It can be difficult to get oriented in the cryptocurrencies if you are not an IT specialist and you make your decisions only on facts that are provided by people on the internet. Let’s have a look at what is wrong with people talking about cryptocurrencies and why adoption is so slow.
How quickly have been significant technologies adopted
The adoption of new technologies is often straightforward. New technology appears and if it gives people a benefit they will adopt it if the price is reasonable. New products using the technology are expensive at the beginning but the price will decrease over time with higher adoption. Thus, inventors and producers are well-paid for bringing new technologies to the world. People adopt new technologies quite quickly and the tempo usually increases. For example, the telephone was invented in 1877 and the adoption took over 100 years. The adoption of smartphones, which is a similar technology, has taken not more than 10 years. The adoption of the automobile started somewhere in 1910 and took also over 100 years. The adoption of a computer started in 1990 and nowadays it is a standard in many households and you can have on in a smartphone.
Blockchain technology is often considered as a fundamental technology that, as the internet did, could reshape the world. Blockchain is basically a distributed network that is based on the internet. The speed of internet adoption could help us with the assessment of how fast the blockchain technology will be adopted.
Let’s start with the year 1974 when Vint Cerf and Bob Kahn develop a communications technique called TCP, allowing multiple networks to understand one another, creating a true Internet. The concept later split into TCP/IP before formal adoption on Jan. 1, 1983. In the same year, 1983, Domain Name System (DNS) was proposed and suffixes such as “.com,” “.gov” and “.edu” came a year later. In 1990: Tim Berners-Lee created the World Wide Web (WWW) and 3 years later, in 1993, Marc Andreessen and his colleagues at the University of Illinois created Mosaic, the first Web browser that was able to combine graphics and text on a single page. Thus, the world of the Web has been opened to the world with software that is easy to use. Amazon came into the world in 1995. The famous dot-com bubble burst in 2000. The dot-com bubble basically was the stock market bubble caused by excessive speculation in Internet-related companies in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Composite stock market index rose 400%, only to fall 78% from its peak by October 2002, giving up all its gains during the bubble. During the crash, many online shopping companies failed and shut down. Some companies, such as Cisco, whose stock declined by 86%, and Qualcomm, lost a large portion of their market capitalization but survived, and others, such as eBay and Amazon.com, also lost value but recovered quickly. Internet technology survived and in 2014 the internet had 1B website users.
It is not so easy to say what was the very beginning of the internet since in 1969 two computers exchanged meaningless data in the first test of Arpanet at the University of California. The Internet is a significantly more complex technology than blockchain that can be considered as an application protocol for distributed databases. Common people were able to use the internet after the web browser was available. If we consider the year 1993 as the start of the available internet up to the dot-com bubble we can say that the adoption took only 7 years. It took approximately 20 to reach the level of 1B web-users.
Bitcoin was launched in 2009. If you check a Bitcoin rich list you can find that there are approximately 30M addresses that hold bitcoins. It is estimated that 7,8 billion people live on the planet. 1 % population is approximately 78M people. Bitcoin has been here for more than 11 years and the adoption is probably not higher than 0,5% of the population. Notice that we can count only Bitcoin addresses but not directly people. People usually have more addresses with their coins. Also notice that exchanges can serve more people and they can have bitcoins on a few addresses. Thus, it is difficult to make an exact estimation of Bitcoin users. Nevertheless, the adoption of Bitcoin is probably less than 1% of the population.
The internet reached 14% of adoption within 20 years of existence. At the moment, it would be nice to see 5–10% of cryptocurrency adoption but it is not the case. We could conclude that the tempo of cryptocurrency adoption slowly began to lag behind the speed of adoption of the internet. On the other hand, we can say that the adoption did not really begin just due to the fact that the blockchain is not ready for it. We are still at the research and building phase and once the scalability issue is resolved then the adoption can really be fast and take only a few years.
People are economically motivated to lie
We think that the adoption of cryptocurrencies will be very different in comparison with other technologies. The reason is mainly the economical aspect of the adoption. Let’s explain it in the example.
Imagine that a smartphone has just been invented and your neighbor bought one. If you buy a smartphone two years later after your neighbor then you will have a better model and you pay less money for it. You can probably choose a smartphone from many vendors. It can be said that you can adopt the technology later without any disadvantages. You can start using the smartphone right after you bought it and you have a better model than your neighbor so you even have some advantages. The neighbor will probably sell the older model sooner or later and he will buy a new one. Notice that if you postpone adoption then conditions are better for you. It is easy to achieve a high adoption level when we talk about technologies and inventions similar to the internet or smartphone. There are no significant economical barriers in the adoption and the only influencers of the adoption are benefits that the technology can offer. It does not matter that you are not an early-adopter. It is easy and even cheaper to adopt technology later and start using it.
