Making Bitcoin Mainstream by Information Cascading
Link: https://www.coindesk.com/can-make-bitcoin-mainstream/
Bitcoin is a recently developed virtual currency system, established by a loyal community and mined through computational methods. Its usages and effectiveness are not the key point of this article, as much as its popularity and number of users. Since February, there are only 1.2 million bitcoin addresses in the world.
Publicity efforts have been difficult, but what’s more difficult as the article points out, is getting people to use bitcoin even after they learn of it. The biggest deterrent seems to be the high learning curve of the currency. Bitcoin entrepreneur Erik Voorhees argues that only a small percentage of the people who know about bitcoin actually understand it. It seems that the number of people using bitcoin is instead directly related to the information that the public knows about it. When prices spike, people flock to bitcoin hoping for profit. When the Mt Gox debacle happened in February, many thought bitcoin had gone bankrupt, and there was a huge drop in users. People are not so interested in the actual details of the currency, but rather if they can make (likely short-term) profit from it or not.
This can be explained by the information cascade phenomenon we learned of in class, where people’s decisions are directly affected by the knowledge of the decisions of others. Bitcoin’s nature as a virtual currency in a small, connected group of online peers allows information about who’s using the currency to travel very quickly. And people are much more likely to use a currency if there are more people using it, because a currency is worth more based on the number of people using it. So even if one person decides to get into bitcoin due to a price spike or get out of it due to a bitcoin exchange closing, there will be many people following based on that one person joining or leaving because everyone is trying to make money or minimize loss.