Signals of Adoption

Long-term and large-scale adoption of anything is a slow process, but with enough time it can lead to dramatic paradigm shifts. Consider the adoption of the internet, from its inception to how it is used today. Recall the initial confusion about what to call “@” and how an octothorpe (“#”) is now better known to many as “hashtag” rather than “pound” or “number sign” due to its indexing function on social platforms. In case you were too young to remember the mass uncertainty of the early days of the internet, these short clips of a talk show host asking "what is internet, anyway?" or the absurdity of this early 90’s AOL commercial provides a stark contrast to the capabilities of the internet as known today. The same thing is happening with the adoption of cryptocurrencies and blockchain technology, or “distributed ledger” as regulators commonly reference it. Recently, many have referenced this as “web3”, a much more palatable terminology. Being a more familiar term and free of misconstrued preconceptions, it's a good rebrand for greater and smoother adoption. It will take time to shift from “magic internet money” in the minds of many to a decentralized toolset that is standard in redefining many industries and how they operate.  Luckily, as with the adoption of the internet, there are many metrics that we can observe and signals that indicate the widespread adoption of blockchain.  

The obvious correlation is “adoption” equals “number of people using it”, so let’s take that to the extreme - “complete adoption” equals “everyone alive using it”. There are, of course, many barriers to this scenario - connectivity and funding to name two major impedances. However, there are companies in the crypto ecosystem, such as World Mobile, that aim to “connect the unconnected”, creating a positive feedback loop for adoption. This paired with Tingo's smartphone services and IAMX’s portals, blockchain can be at the fingertips of everyone. The hypothetical maximum adoption scenario is great to ponder, but we should first consider the basic metrics involved in measuring adoption. 

Objective Metrics

The great thing about public blockchains is that a lot can be measured objectively through aggregate data. Although there are some caveats to consider with some of these metrics, they can be used as a general gauge of several aspects that are indicative of adoption.

Perhaps the most popular metric referenced is market capitalization (MC), a number that many consider being the total value of a cryptocurrency. It’s a fairly simple calculation - the MC is the total circulating supply of tokens multiplied by the price per token. Basically, it’s the napkin math to buy every currency token, not accounting for slippage due to the volatile liquidity shock. We can expand from looking at the MC of a single cryptocurrency as a measure of that specific network’s adoption to the MC of the entire crypto industry and make additional comparisons to MCs of other industries. Below is the screenshot from MELD’s Whitepaper that shows a nice (but dated) graphical comparison between crypto, gold, US equities, and all USD.

At face value, one may consider a crypto’s 24-hour trade volume to simply be the popularity to traders, perhaps due to gameable volatility or other reasons. However, more can be inferred from this metric. A protocol update, an exciting partnership, or some large event can have a noticeable effect on a crypto’s 24-hour volume and one could evaluate the magnitude of the ripple and make comparisons. Another aspect of this metric is that it represents a crypto’s liquidity. It can be seen as a measure of the crypto’s prevalence on exchanges and thus how easy it is to get - more avenues of acquisition means a larger audience.

The MC and 24-hour volume are useful metrics to consider but are subject to volatility. So when evaluating the adoption of not just traders but users of the crypto, we have some other metrics to review. Starting with the question “how many people use it?’, counting wallets is a great start. However we can’t just use the raw number, we have to make some assumptions and acknowledge a few things. The first would be abandoned or lost wallets - lost keys are unfortunate and “boating accidents” seem to be prevalent around tax time. People make “burner” wallets meant to be used only a few times, never to be used again. Another aspect that can over-inflate our estimation of users by wallet count is that one person can own multiple wallets. A measure in which on-chain wallet count can read low is when considering that of users who chose to hodl on a centralized exchange. Now is every user going to make 30 wallets each? Probably not, but this is where a reasonable assumption should be made. 

Beginning to get a little more subjective, there are other strong indicators of adoption within the ecosystem of some cryptocurrencies. The total number of projects, dApps, registered developers, companies, layer 2 protocols, sidechains, and DAOs can be a measure of interest in a particular blockchain. Additionally, data can be acquired on the fungible tokens, NFTs, and wallets, which use a particular blockchain as a base layer. Some also choose to use fees as a measure of adoption, take that as you will, but I don’t consider it since gas war anomalies and repeated failed transactions can grossly inflate this metric. Total value locked (TVL) is a common metric people use to evaluate projects within crypto. Many of these things can greatly vary between particular crypto ecosystems, so they can’t be directly compared but are still worth considering. Chain agnostic tokens and bridging protocols can also make comparisons more difficult.

