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Cryptocurrency Adaption – how far along the curve are we?

You have probably heard of the “Diffusion of innovations” theory, largely popularized by Everett Rogers in the second half of the 20th century.

The Diffusion of innovations is a theory that basically tries to explain how, why, and at what rate new ideas and technologies are spread. It’s main popularizer Mr Everett Rogers argues that diffusion is the process by which an innovation is communicated over time among the participants in a social system. 

Rogers said that there are four main elements that influence the spread of a new idea: the innovation itself, communication channels, time, and the social system. As you can see, this process relies heavily on human capital. So the innovation must be widely adopted in order to self-sustain. Within the rate of adoption, there should come a point at which an innovation reaches the critical mass.

The categories of adopters are innovators, early adopters, early majority, late majority, and laggards. 

  • The first 2.5% are innovators – individuals or companies who seek for entirely new and risky adventures. They usually tolerate somewhat large amounts of risk and uncertainty. They are mostly not respected by the established social system.
  • After the innovators come the 13.5% of early adopters that could be described as people who provide positive insights about new products and services, seeking improvements and efficiency. They’re usually seen as role models for larger groups of people, but not too far ahead of the majority. 
  • Then there’s the 24% of early majority. These are people who will not try something until someone else has tried it first and reviewed it as useful and reliable. 
  • After the early majority comes the sceptical 24% of late majority – people, for whom almost all the uncertainties of the innovation must be removed. 
  • Finally there’s also the 16% of the laggards – the last ones to adopt an innovation. Laggards typically tend to be focused on “traditions” and have the lowest social status, lowest financial liquidity. They’re also usually the oldest among adopters, and in contact only with family and few close friends.

The adoption process of an innovation could be illustrated as a “bell curve”, shown below. And what has this all got to do with cryptocurrencies, you ask? A lot, actually.

In addition to the bell curve, Rogers stated that innovation and new technologies such as Bitcoin, typically follow an S-curve in their adoption. The S-curve above shows the estimated adoption of Bitcoin.

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As Bitcoin is the most well known crypto, we could take it as an example. Currently it is in the “Innovators” stage with some signs of “Early Adopters”. This can be further explored by looking at the number of Bitcoin users and comparing this with the number of all it’s potential users.

The global internet user base is estimated to have reached 4,66 billion by January 2021. Of those 4,66 billion, about 100 million are also Bitcoin users. So it gives a Bitcoin adoption of about 2,15%, meaning the user base of 2,15% out of total potential, placing Bitcoin in the “Innovators” phase on the adoption curve.

Looking at the skyrocketing number of crypto users in the last year, we could definitely see crypto (especially Bitcoin) usage reaching the early adopters stage very soon. 

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