Most people have heard of bitcoin by now. The largest of the new ‘crypto-currencies’ increased in value over +1,400% in 2017 and finally became an exchange-traded currency in December, earning it a lot of deserved attention. It was perhaps the financial story of the year.
But, few people understand this financial technology because its inventors have created horrendous market perceptions around it.
Many cite it as a covert alternative for corrupt transactions. Its lack of governance and volatility earn it a rating at the highest levels of risk. Jamie Dimon, the head of JP Morgan Chase and one of the most influential individuals in the industy, went as far as to call it ‘a sham’.
Then why is this new digital form of currency worth the equivalent of a nearly $300 billon market cap, and, over just the last three months accounted for $1.3 billion in ICOs (an alternative to IPOs)? Why has Goldman Sachs announced that is closely examining how to build operations to support bitcoin? And, why is Jamie Dimon’s very own firm heavily investing in the underlying technology and its biggest competitor?
To be certain, measures are being taken to hamper the growth of a crypto-currency market by establishments who have special interest and frown on inventions. Without the need of regulation governments stand to lose millions. Without the need of brokers to transact the financial community faces even bigger losses. And this alternative form of underwriting threatens the very heart of investment banks’ livelihood.
Also as certain, however, is that those leading the development of this new, disruptive technology aren’t helping matters.
The inventors’ perspectives, not surprisingly, have created descriptions like ‘block chain’, ‘tokens’, ‘mining’ and even the term ‘crypto-currency’ itself that have no relevance to financial interests, nor do they inspire economic confidence. It is the type of ‘inside baseball’ that turns relative outsiders, or newcomers, away from any topic or industry.
The inside-out view commonly taken by the inventing community is that people don’t really know what they want. There is no need to ask their opinions but rather delight them with something they never expected. At least so goes the thinking. Henry Ford’s famous quote embodies this very idea - ‘If I had asked people what they wanted they would have said ‘more horses’’.
On the other hand, taking a market view can provide context for where a disruptive technology like bitcoin can fit in people’s minds and help them makes sense of it.
This outside-in perspective could lead to a point of view on this new financial tool that is more attractive to potential customers. Costs are reduced without the need for middlemen. Security improves with more checks-and-balances. Speed increases without the burden of heavy oversight.
Interested now?
Inventors may not like it, but the fact of the matter is that any new product or service, whether it exists or not, will only succeed by compelling people or organizations to trade out of something they already spend their time or money on. In this sense, the difference between invention and innovation is irrelevant, and bitcoin is just a new, alternative financial instrument.
This outside-in view of the market will identify those who are most likely to adopt bitcoin first. Instead of a preference for the status quo, who are more interested in something new? Instead of tending to delegate, who are inclined to be more hands on? Instead of prioritizing convenience, who values security even more? This kind of focus not only increases the likelihood of adoption, it can even speed it up.
There is no argument that Mr. Ford’s little invention in many ways defined a level of commercial success that spanned generations. Bitcoin has taken nine years to gain popular attention. Had the focus been put on the market problems it solves, perhaps the crypto-currency would be further along the adoption curve by now, and more of an accepted practice then a debate.