It is right the opposite with the adoption of cryptocurrencies. Early-adopters have a significant advantage over the later adopters. The reason is that the adoption is directly connected with native coins of a particular project and not with the network and its utility. If you want to use a public permissionless blockchain then you have to buy coins on the open market. It can be a problem. The more adopted a blockchain project is, the higher will be the price of coins. It means that early-adopters were able to buy many bitcoins for $1000 but nowadays it is not possible to buy even one bitcoin for that same amount of money. Newcomers can buy fewer and fewer bitcoins for $1000 and it is evident that it can be considered as a disadvantage for them. With the rising price, people might be less willing to adopt Bitcoin. Volatility does not help much and it makes the adoption even more difficult. It would be nice to use cryptocurrencies in daily life. Volatility is unfortunately good just for trading and speculation. The narrative about the store of value can help a bit but still, early-adopters and experienced traders are more rewarded than newcomers. The longer the adoption will last the less probable is that people believe the narrative about the store of value. Newcomers basically subsidize the wealth of early-adopters. They might not like it and the question is why they should do it. Besides Bitcoin, there are many other relevant projects with the exact same opportunity to become an early-adopter. Is not it better to bet on a different horse than Bitcoin? This question is more complex than you might think.
Within cryptocurrencies, people are economically motivated to lie to you. Everyone selfishly searches for their own profit and that makes the cryptocurrency space a very hostile environment. The hostility unfortunately hampers the growth of the whole industry. People in different crypto communities support tribalism due to the desire to increase their profit. Thus, they adore and promote their chosen projects and are hostile to rivals.
If you think about it then you can conclude that it makes no sense. This behavior is basically hostile to innovations that the crypto space definitely needs. People who have heavily invested in a project will claim that the project is going to massively succeed and take over the world. If somebody tells you that then you can be quite sure that he or she owns a bunch of coins of the project. It does not matter whether a bitcoin maximalist tells you that nothing else than Bitcoin matters. It does not matter whether the Ethereum lover tells you that there will be no Ethereum killer. It does not matter whether a member of the Ripple army tells you that all banks in the world will use XRP one day. It even does not matter if I tell you that Cardano has the best technology based on math and scientific research. Every project has supporters and opponents that will tell you something nice about a favorite project and something bad about rivals. What matters here are only facts that you can verify or use common sense and judge the statements. Regarding adoption, the problem with this is that if somebody tells you that a project has some critical issue or it will never work then you can be afraid of losing the invested money. If you buy a smartphone you can be quite sure that it will work. If not then you can require your money back and buy another one from a different vendor. You will be able to call your friends and use the internet. It is not the case with cryptocurrencies. You can use Bitcoin to send value but not many people do it. The majority of people just speculate that the price will rise to the moon. So the speculation basically prevents the real usage. The sad fact is that the current adoption of cryptocurrencies is not about usage but about speculation.
In our opinion, the cryptocurrency space needs a lot of innovations to reach mass adoption. For example, we need to resolve the scalability issue. And again, Bitcoin maximalists will tell you that the lightning network is the best solution for that problem. All other second-layer solutions, Proof-of-Stake, and sharding will fail and they are all scams with non-competent teams. Obviously, it is not true. We need more scalable blockchain networks to reach mass adoption similarly as broadband internet that enabled mass adoption of the web. We need more features than scalability. For example privacy. The web started with HTTP protocol but a private version of it, HTTPS, is a standard nowadays. If we want to build new financial services we need to have them private. Do not forget that from the user’s perspective the current financial services are private. It is true that banks know everything about transactions of their customers but from the outside world, people know nothing about transactions of other people. If I pay for an ice-cream then the seller cannot find anything about my account and the same is true for the rest of the people in the shop. Everybody has seen that I paid for the ice-cream by card but nobody can find anything about the transaction and my bank account. The current open blockchains allow bypassing banks but, at the same time, let other people see all transactions that have been processed in the past. At the moment many people think that it is fine to have the public and open blockchain. Will that be true after the next 10 years? We could continue by naming other features like decentralized identity, smart contracts, tokenization, etc. Let’s conclude that we need to innovate to attract new users. The currently available technologies have not attracted many users and as we said, we probably lag behind the speed of internet adoption.
You cannot believe what people say on social media. They say what they want and they are selfishly motivated to support their bags. Be aware of the fact. It is fine to listen to them but you need to verify facts, use common sense and historical context. You can believe in math and science. You can believe some stats. You should be careful when somebody tells something about a project if you know that your money makes him or her richer. Do not overlook Cardano just because haters tell you that it is a scam or PoS will never work. Pure claims without arguments have no value. Make your own opinion.
Crypto-communities live in echo chambers. The echo chamber is a metaphorical description of a situation in which beliefs and statements are amplified or reinforced by communication and repetition inside a closed system and insulates them from rebuttal. Members of an echo chamber are able to seek out information that reinforces their existing views, potentially as an unconscious exercise of confirmation bias. This may increase social polarization and extremism. Such an environment is not healthy for the adoption of the nascent technology and can be perceived as exclusive to newcomers trying to find out information about cryptocurrencies. It might be difficult to bring the world financial or even political revolution if hostility prevails in the industry.
