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What Is a Bitcoin Worth as a Transaction Mechanism

In: Business and Management

Submitted By Lgiaccardi
Words 1460
Pages 6
What is a Bitcoin Worth as a Transaction Mechanism?
February 19, 2014 Eric Gravengaard & Matt Kolbe

Recent op-ed and research pieces by analysts have centered on Bitcoin, not as 21st century financial asset, but as a 21st century payments and remittances mechanismi. The underlying technology behind Bitcoin is an amazing invention that makes electronic, non-reversible, financial transactions possible across the Internet. That there is no central counter-party able to freeze funds or reverse transactions is possibly one of Bitcoin's most useful features. What does the demand for transactions mean for the future of Bitcoin prices? In this note we try to value Bitcoin by comparing demand for “on-chain” transactionsii of Bitcoin to other payment mechanisms.

A Comparison of Payment Systems
Visa is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks.

Visa is the market leader in global electronic payments, transmitting almost $7 trillion in 2013. The majority of this is done by consumers and businesses spending money using credit and debit cards with the Visa logo. Visa’s revenue comes in three major categories: Service Fees, Data Processing Fees, and International Transaction Fees. The sum of those fees, less Client Incentives, is what we are referring to as Visa’s Transaction Revenue in the table below.

Visa (in millions, except ratios) Service Fees Data Processing Fees International Transaction Fees Client incentives Net Transaction Revenue Network Spending Volume # of Transactions #Number of Cards Revenue as Percent of Spending Gross Transaction Fee (excl Client Incentives) Average Transaction Size Dollars per Card per Year Transactions per Card per Year Daily...

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