins is as the fastest growing money transfer product in history.  It is an open source project like Linux, wordpress, Andriod and a bunch of other names you know. The only way to ‘buy’ a piece of those movements is to create a company and service layer product utilizing the open source project. However since all ecoins trade against fiat currency or other ecoins, when you buy an ecoin you are buying a piece of the Bitcoin movement (or company if you prefer).

Ecoins are more than ‘money’

Ecoins are more than money – they are also the way to hold and transfer the money. For almost all other types of currency, the user must engage a 3rd party or undertake additional work to get the money from A to B.  With ecoins, the mechanism to hold and move the curency is completely married to the ecoin itself. This is because the ecoin is only held by wallets with access to the block chain and only transferred by updating the block chain. If you only think of ecoins as the fasting growing financial transaction start-up in the history of the world, what is its present day value?

Holding and transferring money is a BIG business

According to David Woo, Bank of America Merrill Lynch currency analyst if you compare Bitcoin to the three money largest money exchangers Western Union, MoneyGram, and Euronet you can get a good idea of real present day value.

Let’s assume that Bitcoin becomes one of the top three players in this industry. What does that mean for Bitcoin valuation? Given Bitcoin’s supply is fixed, when one buys a Bitcoin, one is acquiring not only a medium of exchange but also an investment in the enterprise value of Bitcoin. From this point of view, Bitcoin’s market capitalization could be viewed, with a little leap of faith, as its enterprise value. With the average market capitalization of Western Union, MoneyGram and Euronet at about $4.5bn, we will add this number to the maximum market capitalization of Bitcoin’s role as a medium of exchange.

Woo  goes on to state that “Assuming Bitcoin becomes (1) a major player in both e- commerce and money transfer and (2) a significant store of value with a reputation close to silver, our fair value analysis implies a maximum market capitalization of Bitcoin of $15bn (1BTC = 1300 USD).”

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