It requires a network-effect for it to work, if more and more vendors accept crypto then how is that fundamentally different that fiat currency to buy raw materials and pay employees with?
In a hypothetically pure Bitcoin economy, that could work. But If we all switched to Bitcoin, the speculative upside would be exhausted and we’d be stuck with all of Bitcoin’s flaws and limitations. If you think $8 transaction fees are high now, how bad do you think it will be if every transaction was suddenly a Bitcoin transaction? Trick question, because Bitcoin has hard used block size limitations and it literally cannot support transactions at scale. By design.
With the speculative upside removed, why would anyone choose to use Bitcoin? Why Bitcoin over any other cryptocurrency with significantly better technology?
I don't understand why you're assuming we need a pure Bitcoin economy for there to be a network effect. If sufficient number of vendors accept Bitcoin that will be enough to create a network effect. Once you have a network effect with a size less than the size of the entire economy there will always be upside to own Bitcoin since that size can continue to grow.
I don't understand why you're assuming companies would willingly choose to use Bitcoin over banking alternatives.
Even companies who transact in Bitcoin generally won't be sending Bitcoin blockchain transactions on the blockchain with all of the associated fees, not to mention risks of keeping your company's money in a computer program where a rogue employee or hacker could simply embezzle the money instantly and irreversibly. They'd use banking services, which would handle the transactions for them off the blockchain (charging exchange fees as appropriate).
Not to mention: Using Bitcoin as a currency only sounds good in times when the price is going up. As soon as it starts becoming volatile again (it will) everyone remembers that maybe it's not a great idea to keep your company's funds tied up in one of the most volatile currencies of all time.
* International transactions easier than regular currencies
* No third-party seizure
* Security and control (user autonomy)
* Anonymity, privacy and no tracking (just make sure your wallet ID is not to your personal ID)
* No risk of chargebacks (better for vendors)
* Transparent and neutral (how much did you trust banks in 2008?)
You may not value some of the above and indeed some vendors may not, but I don't think you can say that is true about everyone.
In practice, companies have zero desire to be their own banks.
The liability would be massive, and the risk of a rogue employee walking away with the private keys is just too high. It's a two-edged sword: Those same upsides are just as attractive to potential embezzlers as they are to honest companies.
In an era where we hear about database breaches and security incidents on a daily basis, do you honestly believe that companies would do better by operating their own cryptocurrency wallets?
So what happens in practice? Companies would still use banking services, just like they always have. Banks would "hold" the cryptocurrency and handle transactions for them.
