Will bitcoin become part of today's financial system, or will the financial system be built on Bitcoin? Here are the scenarios.
For bitcoin to be used more for payments, several things must happen. More people must both earn and spend bitcoin, and the price must become more stable.
The technology must also scale. Layer 2 solutions such as the Lightning Network make small payments fast and cheap, but are still little used. Tax rules where every purchase triggers capital gains tax are another obstacle.
Becoming a unit of account means that goods and contracts are routinely priced in bitcoin. That is a far bigger shift.
One path being discussed is that commodities such as energy begin to be traded and settled in bitcoin. Some states have also begun holding bitcoin in their reserves.
Banks are bringing bitcoin in step by step. First comes indirect exposure through funds and exchange-traded products, then custody and trading for customers.
Later there may be loans with bitcoin as collateral and payment services built on Bitcoin. Each step ties bitcoin more closely to the traditional financial system.
In one scenario, bitcoin is financialized. It becomes an important asset in today's system, with funds, derivatives and loans, but the system itself remains as before.
In the other scenario, often called bitcoinization, Bitcoin becomes the foundation itself. New services are built directly on Bitcoin, and more economic activity is settled in bitcoin.
Supporters are divided. Some see financialization as a sign of maturity, while others warn that debt and counterparty risk will return through intermediaries.
Which path bitcoin takes depends on technology, regulation, the economy and users' choices. None of the outcomes is given.