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Author Topic: Bitcoin's future is clear to those who study technology's history  (Read 7444 times)
ofirbeigel
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November 27, 2013, 10:52:38 AM
 #1

In 2010, when asked about the iPad a but after it was introduced to the market, Bill Gates replied “ It’s a nice reader, but there’s nothing on the iPad I look at and say, ‘Oh, I wish Microsoft had done it’. On May 2013, when asked about Bitcoin, Gates claims it a ” Techno Tour de force”, meaning A feat demonstrating brilliance or mastery in a field.

When coming to predict Bitcoin’s future do we rely on opinions or facts ?
The opinions about Bitcoin’s future vary a lot among so called experts in the fields of investments and technology. For example, on that same interview from May 2013, Charlie Monger calls Bitcoin “Rat Poison”. So today, instead of listening to experts, I decided to take a look into the history and patterns of new technologies to find out what can we learn from them about the fate of Bitcoin.



“The world potential market for copying machines is 5000 at most.” ~ IBM to the founders of Xerox, 1959

Any new technology that is introduced takes time to be adopted by the masses. Anyone who thinks that a new technology is just widely accepted is fooling himself. Here are just a few examples of experts’ opinion from the past:


“Television won’t last because people will soon get tired of staring at a plywood box every night” ~ Darryl Zanuck, Movie producer at 20th Fox, 1946

“There is no reason for any individual to have a computer in his home.” ~ Ken olden, founder of DEC, 1977

“The only question remaining is if, when the  iPhone fails, it will take the iPod with it.” ~Bill Ray, The Register, 2006


But if you don’t listen to opinions and look at the facts you get a different picture. The following graph shows the adoption rate of new technologies in the US since 1900(from 10%-90% penetration):



So what’s holding Bitcoin from being adopted so long…
Each one of these new technologies had it’s share of skeptics and nay sayers (even the Internet). It’s easy to see that as we progress, technologies are adopted faster (the slope is getting steeper and steeper). So why are people so skeptical about Bitcoin ? I believe the answer start with which segment of the population you belong to.

Each of us belong to a certain segment when it comes to new technologies. Here are the different segments:

Innovators – Usually techies…people who aren’t afraid to try out stuff first.
Early adopters – Visionaries – They read about the Innovators experience and decide to drive a change.
Early majority – Pragmatists – They stick with the herd once the early adopters are onboard.
Late majority – Conservatives – They wait to the last minute to adopt something new.
Laggards – Skeptics – No matter what will happen they will not adopt anything new until there’s no choice left.[/li][/list]

If we  Model these groups we get the following:



But what is “The Chasm” Huh
Glad you asked. According to Geoffrey A. Moore’s “Crossing the Chasm” – Each new technology faces one major obstacle. The Chasm. While transitioning from Innovators to Early Adopters is easy, the move from Early Adopter to the Early Majority is a bit trickier. You see Early Adopters are used to the growing pains of a new technology, but the Early Majority are technophobic. They need things to be simplified, and the thing that Bitcoin isn’t, is simple. Each month there are tens of thousands of searches for “What is Bitcoin” (according to Google’s Keyword Planner). And if that wasn’t enough, just try buying Bitcoins in an easy manner like Paypal or a credit card. Early Majority consumers need a “one click solution” which currently isn’t available for Bitcoin.

To cross The Chasm you need to keep your Early Adopters
So Bitcoin is currently stuck trying to cross The Chasm. Not only that, it’s also losing it’s Early Adopters because of new crypto currencies flowing in. There are almost 40 different Crypto Currencies available. These alt. currencies are luring away the Early Adopters’ focus from Bitcoin and affect Bitcoin’s chances to cross the gap.

“Right now Bitcoin feels like the Internet before the browser.” ~ Wences Casares, tech entrepreneur
I recently came across a blog post that explains Bitcoin’s exponential growth in value. It got me thinking – are we truly at the Chasm ? Perhaps we’re somewhere else along the line…So I decided to dig in deeper to whatever historical data I could find about Bitcoin.

Let’s start out with Google Trends from the past 2 years - We can see that the Bitcoin trend has already surpassed the first peak that was earlier this year on April and is growing.

And These are the number of Tweets for the hashtag “Bitcoin” on Twitter since January 2011:


There have been almost 400K tweets about this specific hashtag alone.

And here are some site analytics from Bitcoin.org. You can see that almost 80K unique visitors (UV) visit the site each month:



How can this data help us explain where we are on the curve ?
If we take the technology adoption groups from before and compare it to the market share of a product it will look something like this:


This graph is taken from the Diffusion of Innovations theory which seeks to explain how, why, and at what rate new ideas and technology spread through cultures.

