How many people are currently using Bitcoin? How fast is the Bitcoin network growing relative to other revolutionary technologies and top tech companies? Is Bitcoin a bubble? Is BTC overvalued or undervalued? Is Bitcoin dead? Or will it someday take over entire industries? Does Bitcoin have the potential to someday become integral to global finance, commerce and society? If so, when?
What follows is a multi-part, comprehensive, statistical analysis of many relevant global technology trends, blockchain metrics, market penetration estimates, top tech companies' and BTC trading prices—all aimed at answering the above questions, which I believe are foremost on the minds of many people interested in the modern crypto-phenomenon that is Bitcoin.
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Historical technology trends
Nearly all globally-impactful technologies, particularly communications networks, follow a similar adoption curve referred to as a logistical function, which plots as an S-curve over time.
Logistical curves are used to model systems that grow exponentially towards some upper bound: living populations, chemical reactions, market penetrations, etc. A good example is the global adoption rate of the most revolutionary telecommunication technologies (Fig. 1). The World Bank’s global development indicators database provides information on telecommunications adoption rates (% of world population), in the form of Internet users and mobile cellular subscriptions (Fig. 2).
The mobile cellular subscriptions data, from the Figure 2 inset, is clearly following a logistical curve, though there is not yet enough data to clearly show the entire S-curve in the other plots. Notice how all three curves (Fig. 2) begin growing at the same rate (~40%/year, Tab. 1) before tapering off into the middle-upper S-curve sections of their respective logistical functions. Also, note how the mobile cellular subscriptions is approaching a market saturation greater than 100% of the global population. As there are many people without access to cellular service, there is obviously a significant proportion of people with more than one associated cellular subscription. Although mobile cellular subscriptions may provide a relatively good benchmark for potential Bitcoin adoption rates (for many of the same reasons listed below), perhaps an even better benchmark is Internet users (Fig. 1-3). The growth of global Internet users should serve as a reasonable benchmark for the growth of Bitcoin for the following reasons:
- both are open source peer-to-peer (p2p) protocols
- both essentially require everyone to use the same network and protocol to be maximally useful
- i.e. the value of the network grows exponentially with the number of users, according to Metcalfe’s and Zipf’s laws
- both require rather significant infrastructures, but can be deployed atop existing communications networks (though not ideally)
- e.g. the Internet was first rolled out over phone-lines, before eventual infrastructure inversion (phone calls now routed over Internet lines)
But despite their similarities, there are also important differences between telecommunications technologies and Bitcoin that are likely to have important impacts on the growth of Bitcoin. For example, the Bitcoin protocol is designed to transfer trust and value rather than just information. The consequences of loss of trust/value are much more severe than mere loss of information, which may slow adoption rates due to the need to overcome larger trust barriers to entry.
On the other hand, the ability to securely transact value and trust over a p2p network has the potential to be tremendously more valuable and innovative than the mere transfer of information afforded by the Internet. Because Bitcoin is the first network in human history capable of transferring value/trust securely, p2p, unsensorably, and potentially anonymously across the globe, we simple cannot predict many of its future properties. That said, as long as it remains a viable protocol, it will surely continue to grow along a similar logistical curve as other impactful technologies have done (Fig. 1-3).
By analyzing the growth curves of other technologies, we can hopefully glean some insight into the potential growth of Bitcoin. During their respective linear growth phases (middle of S-curves), U.S. market penetration of the personal computer (PC) sustained growth of ~2.5%/year (Fig. 1, 3), while the more recent Internet and cellular services grew at ~5%/year (Fig. 1-3). Other technologies to have sustained a U.S. market penetration rate of ~5%/year, during the middle of their logistical S-curves, were the radio, television, VCR, and microwave oven (Fig. 3). In general, the speed of adoption of new technologies has continued to increase over recorded history (Fig. 1, 3). For this reason alone, it is certainly reasonable to expect Bitcoin adoption to proceed faster than Internet adoption, if only because there was no Internet when the Internet was being created, i.e. the spread of information is exponentially faster now than during the pre-Internet age.
Additionally, the use cases of Bitcoin are much less limited to world population caps than even mobile cellular subscriptions, because machines can transact with other machines with much more ease when humans are out of the loop. There are many more machines on Earth than humans, all of which can be upgraded to participate in the global economy with little to no human involvement or oversight, e.g. self-owning vehicles, hotels, corporations, etc. Even if, and when, we reach near ubiquitous market penetration of Earth's ~7.6 billion people, this will only be a fraction of the potential users of Bitcoin. I, for one, welcome our machine overlords, as they surely cannot be as evil as our human overlords!?
In the next section, we dive into the mathematical specifics of the analytical techniques used over the course of this combined work and apply these techniques to analyzing blockchain metrics.