By Michael Levin Translated by harris

Bitcoin is one of the most fascinating innovations of the past decade. To critics, Bitcoin is a baffling artifact. Regardless of their confusion, Bitcoin’s adoption can be explained by understanding its dual adoption curve. Bitcoin is an asset, and Bitcoin is a network.

cross the chasm"cross the chasm"first level title

Human Response to Innovation

Humanity's rise in the hierarchy of the species is directly attributable to its ability to harness raw materials to invent innovative technologies.From the fire to the wheel, the power of human invention has paved the way for the highest quality of life of any species in the history of the world. Given this evolutionary backdrop, it's not surprising that humans seem obsessed with the next new thing, the state-of-the-art technological innovation. More often than not, this obsession boils over into speculation and mania, as humans try to imagine and pre-manage the future. but,Regardless of the speculative cycle, the adoption of high-tech innovations follows a predictable and transparent adoption curve.

Over the past twelve years, Bitcoin has captured the human imagination. The story of Bitcoin is perhaps more alluring than any high-tech innovation that came before it. It brings cutting-edge innovation to one of the base layers of humanity: money. Given the potential to revolutionize such a fundamental concept, Bitcoin has experienced several speculative cycles in its short history. However, it would be a serious mistake to use these cycles as an argument against Bitcoin. These cycles are a well-understood psychological phenomenon caused by human fascination with new things. Also, any overemphasis on foam is missing the forest for the trees. Because, in just 12 years,Bitcoin has grown to 135 million users worldwide, a rate of adoption faster than the Internet, mobile phones, or virtual banking tools (i.e. PayPal) in comparable periods. At the current application rate,Bitcoin will reach 1 billion users in 4 yearsfirst level title

innovation diffusion theory

In 1962, Everett-Rogers proposed the theory of innovation diffusion, which aims to explain how, why and at what speed new ideas and technologies spread. The theory explains how a product or technology gains momentum and spreads among a specific population over time. The end result is that people apply a product, technology or idea. One of the key revelations is that,The application of a new technology to the population does not happen simultaneously. Instead, certain people and groups are more likely to use technology at different times, consistent with specific psychological and social characteristics.innovator

Bitcoin Asset, which refers to the store-of-value portion of Bitcoin. A Bitcoin asset, is an investment based on the thesis that Bitcoin will become a global store of value similar to gold. Multiple factors make Bitcoin an extraordinary potential global store of value, including but not limited to its durability, scarcity, and verifiability. However, some would argue that Bitcoin has not proven itself as a store of value for a very long time (see Established History).So Bitcoin, this asset is an investment, I believe it will eventually become a global store of value。 

The Bitcoin network, which refers to the medium of exchange portion of Bitcoin. Bitcoin, the network, implements the native currency or currency of the Internet. The factors that make the Bitcoin network, an incredible potential currency, or money, are different from those that make it a compelling store of value. Bitcoin, the network, enables global, permissionless, programmable money for anyone connected to the internet. The use case for this currency or medium of exchange does rely in part on the strength of the asset, Bitcoin. but,The two technology and application curves remain independent。

Given the importance of stores of value and currencies throughout human history, their creation and evolution have been extensively studied. Vijay Boyapati talks about this process in "The Bullish Case for Bitcoin" and Nick Szabo in "Shelling Out: The Origin of Money". Even as early as the 19th century, William Stanley Jevons explained in his book "Money and the Mechanism of Exchange" that"Historically...Gold appears to have served first as an ornamental commodity; second as a store of wealth; third as a medium of exchange; and finally as a measure of value。"

To further explain how the currency evolves, we can directly quote Vijay's explanation in "The Bullish Case for Bitcoin"…"Using modern terminology, money always evolves in the following four phases.

• Collectivestore of value

• store of value. Once enough people demand its specificity, money is conceived as a means of holding and storing value over the long term. When a good is seen by more people as a suitable store of value, its purchasing power rises because more people need it for that purpose. When a store of value is widely held and newcomers come in who want to use it as a store of value, its purchasing power will eventually level off.

• medium of exchange. When money is fully established as a store of value, its purchasing power will stabilize. After purchasing power stabilizes, the opportunity cost of using money to complete transactions will decrease to a level suitable as a medium of exchange.

• unit of account. When money is widely used as a medium of exchange, goods are priced in terms of money. That is, currency-specific exchange rates will be available for most commodities"。

Within the framework of this proposed evolution of monetary assets, Bitcoin appears to be clearly moving from collectible status to a more accepted store of value. It has been argued that, in the past, these monetary phases have occurred in chronological succession, with an asset not moving from a store of value to a medium of exchange until it has fully completed its store of value application curve. why? The assumption above is that people don't want to wait for a rising store of value before it stabilizes, for fear they will lose value. While this is a perfectly plausible explanation, it may not fully explain the phenomenon.

