Part 1: The Dual Adoption Curves of Bitcoin

Michael Levin
12 min readMay 25, 2021

The adoption of Bitcoin is one of the most fascinating developments of the past decade. For misinformed critics, the adoption of Bitcoin is a confounding evolution. Regardless of their confusion, the adoption of Bitcoin can be explained by understanding its dual adoption curves: Bitcoin, the asset, and Bitcoin, the network.

In this piece, the first of a two part series, I’ll explain Bitcoin’s dual adoption curves in the context of the Diffusion of Innovations theory. Then, in Part 2, I’ll dive into the rapidly approaching ‘crossing the chasm’ moment and posit a hypothesis on Bitcoin’s crossing the chasm superpower.

The Human Reaction to Innovation

The ascent of humanity to its privileged position in the hierarchy of species is directly attributable to its ability to harness raw materials to build innovative technologies. From fire to the wheel, the power of human invention paved the way to the highest quality of life for any species in the history of the world. Given that evolutionary context, it is not surprising that humanity seems to obsess over the next new thing, the cutting edge technological innovation. Often, that obsession boils over into speculation and mania as humans try to imagine and front run the future. But, regardless of the speculative cycles, the use of high tech innovations follows a predictable and transparent adoption curve which can either lead to mainstream adoption or irrelevance.

Over the past twelve years, Bitcoin has captured the imagination of humanity. Bitcoin’s story is perhaps more tantalizing than any high tech innovation before it. It brings cutting edge innovation to one of the foundational layers of humanity: money. Given the potential to revolutionize such a foundational concept, Bitcoin has gone through several speculative cycles in its brief history. However, it would be a grave mistake to use these cycles as a reason to dismiss Bitcoin. These cycles are a well-understood psychological phenomenon caused by humanity’s infatuation with the new thing. Furthermore, any overemphasis on the bubbles simply misses the forest for the trees. As, in just 12 years, Bitcoin has grown to 135M users worldwide with an adoption rate faster than that of the internet, mobile phones, or virtual banking tools (i.e. PayPal) over comparable time periods. At its current adoption rate, Bitcoin will reach 1B users within 4 years. Despite the fear mongering, Bitcoin, like all innovative technologies before it, is following a predictable and transparent adoption curve, albeit, at an accelerated rate.

Bitcoin and Internet Adoption

The Diffusion of Innovations Theory

In 1962, Everett Rogers proposed the Diffusion of Innovations theory, which seeks to explain how, why, and at what rate new ideas and technology spread. The theory explains how, over time, a product or technology gains momentum and spreads amongst a specific population. The end result is that people adopt a product, technology, or idea. One of the key takeaways was that the adoption of a new technology across a population does not occur simultaneously. Rather, certain people and groups are more likely to adopt technologies at different times corresponding to specific psychological and social profiles. There are five established adopter categories for new ideas or products. Those categories are defined below (definitions pulled directly from here)

Diffusion of Innovations Theory Adoption Curve
Diffusion of Innovations Theory Adoption Curve
  1. Innovators: “Innovators are adventurous and willing to take risks. They fundamentally want to be the first to try new things. Their goal is to explore new technologies or innovations and find opportunities to be an agent of change.”
  2. Early Adopters: “Once the benefits of a new innovation start to become apparent, early adopters leap in. Early adopters buy new technology to achieve a revolutionary breakthrough that will give them a dramatic competitive advantage in their industry. They love getting an advantage over their peers and they seem to have time and money to invest.”
  3. Early Majority: “The mainstream early majority typically values innovations that solve a specific problem. They look for complete products that are fully tested, adhere to industry standards, and are used by others they know in their industry. They are looking for incremental, proven ways of doing what they already do.”
  4. Late Majority: “The late majority is risk averse and only adopts new innovations to avoid the embarrassment of being left behind.”
  5. Laggards: “Laggards hold out to the bitter end. They value traditional methods of doing things and refuse to adopt a new technology until they are forced to through obsolescence of their former system.”

Bitcoin’s Dual Adoption Curves

In evaluating Bitcoin within this established adoption curve framework, it is important to first recognize and differentiate the dual adoption curves driving overall Bitcoin adoption. These two curves can be summarized as: Bitcoin, the asset, and Bitcoin, the network.

Bitcoin’s Store of Value Characteristics
Bitcoin’s Store of Value Characteristics from The Bullish Case for Bitcoin

Bitcoin, the asset, refers to the store of value component of Bitcoin. Bitcoin, the asset, is an investment with the underlying thesis that Bitcoin will become a global store of value similar to gold. A variety of factors make Bitcoin an extraordinary potential global store of value including, but not limited to, its durability, scarcity, and verifiability. But, some would argue Bitcoin has not yet proven itself as a store of value over a long period of time (see established history). Therefore, Bitcoin, the asset, is an investment in the belief that it will ultimately become a global store of value.

