Has Blockchain Crossed the Chasm? The Early Majority Phase
In our previous series, we took a peek into the future of blockchain and the emerging trends we’re witnessing and can expect in the coming years. These included third-generation platforms, Decentralized Autonomous Organizations (DAOs), decentralized identity mechanisms, the Internet of Things (IoT), trusted systems of record, and the wider adoption of privacy technologies. In this series, we’re going to take a look at where blockchain currently stands on its path toward mass adoption.
Thanks to the growing institutional interest in the DeFi market in 2020 and 2021, its Total Value Locked (TVL) has reached billions of dollars. This has fuelled observations that the blockchain growth rate is twice as fast as the internet’s.
Taking the above into account, it looks like we’re nearing the mass adoption of blockchain technology. We also seem to be in what Geoffrey Moore called the third stage in the technology adoption lifecycle, dubbed the early majority stage.
According to Moore, each technology lifecycle follows five phases marked by five different groups. In the first phase are the innovators - the technology enthusiasts tinkering with new technologies but less interested in the market. They’re followed by the early adopters looking for new opportunities, discovering the new technology, and willing to take on the risks.
Blockchain seems to have successfully crossed the chasm and is well into the third stage, in which the early majority carefully evaluates the technology before adopting it. This phase is followed by the late majority that makes sure technology is well established before using it. In the final stage are the laggards, or the late adopters.
Blockchain technology on track for mass adoption
Being in the third phase, blockchain and cryptocurrency have gone a long way from where they were in the early 2010s when only the crypto-enthusiasts knew what these were. Other people were either in the dark or didn’t understand these concepts at all (the so-called innovator phase).
Then, starting with 2015 and the development of alternate crypto assets like ether (ETH), early adopters began warming up to them. In the five years that followed, blockchain and crypto assets began their steady climb, entering the early majority phase in 2020, which was ushered by initial coin offerings (ICOs). This is when major institutional players like Square and PayPal took note of the technology and began its rapid push.
How blockchain proceeds and connects with this early majority will make it or break it. Like any innovation, the adoption of blockchain and cryptocurrency requires significant changes in consumer behavior, along with the related infrastructure. Luckily, the early majority is eager to learn about the new tech and their initial skepticism can be debuffed with a compelling story, told in their own terms.
This is where the media plays one of the most important roles. It is weaving and transmitting this story to the public and educating them on new technologies and their usefulness. This entails an “attack” on three fronts:
clarifying what blockchain and cryptocurrency are in simple terms;
eliciting backing from influential people;
familiarizing the interested people with the competition (like banks, equities, the Federal Reserve - anyone with an interest in stamping down cryptocurrency).
Before they can make the transition into the late majority phase, blockchain and cryptocurrency also have to prove themselves viable and find their footing. In their case, it comes in the form of consumers who want to make cross-border transactions quickly and without hefty expenses or including the middleman. This need is most pronounced in countries like Nigeria, Iran, Argentina, and Turkey, where consumers face economic and political instabilities.
Blockchain adoption is accelerating faster than the internet during the dot-com era
The DeFi market is already worth billions, but it still has more than plenty of room to grow. From what we’ve seen, this growth is even faster than the internet’s in its dot-com era. This is also the observation of Real Vision CEO and macro guru Raoul Pal.
He noted the internet was growing at a yearly rate of 63% when it had 150 million users, which was the fastest adoption of technology in all recorded history. Until blockchain. This new technology has already broken the record as right now it has about 150 million users, meaning its annual growth rate is 113% - double the adoption rate of the internet. Using simple math, the number of blockchain users by 2024 will be 1 billion, and by the end of the decade, we’re probably looking at 3.5-4 billion people.
At the moment of writing, the global cryptocurrency market cap was $2.77 trillion. Now, this doesn’t seem much when compared to the $150-300 trillion worth of most major asset classes (equities, bonds, real estate). However, Pal believes the crypto market cap will increase 100-fold to rival those sectors. His rough estimation is that this amount will be close to $200 trillion.
In addition to Moore’s chasm, blockchain is also following the Gartner Hype Cycles - a graphic representation of the maturity and adoption of technologies changing the society and business landscape. Gartner calls the blockchain trend “algorithmic trust” and shows it climbing up the slope of enlightenment.
In this stage, more benefits of the technology begin to crystallize and become better understood by the public. A growing number of enterprises invest in projects, while more conservative companies remain cautious.
This stage follows the trough of disillusionment (waning of interest and survival of the most resilient) and will ultimately be followed by the plateau of productivity (mainstream adoption).
It’s the 90’s all over again
Moore wrote his book in 1991. Soon enough, his thoughts and observations were demonstrated in the success of the internet. However, they’re also applicable now in the (even greater) success of blockchain technology - the next big thing since the World Wide Web.
In the 1990s, many internet companies became the model of dot-com’s overnight success, feeding into the frenzy and rapid growth of entrepreneurship in general. In fact, one in twelve Americans were at a certain stage of founding a business in 1999.
We’re witnessing similar goings-on in the blockchain sphere, where new ideas, companies, and projects emerge with each new day. And just like in the dot-com bubble, the weakest of these will probably fail but the best will survive and continue pushing the adoption of blockchain further.
As the 1990s have proven - the bubble may burst and many may go down with it, but the underlying technology that feeds into it will remain. So even after the dot-com bubble burst, the internet never went away. On the contrary.
The same may be said about blockchain, as the prices of many cryptocurrencies crashed in recent months. However, such volatility is normal while the markets are still in the process of sorting themselves out.
Meanwhile, public blockchains like Ethereum (where anyone can see the ledger, join, and participate in the consensus process) continue to be the dominant platforms for both the public and the enterprise sphere. For instance, Ethereum alone has the largest number of use-cases across industries - 52% - compared to the best performing private blockchain, Hyperledger Fabric, with 12%.
This is especially true as institutions are starting to realize the power of public blockchain. Specifically, it facilitates instant provision of goods and services to anyone connected to the public infrastructure, provides high transaction security and complete transparency, and is fully immutable. On top of that, public blockchain removes the controlling entity that extracts excess profits.
They’re also realizing how concerns of data privacy and security can be addressed using algorithmic trust models. This entails separation of off-chain data, zero-knowledge proofs, and interoperability between private and public networks.
Bring the emergence of other new technologies and the explosive growth of NFTs and DeFi tokens into the mix, and you’re getting a recipe for quite an interesting future.