MIT Study Shows Exclusivity Encourages Greater Bitcoin Adoption
MIT launched a study in 2014 that showed early adopters help to spread new technology throughout society, if they feel they have exclusive access to it. The study’s official research paper was released on Friday, which was published in Science. The experimenters used bitcoin as the “new technology” in the study. Also read: Paul Sztorc Suggests Revising Bitcoin’s Scaling Roadmap […]
MIT launched a study in 2014 that showed early adopters help to spread new technology throughout society, if they feel they have exclusive access to it. The study’s official research paper was released on Friday, which was published in Science. The experimenters used bitcoin as the “new technology” in the study.
The Study; $100 Worth of Bitcoin
Researchers offered participants $100 dollars worth of bitcoin (Bitcoin’s price was around $400 at the time). The students would set up a digital wallet and then wait for researchers to allot funds to their wallets. The researchers, Christian Catalini and Catherine Tucker, saw this experiment as a one-time opportunity to study the role of early adopters in spreading technology in a controlled environment.
The experiment’s catch was that half of the early adopters would randomly receive their bitcoin payments delayed. The MIT article elaborated, “During the rollout, the researchers randomly delayed giving half the students their bitcoin allotment by a couple of weeks. Students who were identified as early adopters of Bitcoin, but whose payment was delayed, cashed out their balance and abandoned the technology at nearly twice the rate of early adopters who received their payment earlier. The early adopters who cashed out also influenced those around them to do the same in high numbers.”
In other words, if the early adopters felt like they were not exclusive or did not gain any consumption value from the new tech, they were likely to cash out. If they were in a public setting, like the MIT dorm rooms, they would likewise influence others to cash out. This diminished the number of early adopters.
The study was the first to determine what happens when “new early adopters” are denied first and exclusive access to new technology.
Details of the Study
The researchers identified who classified as an “new early adopter” by how fast they signed up to the study. They compared these “new early adopters” (NEA’s) to “natural late adopters” (NLA’s). The first 25% who signed up to the study were classified as an NEA. The study explained the qualities of NEA’s:
Surveys showed that those NEAs were also more likely to be top computer programmers, to have built mobile apps, and to use peer-to-peer payment apps, among other identifiers. These characteristics align with popular definitions of early adopters, who generally possess advanced technical skills that help them start using new technologies.
Even though these NEA’s were highly computer literate and understood the technology underlying bitcoin, social and psychological reasons caused them to cash out and stop using the technology. It seems randomly delaying payments caused internal frustration and made early adopters feel less than exclusive. One would expect people with high technological literacy to stay involved no matter what.
Results: Parallel Universes
Randomly delaying the bitcoin payments resulted in “two parallel universes,” researchers said. They did this to determine the S-curve, or the measure of the speed of adoption of innovation in societies. Catalini explained, “In one universe, we ended up seeding Bitcoin in the optimal way, by giving it first to early adopters and later to everybody else. In the other parallel universe, the opposite was likely to happen.”
The researchers found the two-week cash-out rate on those NEA’s who received their bitcoins late rose 18%, which was well over non-delayed NEA cash-out of 11%. The researchers said these alleged early adopters cashing out just because their payment was delayed was surprising.
Conclusion: How to Market New Technology
The results off the study offer a couple of key insights for new tech startups, said the researchers. The most important is for technology firms to take advantage of people’s desire for exclusivity while using new technology. NEA’s are likely to influence others to adopt it if they feel unique. This is the key to diffusing new tech throughout society. The researcher explained:
In settings where the decision to adopt is a social decision, where comparisons or conversations are taking place in communities and when there is uncertainty about the value of an innovation, it can be important for firms to take advantage of early adopters, as they do create this positive effect of others. But that comes with a cost, which is exclusivity.
The student participants who held onto their $100 worth of bitcoin would presently be holding $700, noted the MIT article.
Do you believe exclusivity is important for getting early adopters to promote new technology? Let us know what you think in the comments below.
Images via Shutterstock and MIT
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