Bitcoin, the network, refers to the medium of exchange component of Bitcoin. Bitcoin, the network, enables an internet native money or currency. The factors that make Bitcoin, the network, an incredible potential money or currency are different from the factors that make it a compelling store of value. Bitcoin, the network, enables global, permissionless, programmable money for anyone connected to the internet. This money or medium of exchange use case does partially rely on the strength of Bitcoin, the asset. But, the two technologies and adoption curves are still independent.

Given the importance of stores of value and money throughout the history of humanity, their creation and evolution has been studied extensively. Vijay Boyapati in The Bullish Case for Bitcoin and Nick Szabo in Shelling Out: The Origins of Money talk about this process in their own posts. Even back in the 19th century, in his book, Money and the Mechanism of Exchange, William Stanley Jevons explained: “Historically speaking … gold seems to have served, firstly, as a commodity valuable for ornamental purposes; secondly, as stored wealth; thirdly, as a medium of exchange; and, lastly, as a measure of value.”

To further explain how money evolves, we can pull directly from Vijay’s explanation in The Bullish Case for Bitcoin… “Using modern terminology, money always evolves in the following four stages:

  • Collectible: In the very first stage of its evolution, money will be demanded solely based on its peculiar properties, usually becoming a whimsy of its possessor. Shells, beads and gold were all collectibles before later transitioning to the more familiar roles of money.
  • Store of value: Once it is demanded by enough people for its peculiarities, money will be recognized as a means of keeping and storing value over time. As a good becomes more widely recognized as a suitable store of value, its purchasing power will rise as more people demand it for this purpose. The purchasing power of a store of value will eventually plateau when it is widely held and the influx of new people desiring it as a store of value dwindles.
  • Medium of exchange: When money is fully established as a store of value, its purchasing power will stabilize. Having stabilized in purchasing power, the opportunity cost of using money to complete trades will diminish to a level where it is suitable for use as a medium of exchange.
  • Unit of account: When money is widely used as a medium of exchange, goods will be priced in terms of it. I.e., the exchange ratio against money will be available for most goods.”

Within this proposed monetary asset evolution framework, Bitcoin seems to be clearly moving from collectible status towards a more accepted store of value. It is posited that, in the past, these monetary phases played out in chronological, consecutive fashion where an asset did not move from store of value to medium of exchange until it fully completed its store of value adoption curve. Why? The above hypothesis is that people did not want to spend an ascending store of value until it stabilized because they would be losing value. While that’s a totally reasonable explanation, it might not explain the phenomenon entirely.

Another contributing factor could have been that, during the adoption of gold, the available communications and transportation technology were costly, slow, and limited by geography. Thus, the phases of monetary adoption were severely constrained by movement through homogeneous audiences at a slow pace. In this process, you can imagine that certain people within a nuclear family began to collect gold. Then, they convince the rest of their family, who then convinces their tribe, who pushes the rest of the town, then the region, the nation and so on. Within this process, a new store of value, like any new technology, goes through the adoption curve from innovators to early adopters, but it is severely constrained by locale. Limited by cost, speed, and geography, the store of value adoption moves between geographically similar groups at a snail’s pace. Given that slow, local adoption process, these initial adopters likely had extraordinarily similar monetary needs and ideas. This homogeneity of thought could have contributed to the limited use case of just a store of value for an extended period of time, which forced the adoption curves to unfold chronologically.

Conversely, today, the communications and transportation technology are the exact opposite: free, instant, and global. Rather than being limited to slow locally constrained adoption, Bitcoin can move through its adoption curve at global scale. Bitcoin can be adopted by anyone, anywhere with an internet connection. Thus, Bitcoin could follow a different monetary adoption path versus historical examples. Given its global adoption curve, adopters will have different needs for or ideas about Bitcoin. It can be adopted by investors who believe in the thesis that it will become a global store of value. And, as more investors adopt Bitcoin, the asset, it can also be adopted as better programmable money by audiences who have particular socioeconomic, geographic, or entrepreneurial needs.

Overall, Bitcoin, the asset, and Bitcoin, the network, are distinct, yet interconnected, technology adoption curves. Both have very important and ambitious end states. For Bitcoin, the asset, the end state is Bitcoin as a global store of value. For Bitcoin, the network, the end state is Bitcoin as a global internet native money. As discussed above, these adoption curves need not necessarily be consecutive and chronological like the historical example of gold. But rather, these two adoption curves can occur concurrently with Bitcoin, the asset, kickstarting the adoption process which helps Bitcoin, the network, to ultimately send and receive value. As pictured below, rather than consecutive adoption curves with no overlap, these curves appear more like waves interconnected to push each other and overall Bitcoin adoption forward. Furthermore, the overall Bitcoin adoption curve is reaching a critical moment. And, the interplay of these two curves will be critical for Bitcoin to reach the mainstream.