Bitcoin was an innovative technology at the beginning. It does not mean that it is done and ready. As we said, we need to innovate even more. People say that we need to build on top of Bitcoin or Ethereum and not on other projects. Now you understand what these people really say. They say: Let’s build on top of Bitcoin since we have invested in it. They say it just because rivals threaten their investment. People that are most visible often do not understand anything related to cryptocurrency technologies. They are not programmers, economists, cryptographers, network specialists, etc. They are often expressing just their gut feelings. We have to take a step back. Only further innovation can help to reach higher adoption of cryptocurrencies. We have to listen to users and find out what they really want and what can improve their lives. It makes no sense to think that it can be the only Bitcoin and never ever anything else. Without offering an alternative we will not even know. It is possible to make a few mistakes on the way but one day we could come to the end and find the killer application.
What to do next with the adoption
One way we can help the adoption is to try something else. We should not blindly rely on solutions that we had in the last decade and wait for what will happen in the next decade. Having more projects ready for adoption is definitely a good thing since we do not know what people will want to use. What we know very well is only what we had so far. It just makes sense to offer people something brand new. Cardano will bring a lot of innovation to the market.
Regarding scalability, Cardano will be much better than the first generation of cryptocurrencies. With the throughput of a few hundred transactions per second (TPS) with the potential to reach 1000 TPS, it is a significant improvement. The second layer solution might become meaningless if the first layer will not be able to open and close channels of the second layer. The project should be inclusive so using it should remain cheap. It is true also for opening and closing channels of the second layers. It shows that PoW networks are very expensive technology and thus also exclusive. We can have them and they can serve us well but why should we not have another PoS network like Cardano that will be more inclusive and cheap for everybody in the world including developing countries.
People might want to have a digital gold and can think that only PoW can secure it. It can be the case. People can also want to use decentralized services for many transactions that will not be related to native coins but other tokens. In the next decade will probably see the rise of stable coins. They are very attractive and they are more usable for payments than volatile native coins. Should we really try to persuade people that it is fine to pay by volatile coins even if they often need to use custody services? Will they really enjoy higher financial freedom or just risk losing money? Only a few individuals will tell you that the first statement is correct. In our view, it is smarter to build decentralized stable coins and offer people the possibility to pay by them. At the moment, Cardano will work on two versions of stable coins and anybody else can try to build their own version.
Decentralized identity management can also help the industry a lot. 100% anonymity can be a nice thing in some cases but to be honest it is impractical in real use cases. Atala Prism is a product that can bring that on the table and connect decentralized identity management with the Cardano network. It can simplify many use cases and make cryptocurrencies more attractive and mainly, usable besides the price speculation. We can imagine many useful applications by combining stable coins, decentralized identity management, and smart contracts. Some people often tell you that it will not work. Why should it not? It is easy to take biometric information and combine them with a SEED. People are used to protecting the SEEDs and private keys due to using cryptocurrencies. They will easily manage to protect their digital identity. Should we try it or should we be scared and do not even try it? We definitely have to try it and find a way to bring the idea to life.
If you think about it a while you will find that people will probably not adopt cryptocurrencies if it is only about price speculation. It is necessary to realize one thing. People who have bought ADA coins in most cases consider Cardano as an investment. They might use the network as well and they will probably use decentralized applications that will be built on the top of Cardano. However, there will probably never be more than 10% of the population that will buy ADA. Why? It is a risky investment and many people are not willing to risk. Moreover, investment and usage are two separate things. Some people think that it is possible to combine these two things together. It is the case of Bitcoiners. Not everything that is technologically possible makes economic sense. Paying by Bitcoin can be considered as paying by stocks of Tesla. We believe that it will be an easy and fast thing to do one day. Cardano will allow tokenization and hopefully deliver the feature. However, people will do it only if it is economically sensible. What Cardano really needs is not investors but real users. Users that will use stable coins, decentralized applications, and identity management. These users might not care about ADA coins. They will just care about the real usage of technology and they will be completely isolated from the ADA price speculation.
The whole crypto industry is here to replace banks and build an alternative financial system. It is our ultimate goal and we should not forget it. It is challenging and it will be hard. We can expect a significant push back from the current financial industry. The whole idea might fail, however, we believe the opposite. The Cardano project is here to try hard and achieve the goal. The Cardano community gets bigger every day and we are ready to help to realize the vision.
Do not overlook the Cardano projects just because somebody else tells you something bad about the project. Make your own opinion. You need not buy ADA coins to get interested in the project. You can just watch the development or try to send a few ADA coins. Many projects have the same goal and we believe that they should rather collaborate than to support hostility. It is fair to criticize when you have arguments. It is not fair to say something without them. Crypto must be a friendly space and offer features that people will love to use. Without these prerequisites, we can just wait another decade and we will not see a significant increase in adoption.
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