This article will dive into what ‘early adopters’ are and provide an overview of the first adopters of Bitcoin.
Every time there is a release of a new form of technology, many of us scramble to be the first in line to get it. It’s natural for us to be curious about the new and the unknown. From that instinct, we want to reap the benefits of being the first ones to use the product.
This same mindset can be applied to cryptocurrency, especially Bitcoin. In their essay, “What Differentiates Early Organization Adopters of Bitcoin From Non-Adopters?”, Amy J Connolly and Andreas Kick state that:
“The craze over cryptocurrency such as Bitcoin has been likened to a modern-day gold rush.”
While the market is volatile, one cannot deny the appeal of being the first to ‘adopt’ it. There is an adrenaline rush that comes from boasting about the fact that you were one of the first to invest in this currency. This seems relatable now, but back when Bitcoin was just getting off the ground, investing in it was risky.
What does it mean?
‘Early adopter’ is a term whose definition is quite self-explanatory. It refers to an individual or business that uses a new product, technology, or innovation prior to others. More often than not, an early adopter will pay more for the product than later adopters. However, these adapters will accept this premium if using the product brings many benefits. These include such things as efficiency improvement, cost reduction, or market penetration increase. An additional benefit will be raising the social status of the early adopter.
Companies rely heavily on early adopters. These figures, whether they be businesses or individuals, provide the feedback they need concerning product deficiencies. Moreover, they help with covering the overall cost of the product’s research and development.
The rate of diffusion – or the adoption – of a new product by the market as a whole can vary. It will largely depend on the type of product and what its price is. Early adopters within the business world frequently encounter a high level of risk. Specifically, they are using a product or technology that has yet to reach completion. It may not work with the products that suppliers and customers are using. Alternatively, it may not be compatible with the other products that they own.
Early adopters will often enjoy a period of prestige, being the first ones to own a new piece of technology. However, they are susceptible to one specific drawback. There’s a high probability that the equipment or service they are using will be obsolete in future iterations.
Because of fluctuating value, widespread adoption is uncertain despite the steady increase of organization adopters. The essay from before explains that organization adoption is more important than consumer adoption. This due to the fact that consumers cannot use cryptocurrency if organizations refuse to accept them as payment.
The earliest adopters
Many people assume that cryptocurrency relates to the black market or the dark web. They believe that its usage ties directly to those engaging in illegal sales and activities. As easy it would be to dismiss these assumptions as foolish, they are not baseless.
Some of the most well-known bitcoin owners were able to make millions by collecting the currency in the early days. Although, there are also several anonymous millionaires that people will likely never know the identities of. Among them are those who work within the darknet market (DNM). Alternatively ‘cryptomarket’, this is a commercial website that operates by way of darknets such as Tor and/or I2P. They function primarily as black markets that sell or organize transactions involving various illicit goods. They also run sales of legal products.
DNM operators and vendors are one of the earliest adopters of Bitcoin. This is mainly because of the inception of the first modern DNM, Silk Road, which launched back in 2011. Silk Road was an online black market and was a popular platform for illegal drug sales. Being part of the dark web, its operation was mainly as a Tor hidden service. With it, online users were able to browse it anonymously and securely. They could do so without ever experiencing any potential traffic monitoring.
Rough calculations illustrate that the Silk Road garnered $30-45 million annually with 146,946 buyers in 2013. Moreover, with 3,877 vendors. In October of 2013, the Silk Road would suddenly collapse. In response, many of those vendors opt to move on to newer DNMs; many of which still exist today.
Cash out issues
According to a report on Vice by David Gilbert, many DNM vendors were able to obtain massive quantities of bitcoins. They could achieve this by selling their wares and deeds online. However, the process of cashing them out into fiat is not as easy. Gilbert goes into detail about this. He states that a majority of the wealthy vendors have been in contact with Swiss banks. This is out of a desire to try and exit into fiat in a considerably quiet manner. Some are offering employees at the banks up to 10% as a way to get them “out of the situation.”
In the report, he also adds that:
“Exchanges such as Coinbase, founded in 2011, offer the easiest way for the general public to buy and sell mainstream cryptocurrencies like bitcoin, litecoin, and ethereum. But users have to register with their real identities and prove their cryptocurrency was acquired legally. That makes them less appealing to criminals. Cashing out small amounts of bitcoin is still possible, but it’s becoming more difficult to do so without attracting law enforcement attention.”
There is an explosion in demand for cryptocurrency. Anyone who is using Bitcoin today faces increasing transaction fees. Furthermore, they have to go through long wait times for payments processing. All in all, this means that people who are rich on paper (i.e. on the blockchain) need help. This help comes in the form of complex methods that will allow them to convert their “ill-gotten gains.” If they cannot devise these strategies, then they risk losing value, whether that amount is small or large.
Tom Robinson, co-founder of the blockchain analytics company, Elliptic, has this to say:
“Funds from illicit activities are just lying dormant, and they are waiting to find effective means of cashing out.”