The Dual Adoption Curves of Bitcoin

The Current State of Bitcoin Adoption

Bitcoin, the asset, sits in the first part of the adoption s-curve. Depending on which target market is used as the denominator, there are slight differences in where exactly it currently sits on this curve. For simplicity, let’s use ~135M current Bitcoin users. And then, for just Bitcoin, the asset, let’s start with Croseus’ method, which looks at the number of people who have some wealth to store or invest in Bitcoin. He uses 2.2B people, which is the number of people in the world with $10,000 in net worth. Given that denominator, Bitcoin, the asset, sits at a 6.1% current penetration rate or in the early adopter segment of the adoption curve. But, a significantly smaller number of people globally actually actively invest. The number of investors worldwide is difficult to triangulate. In the US, 52% of families have direct or indirect exposure to the stock market. The US is recognized as having the highest proportion in the world. But, just to be conservative, let’s just plug in that 52% number across the entire world population of 2.2B with $10k to invest, which gives us 1.14B people. Given that conservative investor base denominator, Bitcoin, the asset, sits at a 11.8% adoption rate or right on the cusp of the early majority.

For Bitcoin, the network, the denominator is more difficult to choose. But, in the ideal end state, anyone with an internet connection could and should use better money. So, we’ll use a more aggressive target market, the total number of active internet users, 4.66B. For the numerator, for simplicity, we’ll keep the ~135M number. It would be better if we could differentiate between users who are investing in the asset versus buying it to use as money. Because, it’s likely that, at this point, most of these users are investing in Bitcoin as an asset, not yet using it as money, but it is excruciatingly difficult to differentiate with any reliability (more on this later). With that denominator, Bitcoin, the network, has a 2.8% penetration rate or right around the innovator segment of the adoption curve.

Any reasonable measurement will show similar results. Bitcoin, the asset, is likely crossing into the early majority while Bitcoin, the network, is on the cusp of moving from innovators to early adopters. So, overlapping the two, Bitcoin, overall, is still early in its adoption curve, likely somewhere in the early adopter phase.

To understand how we got to this point in the overall adoption, it is important to recognize that the narratives and positioning around Bitcoin are constantly evolving. In their piece, Visions of Bitcoin, Nic Carter and Hasu explore the various narratives surrounding Bitcoin over the past 12 years. They identify seven major ideological narratives that have held positions of prominence for Bitcoiners throughout history. They explore how these strains of thought have characterized Bitcoin users over time.

The Evolving Narratives of Bitcoin

In the first stages of Bitcoin adoption, e-cash proof of concept, censorship resistant e-gold and a cheap payments network were the dominant narratives among users. In this stage, innovators adopted Bitcoin. As outlined above, innovators want to be the first to try a new idea. They are technologists and, therefore, not much needs to be done to position an innovative technology for them. The innovators adopted it simply because they were intrigued by the tech.

As Bitcoin started to spread to early adopters, the positioning and narratives naturally started to shift. Early adopters are a rare breed of visionaries who have the insight to match an emerging technology to a strategic opportunity. These visionaries drive the high tech innovation forward because they see the potential for an order of magnitude change. As early adopters came on board, the popular narratives around Bitcoin shifted towards censorship resistant e-gold, reserve currency for crypto, and an uncorrelated financial asset. Early adopters saw the potential for Bitcoin, the asset, and pushed the narratives to focus on that potential use case. These early adopter beliefs and narratives took Bitcoin, the asset, from the innovator to the early adopter phase. Given that narrative shift, it is not surprising that, over the past few years, most Bitcoin users bought Bitcoin as an investment asset.

A survey in 2017 by LendEDU asks Bitcoin owners, “Which of the following best describes the reason you invested in Bitcoin?” 21.81% of respondents answered “Bitcoin is a long term store of value, like gold or silver.”. A 2021 Surveymonkey of Bitcoin owners showed similar results. Most of those who own Bitcoin say they personally own it “as a growth investment” (67%). Cited less frequently, 30% say they own it “to hedge against traditional asset crashes” and 29% say they own it “as a store of value.” Meanwhile, for Bitcoin, the network, this survey shows that only 13% bought it “as a currency to purchase goods and services.” So, the current adoption of Bitcoin overall shows that most people are purchasing Bitcoin as an asset. And, as previously discussed, when compared, the adoption curve of Bitcoin, the asset, is currently further along (comfortably into the early adopter phase) than Bitcoin, the network (likely still in the innovator phase).

Bitcoin’s current standing and trajectory on its overall adoption curve is mostly due to its smooth transition from innovators to early adopters who embraced the asset and store of value narrative. Given the current point on this overall adoption curve along with the projected rate of adoption, it is clear that over the next 10 years, Bitcoin will start to move past those early adopters into the early majority.

If you enjoyed this post, keep your eyes out for Part 2: Bitcoin’s Crossing the Chasm Superpower. In that post, I’ll explain Bitcoin’s rapidly approaching crossing the chasm moment and hypothesize about a crossing the chasm superpower.



Michael Levin

#Bitcoin Previously: Product and Growth at Google for Grasshopper App and Google TV. Wharton. Engineering Entrepreneurship.