Everyone has different opinions on what it will take for Bitcoin to play in the big leagues. Some argue it must be by gaining favor among regulators and governments, forming banking relationships, and generally playing ball with the disrupted financial industry. Others suggest that Bitcoin should make no attempt to appease industry incumbents and instead generate its mass following by enabling the world-wide black market industry, known as System D, to flourish. The manner in which Bitcoin grows is important, for it affects what potential services will be explored and utilized, and what will be marginalized.
There is an idea that, in order for Bitcoin to succeed, it must be made as sweet and palatable to wealthy consumers as quickly as possible. They must be able to shop at Starbucks and Home Depot frictionlessly using Bitcoin. This idea presumes a theory, namely that the success of a money is dependent on its success as a medium of exchange at the retail level. Individuals in the checkout line must be tempted with the option of saving 3% on Amazon purchases — or Bitcoin will not present any clear advantage to the typical middle-class Western consumer, and it will not gain “mass acceptance.”
This idea is erroneous, as the theory of money presumed by it is erroneous. Bitcoin will not gain mass acceptance by being money for Whole Foods or Honda – these companies will accept it as money (and offer larger and larger discounts over time for it) because it is massively accepted. Therefore, those who argue and strive to spur Bitcoin merchant adoption are investing their time and energies building carts before taming horses.
Bitcoin will succeed as a massively-accepted currency as it continuously demonstrates its ability to fulfill numerous value propositions. One such value proposition lies in the darknet drug trade, where Bitcoin excells in providing an anonymous alternative to pure cash transactions, and thereby protects buyers and sellers in a market made artifically dangerous by State intervention. By creating value through further inroads, such as in the pornography, gambling, and sexual industries, Bitcoin is gaining traction and proving it can truly benefit workers by proving an alternate, liquid currency network that is uncensorable and decentralized. It will continue to gain ground in more licit industries over time, as the protocol doesn’t discriminate between legal and illegal exchanges — it is a dumb network. As such, it’s growth is viral. It rivals the Internet regarding adoption and growth rates. At the very least, therefore, everyone theoretically could sit back and rest on their laurels as Bitcoin, purely on its own merits, would win out over every other type of money in the long run.
Of course, few of us are content to sit around and wait for our parents to learn about open-source software and stumble into Bitcoin. Indeed, there is much to be done in transforming this circus of competing inflationary fiat currencies, fragmented by trade barriers and war, into a globally integrated crypto-economy. I stress, however, that dedicating one’s efforts — labor and argument — towards convincing shopkeers (or convincing others to convince shopkeepers) to accept a novel, digital currency is short-sighted.
What to Do?
The best course of action is to identify and pursue the strongest value propositions — not just in the United States, but everywhere. Who can best gain from using Bitcoin? Presumably, if those with poor banking facilities desire Bitcoin, those with no banking facilities at all will desire it more strongly. In the same vein, if those living under the auspices of a growing Big Brother are interested in acquiring Bitcoin, should not those under brutally repressive regimes benefit more?
The trick, therefore, is to market and create products that enrich the lives of those most desperate for it; it is to go for the low-hanging fruit: the other six billion. By developing solutions, creating marketing, and supporting the efforts of remittance and conversion goals, we introduce the bright light of Bitcoin to a world connected by mobile devices and disconnected by financial institutions. The adoption of Bitcoin by Indonesian farmers and Argentian families will be huge. Not only will they use a currency more stable, secure, and private than their regining fiat currencies, but these people will provide the liquidity Bitcoin needs in order to absorb the monetary traffic of the Apples and Exxons of the world. Thrusting one’s weight on merchant adoption is premature as the effort it will take to convince them and the traffic they will receive will be commensurably uneconomical until there are already millions of people using and relying on it. The Big Bad Wolf did not work so hard huffing and puffing for a single strip of bacon.
By thinking more globally and understanding the environment in which billions of people live, one is led to admit that Western countries, in particular the United States, will not lead Bitcoin adoption (it is likely “advanced” countries will deploy more resources in a futile effort to censor Bitcoin than poorer neighbors). Banking and credit is plentiful in these countries. Lending channels abound — centralized or crowd-funded. Title to one’s home and property is clear and assured. The stock exchanges are the largest on the planet. Such people need Bitcoin far less than the family in Sudan living on remitted income. That market is very large, and very ripe. The opportunity for large-scale disruption in the remittance and conversion industry would establish Bitcoin as a serious money-like alternative that would permeate through society and social discourse. As such events transpire, individuals won’t need to be given a crash course in Bitcoin before they use it. Awkward and overly technical explanations are employed now as most people do not accept its value as a given. They must be enlightened.
But, if Bitcoin gained acceptance through remittances instead of shopping, individuals who encounter Bitcoin will not need any such crash course. By its massive volume and worldwide acceptance, Bitcoin will be seen as a promising alternative — such as PayPal or Discover. Those who use credit cards need not understand the SWIFT and ACH networks that provide the banking backbone for current international wire transfers. They also do not trust banks to process funds internationally because an intelligent salesperson convinced them their network cost less than the previous system; they trust Visa because it is, appropriately, “accepted everywhere.” Millions of merchants, if not billions of people, use and know Visa — that fact itself establishes a sufficient baseline of trust for most consumers. Likewise, global and interregional Bitcoin use is needed to establish this implicit trust. Certainly, hearing that Microsoft is dabbling with Bitcoin does lend it credibility – but this credibility is dwarfed by the credibility the currency itself provides as it accelerates in price and hashing power year over year, something that can only be provided by the introduction of millions of hands.
Think “and,” not “or”
Undoubtedly, this grassroots adoption will happen as merchants discover Bitcoin’s commercial potential and begin accepting the digital currency. These things will occur simultaneously. However it is important to keep in mind the difference between the driver and symptom, the cause and effect. Mass amounts of consumers — unconnected to economics or crypto-anarchy — will hardly be swayed to go through the process of learning how to acquire, store, and spend Bitcoin for the prospect of saving a few percentage points at Gamestop or Target.
It is true, this type of discovery will naturally occur as a consequence of game theory between merchants and consumers — but to focus on this process is to see the exhaust as driving the car. It is to commit a confusion not terribly different from the Keynesian confusion of regarding spending and velocity of circulation as the key indicators and drivers of economic growth. As in the Zen parable, where the master points at the moon and the fool stares at the finger, let us keep our eye on the moon, and continue to unearth and market the huge value propositions Bitcoin can offer. The alleviation it will bring to impoverished Indians and Brasilian workers and Chinese investors and North Korean slaves will be more than just a cool mint salve — it will be a tidal wave of relief. Massive, global income redistribution is coming as Bitcoin permeates the monetary walls of every nation. Purchasing power will radically shift. Unable to censor any transaction, every individual on the planet finds himself able to market and trade with billions of people. The global trade opportunities Bitcoin will allow are fundamentally staggering. They are far, far more impressive than the trickle of opportunities provided by a revamped e-commerce section on Newegg.
Bitcoin stands to remake the world. It can be everyone’s safe haven from inflation and political caprice. When Bitcoin holds a price at tens of thousands of dollars and when regulatory agencies are defunct or ignored, that will be a good time for payment processing and merchant onboarding. For now, resources — financial and intellectual — should be invested in taking the lunch of the Western Unions and Moneygrams of the world. The shoppers will follow suit in time.
Where do you think Bitcoin will initially achieve mass adoption? Let us know in the comments below!