Constant drivers for Bitcoin usage

What are the primary drivers of Bitcoin's epic growth?

The primary drivers of Bitcoin’s epic growth are:

W00t! Bitcoin broke through $50 tonight for the first time. Bitcoin’s adoption worldwide, too, is up. WAY up.

But still there are doubters that bitcoin can become truly relevant. Most opinions online assume that any bitcoin’s success is strictly due to the black market, and a few tech-loving geeks, A few others will admit that there is some actual market speculation going on too by random investors.

Thankfully, this isn’t even close to a realistic sampling of the bitcoin community. In fact it is laughably off track.

There are a few polls online, some informal, and a few much more formal like this one taken mostly from users of the BitcoinTalk forum. Taken together, these polls paint a pretty clear picture of who is actually buying bitcoin, and there appear to be 7 distinct groups that my untrained eyes can spot.

In order from most popular to least, the 7 groupings of bitcoiners are:

1. Libertarians, Anarcho-Capitalists, & assorted mal-contents.

The largest portion of bitcoin faithful are clearly interested in the coin for it’s power to offer them freedom from tyranny. Some of these people (like myself) are hoarding most of their bitcoin, but plenty of them are spending too.

This die-hard group isn’t going to give up bitcoin if it’s made illegal or the exchanges are shut down by the world’s governments… Such news will just rile us up more and we’ll take more pleasure in using a currency that the governments can’t confiscate nor even detect.

I’ll throw the Technofinancialists, code purists, and futurist/visionaries in with this group of advocates as well, making a serious block of people from all walks of life who won’t stop promoting bitcoin until every last human on Earth is using them.

How many people could this be? If there is one thing I learned from American politics in the last year it is that we are actually not a minority of any kind. Ron Paul had a profound effect on the culture of this planet, and pretty much anywhere you go in the world, you will find people who wish to “end the fed.” All it takes for these people to because staunch Bitcoin advocates is a proper introduction.

2. Political monetary refugees.

Not a day goes by that some poor country like Cyprus pops up in the news for their draconian financial policies and decisions. Today’s 3.5 Euro climb is pretty obviously flight from the Euro because of the pending monetary grab news in Cyprus. Some of these folks are obviously finding ways to get their cash out, and have chosen the only currency that isn’t able to be stolen by their government to store it in.

Even when such news isn’t happening though, smaller examples of financial tyranny are happening constantly around the world. The 75% tax rate in France is constantly sending French nationals like Gerard Depardieu scurrying to other parts of the world and renouncing their citizenships. Countries like Argentina, Portugal, Italy, Spain, and Greece are constantly imposing capital controls on their people, and these people are constantly flooding into the bitcointalk forums as well spilling their stories of desperate escape with us.

It should be no surprise that as their local currency hyperinflates, and capital controls start to set in, these areas adopt bitcoin into their everyday use. It’s only a matter of time now before bitcoin is the #1 currency across all of southern Europe.

Once these people start to depend on bitcoin for normal purchases, I don’t see how another currency would ever get in there and become dominant again. Trust is being ripped away from these poor souls like we haven’t seen in centuries.

3. Bitcoin’s mainstream early adopters

Early adopters are normal folks who don’t fall into groups one and two are attracted to bitcoin because of other reasons. Sometimes they are even forced to use bitcoin by a merchant that only accepts bitcoin… This happens a lot with online activism, in fact.

While numerous, this group is often overlooked because they are not vociferous. You never see a bitcoin blog started up or new members to a bitcoin forum that just arrived there because they had to get some bitcoin to buy something they saw online… And you never will.

The only way we know about this group of users in fact is because the Merchants say they exist. Sometimes these people are existing customers who wanted to stay customers when they switched to bitcoin payments. More often, however, they are customers of a new website that only takes bitcoin for some kind of product you won’t find anywhere else online.  The ever-popular CoinDL store would be a great example of this, because many artists are listing their products there and selling only for bitcoins.