So although they may not look as smooth as they should be in theory, you can see that the interest of the general public in Bitcoin is rising with a positive second derivative – showing we are in fact somewhere between the Early Adopters and the Early Majority. One more thing that created a lot of noise over the web and was talked about in that same blog post was about a product’s decline. The important thing to remember is that every product declines eventually, even Bitcoin. The idea may remain but the actualization of it will change. So while the idea of digital currency or crypto currency may remain forever, the product – Bitcoin, will have a limited lifespan. This lifespan  can be 5 years, 50 years or 500 years, but in the end it will, just like everything else, cease to exist.

Bitcoin is the first in line as a digital currency solution
So to conclude there is not doubt that Digital Currency is on its way, and from what it seems, the Bitcoin solution is the leader. The skeptics out there aren’t skeptical about digital currency, they are skeptic about Bitcoin. And yes, Bitcoin has many flaws, and it still has to cross The Chasm and supply easier access to the Early Majority in order for it to be widely accepted. But at the moment, with so many Bitcoin startups popping up and are helping to bridge this gap, I personally believe Bitcoin’s future looks brighter than ever.

This article was written by me on my Bitcoin Blog. You can subscribe here.
 

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18RATTT
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November 27, 2013, 11:04:20 AM
 #2

great writeups !!

a quote that fits in bitcoin early struggle

bitcoinpsftp
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November 27, 2013, 11:05:27 AM
 #3

Wow, great post.  You put quite  a lot of time into it.  What you say is spot on.  It is a fact that bitcoin is just NOT SIMPLE.  I searched for like an hour for an easy way to buy bitcoins back when they were 50 dollars each, and failed, so didn't buy.  Mistake, but oh well.  They're just SO HARD to get.  So obviously the potential for it's growth is VERY limited (who wants to post on a forum, and obtain an obligatory 4 hours of online time, in order to post in the marketplace to buy bitcoins, I assure you, 99% of the population won't do it).

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November 27, 2013, 11:08:28 AM
 #4

I think we are just dipping our toe into the early adopters stage.
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November 27, 2013, 11:58:58 AM
 #5

Sorry I disagree.  Bitcoin still has negligible users and a tiny total value.  We are in the Innovator stage. 


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Lewis2
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November 27, 2013, 12:23:30 PM
 #6

Nice post, you put time and effort in it and thought things trough, something I miss in a lot of discussions here.

Major drawback that I also saw in an other discussion is the comparison with adoptation of other innovations. The graph is nice, but looks at consumer electronics and is so fundamentaly different from a new valuta. Bitcoin has the potential to change the way we think about money and monetarian regimes. It also has the potential to be a complete bust.

Problem here is that you can not compare it to any past technoligical (r)evolution. I do think we are at the frontier and absolutely innovaters at this stage, now let's hope we get past the chasm!

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November 27, 2013, 12:30:36 PM
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Great article!

I think the tool that will enable mass adoption will be an open source hardware wallet with the security of an offline Armory wallet and the ease-of-use of a smart phone.  It will be connected to exchanges for converting from or to fiat.  It will interface easily to wallets owned by merchants or other individuals for making and receiving payments.  It will handle escrow and multi-signature simply and easily.

It will be a safe place to store large sums of money, because a thief who steals it will have zero chance of getting a single satoshi out if it, yet you'll be able to recover everything from the one-time paper backup in your safe deposit box or multi-part backup distributed to your most-trusted friends and family.

The bulk of individuals and businesses are not going to adopt Bitcoin if it means their funds are vulnerable to thieves hacking in and stealing their money.  We need to develop the technology to keep bitcoins secure.  I think it needs to be on a device more secure from malware than a PC or smartphone.  And it needs open source hardware and software to drive innovation.

Oh, and by the way, we need to have it before Bitcoin loses its momentum.

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November 27, 2013, 12:31:38 PM
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Wow, great post.  You put quite  a lot of time into it.  What you say is spot on.  It is a fact that bitcoin is just NOT SIMPLE.  I searched for like an hour for an easy way to buy bitcoins back when they were 50 dollars each, and failed, so didn't buy.  Mistake, but oh well.  They're just SO HARD to get.  So obviously the potential for it's growth is VERY limited (who wants to post on a forum, and obtain an obligatory 4 hours of online time, in order to post in the marketplace to buy bitcoins, I assure you, 99% of the population won't do it).

In the Netherlands there are multiple outlets where you can already buy Bitcoin by ideal (online banking system). You have your Bitcoin within minutes and you have the possibilities to compare prices. Buying on a forum will be a temporary thing. We have to wait until transfer times reduce (if ever) and buying Btc is possible by credit card or paypal.

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November 27, 2013, 01:58:01 PM
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i remember when charlie munger called bitcoin "rat poison". i wouldn't like bitcoin if i was him, either.

warren buffett has an anti-gold posture, as well (from an article that made it's way around the 'net): http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

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November 27, 2013, 02:05:15 PM
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Great article!

I think the tool that will enable mass adoption will be an open source hardware wallet with the security of an offline Armory wallet and the ease-of-use of a smart phone.  It will be connected to exchanges for converting from or to fiat.  It will interface easily to wallets owned by merchants or other individuals for making and receiving payments.  It will handle escrow and multi-signature simply and easily.

