Diffusion is the process by which an innovation or technology is communicated through different channels, over a longer period of time in a social system. Diffusion describes how innovation spreads through time.
Adopter Categories: Four Stages of Diffusion
People can be divided into five categories describing how innovative they are and where they fit into the timeline when it comes to adopting innovation. The five categories are “Innovators”, “Early Adopters”, “Early Majority”, “Late Majority” and “Laggards” as shown below. Data seems to indicate that Bitcoin is in the “Innovators” phase, with beginning signs of an “Early Adopters” phase.
“Innovators”, is characterized by being almost obsessed with the idea in question. They seek new, dangerous and risky adventures and they tolerate relatively large amounts of risk and uncertainty. They are generally not respected by the established social system.
Bitcoin “Innovators” can be described as freedom-loving individuals, with motivations to empower the individual, limit the state and entrenched institutions. The earliest bitcoin “Innovators”, were anonymity and sovereignty lovers. The Cypherpunks.
“Early Adopters” are characterized by the fact that they are opinion-makers and respected figures in the established social system. They are often seen as role models of the incumbents.
In 2017, several established players from the investment and finance media world entered the crypto market. These players are opinion formers and quickly established themselves as authorities in this new industry. Examples include Ari Paul and Preston Pysh from Theinvestorspodcast.com. According to Rogers, these leaders and opinion formers are characterized of a shift from the “Innovators” to the “Early Adopter” phase.
Rogers research shows that adoption in the different categories typically follows a normal bell shaped distribution, as seen. The bell curve shows the percentage of people adopting over time. Innovation and new technologies such as Bitcoin, typically follow an S-curve in their adoption. The S-curves below shows the adoption of well known technologies through time.
Bitcoin is currently somewhere between “Innovators” and “Early Adopters”. This can be further examined by looking at the number of Bitcoin users and comparing this with the number of potential users.
Adopter Data
On January 1, 2017 the estimated number of Bitcoin users with a “material” holding of Bitcoin, was estimated to be 10 million. This is according to one of the world’s largest bitcoin wallets, Coinbase, and the Investment firm ARK Invest.
This figure seems to be the best bet on the number of Bitcoin users in 2017. No quality research has been published since. Therefore, this number is used as a foundation. To find the current figures, look at the growth rates of the industry’s largest wallet providers:
Growth rates for the largest bitcoin wallets:
- Blockchain.info claims to have 24.27 million wallets as of April 20, 2018. On 1 January 2017, the figure was 11 million. In other words, growth of approximately 10%. 120%.
- Coinbase verified aquiring +20 million users as of March 12, 2018. In January 2017, this figure is assumed to be approximately 6 million. This results in growth of 233%.
- The growth rate at Coinbase and Blockchain.info is now used as a proxy for the growth of Bitcoin users. This means an average user growth rate of 177% from January 2017 to March-April 2018.
To get the total number of Bitcoin users, the average growth rate is multiplied by the figure from January 2017. This gives a current (April 2018) user base of 27.7 million.
Alistair Milne from altana Digital Currency Fund also tracked the number of bitcoin users. He estimates on April 19, 2018 the number of bitcoin users to be under 30 million, which supports the calculations above.
The global internet user base is estimated to have reached 4 billion by 2018. To find out where we are on the adoption curve, we now measure the 27.7 million Bitcoin users, compared to the 4 billion Internet users. It gives a bitcoin adoption of 0.7% (27.7 million divided by 4m billion). A user base of 0.7% out of total potential, place Bitcoin in the “Innovators” phase on the adoption curve.
These figures are inherently imprecise. They are estimates. As an example, a single user of the Blockchain.info wallet, can have multiple wallets.
Bitcoin S Curve: Where Are We?
Using Rogers’ theory of Diffusion of Innovation, we can assess how widespread Bitcoin adoption is and where we are on the bitcoin adoption s curve.
Take Aways
Observations of opinion leaders in the Bitcoin and Crypto community indicate that Bitcoin is in the “Innovator” phase (with initial signs of a shift to “Early Adopters”). Several mainstream opinion formers have emerged in the last year. Data based on the growth of the largest bitcoin wallets, as well as the 2017 survey, show that bitcoin with an adoption of 0.7% is still in the “Innovator” phase. The conclusion is that Bitcoin is in the “Innovator” phase, with initial signs of switching to the “Early Adopter” phase.
Rogers’ theories on “Diffusion of Innovation” are a tool that can be used to understand the current stage of adoption. The characteristics of the Adopt categories are comparable to the characteristics of the industry’s current form and are thus used to indicate where on the S-curve the technology is located. These adopt categories and the corresponding location on the S-curve can be examined with data and a more accurate picture of the stage can be formed.
(Posted spring 2017)