4. Investors and Speculators

It should come as no surprise that people who like to speculate or just take small chances with parts of there investment portfolio are starting to dabble in bitcoin. Actually, they’ve been dabbling for well over a year now, and even institutional investors have even figured out a way to sell a Bitcoin Fund!

This group, while not as large as any group above, probably holds the most BTC between them. Lots of people who fall into groups 1 and 2 would also be in this group too.

It’s clear, however, that the majority of bitcoin adoption is not merely speculative. This is obvious after the incident the last week when a technical problem created two separate blockchains, making it appear as if the core code in Bitcoin could be hacked.

If these investors were all speculators, then the price of bitcoin should have easily gone down on this news, as they rapidly sold off their coins to the exchanges. Since that time however, bitcoin has risen over $5! Their initial sell off was measured in mere minutes… Which indicates to me that bitcoin investors view it more like Gold (a store of value) than they do a stock.

5. The Gray Market

The largest growth market for bitcoin is clearly the Gray market. It’s not even close. Most usually comprised of gambling, porn, and under-the-counter transactions, the gray market includes things that aren’t (usually) illegal, but for which people require an increased amount of privacy to make purchase therein.

Online gambling actually is, in fact, illegal in the United States right now, but only for US Dollars… So Bitcoin has effectively soaked up a lot of that business already. Meanwhile worldwide casino brands, even major ones, are starting to get in on the action too.

System D is a name for what is now the 2nd largest economy in the world; under-the-table, off-the-radar transactions. All cultures have a steady percentage of System D users, from the local mafia to the mom-and-pop shops under-reporting on their taxes. Until now, these transactions were always done in cash alone.

However, if that cash finds itself inflating to worthlessness, what will these people be left with to use? For them, bitcoin is waiting.

Then there is pornography. Let’s face it, there are tens of millions of people in the world that don’t want their parents or spouses to learn that they are buying porn, so their options today are to either somehow keep their credit card bill hidden from them, or use Bitcoin.

It should be no surprise to anyone to learn that bitcoin purchases are up on many of the smaller and some of the larger porn outlets already. A few of the largest outlets here however haven’t bothered yet. They’ll be forced to in time however, or go extinct.

Sex toys, legal drug paraphernalia, or confidential products like foreign pharma, private investigators, medical, or genealogy reports all clearly fit on this list. The potential for growth in this gargantuan market is HUGE. We’re talking 20% to 30% of the world economy huge! (Enough to make the price of bitcoin go up to $10 million USD per BTC!)

6. Merchants & Entrepreneurs

Down near the bottom of our user list for now, but certainly not for much longer, are the humble merchants and entrepreneurs that have chosen bitcoin to build a business around.

With constant stories of venture capitalist money flowing from silicon valley for one bitcoin project or another, you’d think that all non-bitcoin business models have failed. 😉 This is a really exciting and rapidly growing group to be in, and of course there are many cross-overs from groups #1 & #4 as well.

How many bitcoin merchants are there? Quite a few actually. Probably somewhere around a thousand today. You can see many of them for yourself in some of the many directories online stuffed with bitcoin merchants… My personal favorite is Bitcoiney, but it’s not the largest.

Meanwhile, the big money is flowing into the more established big-brand merchants like Namecheap and Mega, who have both recently announced that they are accepting bitcoin. Just the awareness that these brands bring alone to our coin is cause for celebration.

7. The Black Market

Finally, by now you’ve surely heard of the Silk Road and possibly some other online black markets. These have long-embraced bitcoin as their gold standard, and almost all people buying anything from weed to weapons to child porn online are sending and receiving bitcoins all over the world on an every-minute basis.

In the early days of bitcoin, the adoption of it by this market was the primary driver for bitcoin’s price. (Usually between $2 and $5 back then.) Nowadays it is almost insignificant, but at least it keeps a steady baseline for us to build from.

So in summation: Bitcoin users come from all walks of life, all over the world, and use it for all sorts of reasons. There is clearly a lot of room to grow, too.


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