It will be a safe place to store large sums of money, because a thief who steals it will have zero chance of getting a single satoshi out if it, yet you'll be able to recover everything from the one-time paper backup in your safe deposit box or multi-part backup distributed to your most-trusted friends and family.

The bulk of individuals and businesses are not going to adopt Bitcoin if it means their funds are vulnerable to thieves hacking in and stealing their money.  We need to develop the technology to keep bitcoins secure.  I think it needs to be on a device more secure from malware than a PC or smartphone.  And it needs open source hardware and software to drive innovation.

Oh, and by the way, we need to have it before Bitcoin loses its momentum.

The trezor can be connected to an android smartphone, so that would be really secure.
Later there could be more convenient solution for the average joe but we have to get aways from wallets that are on the computers, that will lead to a lot of hacks and it will make the news that random people got hacked of their money cue they clicked on a funny cat pic.
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November 27, 2013, 02:44:54 PM
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Internet security will be as booming as Bitcoin itself! Mark my words!
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November 27, 2013, 02:46:12 PM
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Internet security will be as booming as Bitcoin itself! Mark my words!

Couldn't agree more....

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November 27, 2013, 02:56:16 PM
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But if you don’t listen to opinions and look at the facts you get a different picture. The following graph shows the adoption rate of new technologies in the US since 1900(from 10%-90% penetration):

This kind of thinking suffers from survivorship bias. What's not in your chart are adoption curves of technologies that failed to reach 90% penetration, that failed to gain traction - like Betamax, Segways and hundreds of "next year's must have gadget". Naturally you're aware of this since you wrote as much in the title of it, but many who look at this chart will think of it in the wrong way. They won't think "if Bitcoin follows the pattern of smartphone adoption it'll grow unexpectedly fast".

It's easy to pick a selection of technologies that had an S-curve, but it's hard to find all the technologies which had a U shaped curve. They failed so we don't remember them.

Bitcoin will do great but it's possible to realise this through more careful rational thinking.

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November 27, 2013, 04:20:08 PM
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Great effort trying to map where we are

Think we are still in the early adopter stage as well

Believe though that the next crash will winnow out most of the other alts leading to a welcome refocusing on btc by miners and other early adopters

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November 27, 2013, 05:31:23 PM
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nice! although BTC has some unknown resistance in that banks are yet to play their hand on how they feel about it, many other techs didnt have that societal resistance. Also, who knows if other coins will replace BTC in the future, i agre btc is leading the way but plenty of room for others - But i guess youre kinda talking about general crypto situation anyway:)

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November 27, 2013, 05:49:07 PM
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I`d like to step up in defense of Mr. Ken Olsen. This quotation has been taken out of context for a long time and is not a proper representation of his thoughts about personal computers. People like to reference it though; I suppose it`s human nature to point and laugh at `authority figures` when they get something wrong, although this really isn`t fair.

Mr. Olsen was referring to the popular idea in the 1950s and 60s of a `master computer` that controlled the home environment, something similar to HAL in 2001: A Space Odyssey. Olsen believed that people wouldn`t want a `computer` to control their living conditions, such as preparing meals for them and keeping account of odds and ends in the house, because he believed it would interfere with our lifestyles. I`m not aware of anyone living with a HAL-like computer, aside from Tony Stark, so he`s basically right about this.

Mr. Olsen recognized the potential for personal computers, and owned early prototypes of his own.

http://www.snopes.com/quotes/kenolsen.asp

I`ve never heard that quote about TV, but it seems a reasonable prediction to make back in the days of black and white television, displayed on tiny, blurry screens. Television has definitely come a long way since then. Just for reference, this is what a new television looked like in 1946. Gives me a headache just thinking about it.



It`s not surprising to see someone predict the iPhone would fail; Apple has always had its critics and still does. Though when the iPhone came out in 2007 I seem to remember most people recognizing it as a big step in smartphone technology. Actually, I remember a lot more criticism surrounding the iPad. Part of that is due to the fact that the first gen iPad was a piece of crap with no multi-tasking support or camera, but it has since gone on to revolutionize the home PC market.

Night gathers, and now my bitcoinwisdom watch begins.
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November 27, 2013, 06:31:04 PM
 #17

I am still a bit new to BTC myself, but I thought we were in the Early Adoption stage before reading OP. IMO BTC will have to crash one more time in order for it to succeed, unless banks get into the digital currency right now. After it crashes it will be here to stay.
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November 27, 2013, 06:43:42 PM
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That is a great post, thanks!  I believe I crossed the "Chasm" following the US Senate Committee meeting regarding crypto currency.  I've been trying to convince others are there are a lot of skeptics!  I'm not sure that we want this to grow too large too soon but it will be nice when more people begin to realize BTC's potential and future.
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November 27, 2013, 06:50:10 PM
 #19

nice post. thx.

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November 27, 2013, 06:53:25 PM
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If I owned this forum I would make this thread a:

STICKY

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