The last commonly evaluated metric is… *shudders*... price. Some choose to evaluate the price of a token and compare it to the token supply, which in theory is a great indication of desire - basic supply and demand. That said, crypto is incredibly volatile and markets can be manipulated. To say the least, it’s something to consider, but it doesn’t tell the whole story.

Subjective Signals

Continuing on our path on the spectrum from objectivity to subjectivity, there are signs of adoption that the perceptive among us can notice. These can more subtle and aren’t easily exported. Some of these first start with you, then your bubble, then your larger network, and then soon enough mainstream - so early on, it's quite subjective as my bubble will inherently differ from yours. Your circle of friends and family may have been very crypto-forward and are reading these signals loud and clear while other bubbles could be completely deaf to them and still see crypto as magic internet “money” - it can be very subjective on small scale.

One major signal is where the “big money” is investing. As we see large firms and public companies invest more of their portfolio in crypto, these institutional investors do two things. Their large acquisitions help drive the market and the public companies with crypto reserves allow retail to have an additional route to crypto exposure without worrying about self-custody.

Speaking of companies, another subjective signal of adoption is when the mindset shifts from “crypto projects” to “crypto companies”. As more startups become solidified and grow, more business needs must be addressed. You’ll know crypto is mainstream when a crypto company has an HR department that asks you to complete an annual survey asking ‘if you have a friend at work’ and ‘if you feel you have the materials to complete your job’. Of course, like in our non-crypto 9-to-5s, the results of these surveys will likely change nothing - but hey, we get paid to fill them out!

The majority of people that have yet to adopt blockchain technology are non-technical (obvious, but an often overlooked aspect). Even those of us who are non-technical/semi-technical early-adopters can be a part of this next signal. Have you ever participated in a testnet, or even on mainnet, and observed an error message you couldn’t understand - having to google it or ask about it on a social forum or group? Supporting non-tech-savvy users in the space is a crucial component of adoption. The more crypto-related software that aligns with usability heuristics, the lower the technical barrier of entry becomes. A “regular joe” could easily get freaked out by a message such as “Transaction failed to create: Unexpected token B in JSON at position 0”, especially after hearing the multitude of horror stories of people’s crypto lost forever. When we have error messages and user interfaces that anyone can understand, there is less that is inhibiting global adoption. 

While cryptography supplies the critical backbone of blockchain technology, it's not very human-friendly. QR codes and copy/paste functions are huge improvements compared to manual entry of alphanumeric addresses, but we still need further simplicity for the masses. Luckily human-readable addresses such as ADA Handle and ENS Domains are already able to be used and really improve the user experience, enticing utilization of blockchain technology. The ability to “express pay” and breadth of “easy wallets” will further adoption significantly.

Currently, the crypto industry comprises developers, entrepreneurs, economists, tech-savvy artists, and, unfortunately, the collection of “wen lambo” barkers looking for a quick buck. True mainstream adoption will come when these user groups are broadened. Widely expanding into conservation, agriculture, music, sports, fashion, manufacturing, and education to name a few - and they all utilize blockchain technology. When the scope is everyone, it’s easy to measure in your bubble. Is crypto vernacular commonplace in your circles? Do you see crypto ATMs at the store? And of course, there’s the fan-favorite indicator - merchandise. Branding is a big part of adoption. When you start seeing Bitcoin hats, Ethereum shirts, and Cardano coffee mugs being widely used, that’s an endorsement. The adoption of cryptocurrency is fully realized when it’s freed from behind our keyboards.

Another signal that is much more obvious is regulation and adoption by companies. Regulation comes into play as a means to safeguard consumers; when there’s more regulation being discussed and developed, that's indicative of a larger consumer base to be protected. Companies using blockchain technology are a signal that might only be observed if you know where to look - in other words, it can be publicly advertised or simply just web3 under the hood. Two examples of this are DISH's BoostOne App and Book Token's ebooks and reader app.   

What’s great is that we can observe these adoption signals right now. More and more people are learning about crypto and are empowered by blockchain technology. Companies are directly onboarding users. People are getting internet and income through crypto. The plague of expensive and delayed remittance is being solved. Change is happening, the world is getting better day by day. 

MELD’s Role in Global Adoption

Unfortunately, we can’t just blink and suddenly be living in a decentralized blockchain-based utopia. Adoption takes a long time and has many challenges. A big one that the people who live in both the “fiat world” and the “cryptosphere” are experiencing is being able to HODL their crypto while paying for groceries, utilities, and rent with fiat. They live in two worlds and can’t just port everything over immediately - this is where MELD comes in. MELD is the banking stack of DeFi, enabling both crypto and fiat lending/borrowing in a non-custodial manner. Through its products, MELD will let you be your own bank, regardless of currency. It’s your fiat, it’s your crypto; you should have the power.