The leading methods
There are some DNM vendors from certain marketplaces that detail how they get their bitcoin’s back into the fiat system. These marketplaces include the likes of the Wall Street Market and the Point market, among others.
One method is mixing the coins and selling them locally. Specifically to someone who is willing to pay for the cryptocurrency with cash. This particular method is what is known as ‘cryptocurrency tumbling’ (alternatively ‘cryptocurrency mixing’). A tumbler is a service that mixes potentially identifiable cryptocurrency funds with others. This is in the hope that it will cover up the trail leading to the original source of the fund. The purpose of tumblers is to improve the anonymity of cryptocurrencies, typically Bitcoin. Some popular mixing platforms include BitMix.Biz, Bitcoin Laundry, and SmartMixer.
Another common procedure is purchasing cards that are prepaid with the bitcoin that offer credits. Not only that but also ones that offer gift redemptions that are applicable to a wide range of stores. An unusual technique is using the payment service Western Union. One vendor will send their coins to platforms that “automatically transfer bitcoin to Western Union accounts.” It is rather unorthodox, but it works.
Last but not least, let’s assume that a person makes the choice to exchange their cryptos for fiat. In this case, the trick is to go about doing it at a slow pace. One vendor comments on the process, remarking that it tends to be “slow and tedious.” The report later quotes another vendor who has experience with this method. They explain that only about 20% of these people have come up with “innovative ways of cashing out — 80% have no idea how to do it.”
During his ‘The Internet of Money’ tour in Ireland, Andreas Antonopoulos spoke about the topic of early adopters. When a member of the audience asked if we are early adopters, Antonopoulos’ answer was basically “No.” Instead, we are in a ‘lunatic fringe’ stage.
The term ‘lunatic fringe’ refers to an extreme or eccentric minority existing within a group or society. In a way, one can view them as trailblazers or, appropriately enough, lunatics; it is all entirely subjective. In Antonopoulos’ opinion, we are not in the era of early adopters. Rather, we are in a lunatic fringe era. Be that as it may, early adopters will follow by the time this lunatic fringe phase comes to an end.
The words “cryptocurrency” and “Bitcoin” as brands are now widely recognizable to the general public. True, they may not understand the mechanics or the principles and may only see it as the currency of hackers and drug dealers. To be fair, as mentioned earlier in the article, these assumptions are not baseless. The bottom line, though, is they still recognize the words, whether they know the actual meanings or not.
In Antonopoulos’ own words, “the zeitgeist has happened.” Once upon a time, it was rare to come across the use of these words. “Bitcoin” and “cryptocurrency” were subject to infrequent usage and were quite obscure to the mainstream. Nowadays, however, they are becoming more and more common in the media. Whatever that form of media might be (TV show or news article), the terms will be used. Moreover, regardless of what the reader or viewer may know about it – a lot or very little – they will still recognize it.
Antonopoulos recounts an improv comedy show in Chicago that he attended a couple of years ago. During this show, there was a sketch where someone was acting as a hairdresser and another was acting as a customer. The hairdresser asks, “What do you think about Bitcoin?” The customer replies, “I don’t know, I don’t understand it.” This response made the audience laugh and this reaction surprised Antonopoulos.
“When you say [bitcoin] now, people recognize it.”
We hear the words a lot, no matter the context, but that is a big difference from actually using them. The number of people who use cryptocurrency are, according to Antonopoulos’ estimation, roughly 20-25 million. Given that this number is a small percentage, he does not believe that we are necessarily in the early adopter phase; at least not yet. We are still in the “lunatic fringe.”
The future of mainstream
Regardless of if you prefer the term early adopter over the lunatic fringe or vice versa, this raises an interesting question. Paraphrasing one of Antonopoulos’ spectators during his presentation: “Will we become the mainstream?”
With the continuously increasing popularity of cryptocurrency, one would think that the answer would be “Yes.” At the very least, the answer would be “It is likely.” However, Antonopoulos provides a different answer. He does not think that we will become mainstream. It could happen, but that will likely take several generations to take effect. Becoming a popular name that everyone both recognizes and understands is a gradual process.
His justification for his answer ties into the fact that crypto is a new system. It is almost a decade old, but it is still technically in its infancy. The idea of free access to information and sharing information is becoming commonplace in this generation’s culture. Moreover, being a content creator and publisher as an individual (i.e. without an intermediary) is becoming prevalent as well. Those who grew up with religious use of the Internet cannot imagine a time when publishing content required signing contracts with a publisher. For that matter, having a gatekeeper who determines what may or may not undergo publication. For the longest time, accessing information would always mean taking a trip to the library
Eventually, there will be very few who remember a time without the Internet. It will become an obsolete way of living. With every generation, “new becomes normal, old becomes forgotten.” People will be born into an era where banks are not the dominant form of economics, as Antonopoulos points out.