Behaviorial psychology around Bitcoin

In a recent Bitcoin bootcamp this February (at Jaipur) I was leading the session with a small, yet enthusiastic, batch of middle aged working professionals from the field of media and advertising. Within 10 minutes of the discussion everyone was amazed that bitcoin is just not a currency but there’s also bitcoin the technology. The key question was so, what exactly is a bitcoin? It gets a little confusing because people refer to two different things when they talk about bitcoin. The first is the feature that has got the most attention: bitcoin the currency, the digital units of value that are used by people in exchange of goods and services or other currencies, and whose price tends to swing wildly against the rupee. But that narrow definition distracts from a broader one that captures bitcoin’s far more important contribution, and that is bitcoin the technology– or, as some prefer to write it in text, Bitcoin, with a capital B (with the currency always referred  to with a lower case b). The group was also aghast with the concept of a currency which is not regulated by any government and is decentralised (more on this in a follow up article).

And I pity the sentiment as the Indian media is so narrowly focused with two things around Bitcoin. One is its shoddily written articles on price movements, which are right now towards the moon, which have no insights as to why this gravitation in prices and hence creates a distrustful speculative environment. This can be purely attributed to the fact that business journalists (and the regular ones) are still in complete denial of this as a financial revolution. Part of this can be attributed to the fact that the underlying technology, Blockchain, is fairly hard to understand as to how it works and partly because there has been no incentivisation structure for the media houses to write anything positive about the Bitcoin or any other virtual currency. Hence the skepticism for Bitcoin prevails around the currency aspect of it. On the other side the banks have been vociferous of accepting Blockchain (pure lip service currently, I’ll do a myth buster article on this soon) as the single key innovative financial technology waiting to be tapped by them. Well, the fact of the matter is that once Blockchain is activated for masses the only currency which will ply on the network will be a pure digital token (a virtual currency) much like Bitcoin contrary to the fact to what they might brand it as (remember ItzCash).

The reaction from general consensus or the so-called leaders of finance is not unusual actually. Some get past the initial gut reaction, some don’t. I expect you’ll go through a sort of Kubler-Ross model of cryptocurrency recognition till you fundamentally live with the fact that Bitcoin (or alternate cryptocurrency) is for real and here to stay for eternity. If you’ve ever heard of Bitcoin for at least once in your lifetime, following are the series of emotions you’ll ladder up to:

  • Stage One: Disdain

Not even denial, but disdain. Here’s this thing, it’s supposed to be money, but it doesn’t have any characteristic of money with which we’re familiar. It’s not tangible. It’s not issued by a government or forged from precious metal.

  • Stage Two: Skepticism

You read the paper every day, and enough stories have appeared to convince you that bitcoin is real, that some entrepreneurs, including the Winklevoss twins of Facebook fame, expect to make a lot of money from it. But the details don’t add up. You get it by doing math problems? No? By having your computer do math problems? How can that possibly work? At this stage: phrases like Ponzi scheme enter your mind.

  • Stage Three: Curiosity

You’ve kept reading. It becomes clear that many people, even some seemingly sensible people such as Internet pioneer Marc Andreessen, people with a track record for being right about this stuff, are genuinely excited by it. But why all the fuss? Okay, it’s digital money, it may work, but what difference is that going to make to regular people? And why are people so heated up about it? And just in case if you’re the one who swears by Warren Buffet, who called Bitcoin a mirage, don’t forget that he clearly missed investing in Amazon cause he admonished it in the first place and he recently accepted the fact publicly.

  • Stage Four: Crystallization

This is the critical one. Choose whatever metaphor you like – call it the jaw drop moment, the lightbulb moment, the mind-now-officially-blown moment – it is a point of realization that hits just about everybody who spends any time around digital currencies, even if they remain sceptical about the hurdles to their acceptance. Some people I spoke to talked about being unable to sleep for days, scouring every word they could find on bitcoin. In one fell, digitized swoop, an entire new way of doing things crystallizes in your mind.

  • Stage Five: Acceptance

It’s not an easy thing to get your head around, but big ideas never are. The bottom line is that even if bitcoin doesn’t keep growing, even if none of the other “altcoin” cryptocurrencies catch on – and several hundred of these bitcoinlike cryptocurrencies with their own features and quirks exist – we’ve seen a way of doing business that is faster and cheaper, that cuts out the middleman and the rentier, brings in millions of “unbanked” people, and gives everyone a measure of control over hi or her finances and businesses that has not existed before. Once you see this, there is not way to unsee it.

It took me a year to reach stage five. Which stage are you in as of now?

(Acknowledgements: Cryptocurrency The Future Of Money, Paul Vigna & Michael J. Casey)

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