Taking the measure of the Bitcoin revolution

"Bitcoin adoption is faster than the Internet.” True. But look behind the headlines and you find a richer, more complex and more rewarding measure of #Bitcoin’s success.

by Nik on 23 Dec 2021

Bitcoin isn’t a matter of faith. It’s a philosophy that encourages, if not demands, that its users validate and self-educate. But let’s be honest: Bitcoin has a relentless, almost religious focus on user adoption, and this does us fewer favors than we think.

It’s not that adoption by individuals, institutions, and countries isn’t an important part of the narrative, or that we shouldn’t celebrate those who embrace a future of financial self-sovereignty. It’s that by focusing exclusively on one metric, we’re failing to tell the story that really matters — and missing the single most meaningful measurement by which Bitcoin’s ascent should be judged.  

On the shoulders of giants

It’s easy to see why we like to talk about adoption. In the space of thirteen years, Bitcoin has amassed some 135 million users and is projected to hit over a billion by 2025. As former Googler Michael Levin points out, like previous technological innovations, Bitcoin is following a transparent and predictable adoption curve. The only difference is speed. When the Internet had equivalent penetration, it took another eight years to reach a billion users.

This rapidity should not surprise us. Bitcoin is an exponential technology that stands on the shoulders of other exponential technologies. Bitcoin’s backbone is the blockchain, which sits atop the Internet, which was built on 20th-century communications networks, all ultimately the product of humanity’s harnessing of electricity. Here is the invisible thread connecting Faraday to Nakamoto via DARPA and Tim Berners-Lee, an ever-steepening line of adoption that continues with new services and technologies built on Bitcoin’s success, like Lightning.

Measuring Bitcoin’s user growth against other technologies is seductive, but it’s a false equivalence; moreover, it’s a surprisingly poor way of gauging its success. If we’re the rational, cool-headed empiricists we claim to be, the stories we tell ourselves (and others) about Bitcoin must be based on something much stronger than user numbers alone.

Beyond the bell curve

To understand why we need to think differently, remember that Bitcoin is more than a currency: It’s both an asset and a network. You can count the coins in circulation, track the number of users, nodes and active wallets and still be no wiser about its progress down the road towards worldwide adoption.

To judge this, it helps to keep the central philosophy in mind. Bitcoin was invented to enable anyone to break free from the government and central bank-manipulated fiat currencies, to transfer wealth easily through time and space, and to be your own bank. So, progress can be measured in many ways: Through the value transacted in Bitcoin, for example, or the strength, stability and longevity of the network. The stronger the rails on which it runs, the more people storing wealth and transacting in Bitcoin, the more value transferred  — these are only the most obvious factors that affect its true value.

And then there are the intangibles, the difficult or impossible-to-quantify. Bitcoin isn’t just an insurrection against fiat, it’s a revolution in the mind. For example, one of the biggest (and, to my mind, still-distant) milestones is when Bitcoin becomes a standard unit of account, or when ordinary people start measuring the value of their wealth in non-inflatable bitcoin rather than ever-depreciating fiat.

It’s clear that the bell curve of users is just one way we can gauge Bitcoin’s progress and a long way from the best. To discover a better metric, we need to break out the microscope.

Putting fiat on ice

From the eagle’s eyrie, Bitcoin adoption looks like a smooth curve. But as we’ve seen, there are many ways to measure growth, and each of these domains has its own growth cycle. When you zoom in on any one of these, you don’t see a straight line, but a fitful pattern of progress, stagnation, regrowth and then saturation. Like a fractal, these patterns repeat at larger resolutions.

There’s a simple reason for the stop-start nature of progress, and it explains why comparisons with earlier technologies are often far from the mark. When the Internet burst onto the scene, there was nothing to compare it to, no competitor it had to fight for market share (except, perhaps, old occupations for our eyeballs like television). Bitcoin, however, is battling against some of the most powerful entities on the planet, including governments, international markets, and the world’s reserve currency.

And so we stumble upon a far better way of charting Bitcoin’s rise. We often use the analogy of fiat currency being like a melting ice cube, the real-world value melting away over time. That’s exactly how we should think about Bitcoin adoption. It’s not just the number of people using it, nor even the amount of value they store or transact. What matters, ultimately, is the flight from fiat as more people are in favor of a currency that can’t be manipulated at politicians’ whims, which enables them to transact on their own terms and keep the value of their hard work.

So by all means, cheer as user numbers soar past the stratosphere. Ultimately though, Bitcoin’s success will be judged on factors too intangible to measure: The sovereignty of the individual, and the financial freedom of all.