October 14th, 2018

I've originally come to Bitcoin from silver and gold camp back in 2011. I met Roger in Tokyo around Aug 2013 and have been bitcoining ever since.

Despite the downdraft of BCH price this year, considering all the developments we see including Hackathon, tokenization protocols and all kinds of interesting apps coming out, BCH's fundamentals are stronger than ever.

In fact, I think we are entering into BCH Cambrian explosion period once we passover the Nov 15th upgrade. So, I thought I write once again about "velocity" of BTC and BCH and what's going to happen with "the store of value" coin, BTC.

Let's look at Bitcoin (BTC) and Bitcoin Cash (BCH) in terms of velocity.

Amount Transaction Fee Velocity Cost of Transactio n

BTC $100 $5 100 $500

BCH $100 $0.005 100 $0.5

BTC's cost of transaction is 1,000 times more than BCH, and the transaction fee will cost 5 times of the original BTC value when the coin is used 100 times. Which coin would Bitcoin merchant prefer to use, BTC or BCH?

If this is the the case, BCH market will be much more liquid than BTC, right? And more liquidity will make it easier to buy and sell for BOTH small and large amount of transactions.

So, the next question is: Would BTC be "store of value" being useful for large amount transaction? For this, let's take a look at the history of physical gold and silver coin. We talk a lot about "gold" but nobody talks about "silver".

When US Dollar was defined in early 1800s, One Dollar coin came out in two different forms, silver and gold. The silver dollar coin was one ounce (90% purity, 371.25 grains, 24.056 grams) and the gold dollar coin was one-sixteenth ounce (90% purity, 23.22 grains, 1.505 grams). See below right side. For your information, when Japanese Yen came out in late 1800 after Tokugawa-Shogun period to trade with the West, they were the same size. (suprise, suprise! )

However, in 1889, US government stopped minting the gold dollar coin. According to Wikipedia, "The gold dollar (1849–89) was a tiny coin measuring only 13 mm making it difficult to grasp and easy to lose, a serious problem when a dollar was almost a day's wage." https://en.wikipedia.org/wiki/Dollar_coin_(United_States) Interesting?? The silver dollar coin was much convenient for the daily wage payment.

Gold value at that time was set to be 16 times higher than silver, and gold physical density is about twice as much as silver. Yes, gold and silver have two different unique properties and therefore, gold is much easier to transact, transport and store than silver for large amount transactions.

Two metals had different roles to play, silver for daily commerce for the people and gold for large amount of transactions like buying real estate. This is why Double Eagle Twenty-Dollar Gold Coin (0.9675 troy oz, 30.0926 grams, minted from 1849 to 1933) was very popular for "large amount transaction" and even popular to this date as "store of value"!

Now, back to BTC and BCH. Unlike physical silver and gold coins, they are digital currency as we all know. So, what's going to happen to BTC when BCH has more velocity and liquidity and network effect? BTC would not have a role to pay as "store of value" unlike Double Eagle Gold coin. I think it would go to zero.