Another factor may be that existing communication and transportation technologies are costly, slow, and geographically limited in the application of gold. As a result, the adoption phase of the currency is severely limited, moving at a slow pace to a homogeneous audience. In the process, you can imagine, someone in a nuclear family starts collecting gold. Then they convince the rest of their family, then they convince their tribe, they push the rest of the town, then the region, the country, and so on. In the process, a new store of value, like any new technology, goes through an adoption curve from innovator to early adopter, but it is severely constrained by geography. Constrained by cost, speed, and geography, store-of-value applications move at a snail's pace among geographically similar groups. Given this slow, endemic adoption process, these initial adopters likely had unusually similar monetary needs and ideas.This homogeneity of thought may have contributed to the limited use cases of being just a store of value over a long period of time, forcing the adoption curve to unfold chronologically。

Instead, today's communication and transportation technologies are the exact opposite: free, instant and global. Instead of being restricted to slow places, Bitcoin can be used globally through its adoption curve. Bitcoin can be used by anyone with an internet connection. Thus, Bitcoin could follow a different path of monetary adoption than historical examples. Given its global adoption curve, adopters will have different needs or ideas for Bitcoin. It can be applied by investors who believe in the thesis that it will become a global store of value. and,In general,。

In general,The Bitcoin asset and the Bitcoin network, are distinct but interrelated technological adoption curves. Both have very important and ambitious end statesfirst level title

The current state of Bitcoin adoption

Bitcoin, as an asset, is in the first part of the application S-curve. Depending on which target market is used as the denominator, there are slight differences in exactly where it currently sits on this curve. For simplicity, let's use roughly 135 million current Bitcoin users. And then, for an asset like bitcoin, let's start with Croseus' approach, where he looks at the number of people who have some wealth to store or invest in bitcoin. He used 2.2 billion people, which is the number of people in the world with a net worth of $10,000. Taking this denominator into account, the asset currently has a penetration rate of 6.1%, or the early adopter portion of the adoption curve. However, the number of people around the world who are truly actively investing is much smaller. The number of investors worldwide is difficult to determine. In the United States, 52% of households have direct or indirect exposure to the stock market. The United States is recognized as the country with the highest ratio in the world. But, to be conservative, let's plug that 52% figure into a $10,000 investment for the entire world's 2.2 billion people, so that's 1.14 billion people.Given this conservative investor base denominator, the asset has an adoption rate of 11.8%, or on the verge of the early majority。

For the Bitcoin network, in an ideal end state, anyone with an internet connection can and should use a better currency. Therefore, we will use a more aggressive target market, the total number of active Internet users, 46.6 billion. For molecules, we'll keep the number ~135 million for simplicity. It would be even better if we could differentiate between users who invest in assets and users who buy assets to use as funds. Because, likely at this point, most of these users are investing in Bitcoin as an asset rather than using it as a currency, but it is very difficult to distinguish reliably (more on this later). with more content). With that denominator, Bitcoin, the network, has 2.8% penetration, or just in the innovators part of the adoption curve.

Bitcoin, the asset, may be entering the early majority, and Bitcoin, the network, is on the verge of going from innovator to early adopter. So overlapping the two, bitcoin, overall, is still very early in the adoption curve, probably somewhere in the early adopter stage.

To understand how we got to this point in overall adoption, it's important to realize that the narrative and positioning around Bitcoin is constantly evolving. In their piece, The Vision for Bitcoin, Nic Carter and Hasu explore the various narratives surrounding Bitcoin over the past 12 years. They identified seven main ideological narratives that have historically dominated Bitcoiners. They explore how these schools of thought describe Bitcoin users, over time.

In the early days of Bitcoin adoption, e-cash proof-of-concept, censorship-resistant e-gold, and an inexpensive payment network were the dominant narratives among users. At this stage, the innovator applies Bitcoin. As mentioned above, innovators want to be the first to try out new ideas. They are technologists, so it doesn't take much to position an innovative technology for them. Innovators apply it simply because they are curious about the technology.

As Bitcoin began to spread to early adopters, the positioning and narrative naturally began to shift. Early adopters are the rare visionary who have the insight to match an emerging technology with a strategic opportunity. These visionaries drive high-tech innovation forward because they see the potential for an order of magnitude change. As early adopters jumped in, the buzz around bitcoin shifted toward censorship-resistant electronic gold, a cryptocurrency’s reserve currency and an uncorrelated financial asset. Early adopters saw potential in Bitcoin as an asset and pushed the narrative to focus on this potential use case. The beliefs and narratives of these early adopters took Bitcoin as an asset from the innovator stage to the early adopter stage. Given this shift in narrative, it is not surprising that the majority of Bitcoin users have purchased Bitcoin as an investment asset over the past few years.

A 2017 survey by LendEDU asked Bitcoin owners:"Which of the following best describes your reasons for investing in Bitcoin?"21.81% of the respondents answered"Bitcoin is a long-term store of value, like gold or silver". The 2021 Surveymonkey survey of Bitcoin owners showed similar results. The majority of people who own bitcoin say they personally own bitcoin"as a growth investment"(67%). Fewer citations, 30% say they own it"To hedge against the collapse of traditional assets", 29% said they had it"as a store of value". Meanwhile, for the Bitcoin network, only 13% of people buy it, according to the survey"as currency for purchasing goods and services". So, the current overall adoption of Bitcoin shows that most people buy Bitcoin as an asset. And, as discussed earlier, when making comparisons, the asset’s adoption curve is currently further down the adoption curve (comfortably into the early adopter stage) than the network (probably still in the innovator stage).

Bitcoin’s current position and trajectory on the overall adoption curve is largely due to its smooth transition from innovators to early adopters who embrace the asset and store of value narrative.Given the current point on this overall adoption curve and projected adoption rate, it is clear that Bitcoin will enter an early majority adoption phase over the next 10 years。