The exciting thing about predicting the future of Bitcoin is that there is very little direct history that can be relied upon. Everything is new, unpredictable, terrifying, and full of opportunity. Until El Salvador, there were no data points, but perhaps this provides insight into the next domino of the size of the country that will fall.
What internal or external triggers might be necessary for a country to adopt Bitcoin?
First movement feature?
These motives are spread unevenly among the population and government officials. All of these are powerful triggers and perhaps the data to follow can provide insight into the drivers that may lead to the next seismic shift in the monetary landscape.
Before the data, let’s examine potential adoption patterns. The first is top-down adoption by the government, which provides laws to guide the state towards bitcoin adoption with potentially modest population support. Mixed adoption is a moderate population with adoption increasing momentum motivating the government to initiate bitcoin laws. Finally, bottom-up adoption led to overwhelming adoption by the population, except for forcing the government to fight back and eventually comply. Countries that embrace Bitcoin will give their reasons, trends will eventually emerge, and history will show the metrics that mean the most.
Adoption from top to bottom
The government steps in and legalizes Bitcoin into law before Bitcoin is widely adopted by the population. In my view, this is the least preferred but probably the fastest dependency mechanism. Forced adoption goes against the principles of the free market and self-sovereignty that many bitcoins hold. Given enough time, El Salvador was likely to be a mixed adoption case (discussed below) as word of Strike implementation and adoption spread organically, paired with a forward-thinking government.
However, El Salvador advanced quickly and opted for a top-down approach. El Salvador’s president, Neb Bukele, offered several reasons to present them as data points in its top-down adoption – a high remittance-based economy, negative immigration numbers, dependent on monetary policy not of their choosing, and unbanked citizens. Every rationale, and fixing every issue benefits the state as a whole.
These data points are likely to be consistent with top-down approaches as governments look to plug holes in their sinking financial vessels or escape suffrage. I think this method is vulnerable to contagion as world leaders flock to be seen as innovative, forward-thinking and visionary, and the risk that another world leader gaining first-mover influence may push countries in a similar region toward adoption.
This approach to adoption is being led by enough of the population to motivate a forward-thinking government to catch the movement and codify bitcoin into law. By riding the wave of adoption early on, the government can seize the momentum and count Bitcoin’s success as its own. Free markets will already have spurred adoption, innovation, and education. The government will simply need to take Bitcoin another 20-30% of the way to the full Bitcoin standard.
The common features of such a country are likely to be high inflation rates, unstable monetary policy, moderate penetration of mobile phones, active social media and low per capita GDP. I expect this method to be the most likely for the majority of countries that politicians encounter game theory Choices that can be devastating to their political careers.
Such politicians could choose to embrace innovative, dopamine-saturated and shared social media, the futuristic monetary system and lobbying, or crack down on bitcoin adoption, possibly losing their political career. Political parties will find themselves at odds with younger generations and face extinction at the polls. Additionally, similar to the top-down approach, I believe that this method of adoption is highly vulnerable to contagion as other countries in a similar region report Bitcoin adoption; It puts pressure on governments for monetary progress.
The method most preferred by any individual with free market and self-sovereignty may end up being the most chaotic method of adoption. Governments unwilling to adopt the hybrid method will likely avoid coding Bitcoin in law for specific reasons to conserve energy. This can lead to bans, crackdowns, tough regulations, fines, and other human rights abuses. The Bitcoin movement will likely continue to build momentum and consolidate slowly but surely.
Bottom-up adoption will occur in countries with moderate to high corruption, neutral immigration numbers, moderate to high urban populations, very active social media, and very high cell phone penetration.
Countries and governments that lose out most in terms of monetary power, geopolitical influence, and unfettered spending budgets will be the most resistant. Free markets will, of course, opt for open and math-based monetary policy, but governments are likely to try to convince the population that this is not in their best interest. Hacking into social media and mobile phones will be a key factor in circumventing disinformation. The free market will converge with Bitcoin, but governments will face the choice of either paying to adopt Bitcoin, reluctantly withdrawing, or fighting back. Countries may be stuck in this method of adoption for some time.
In light of these three adoption scenarios, let’s get to the data that exists. I collected data from multiple sources and time periods. The data is the most recent year available with a mostly complete data set. As is usual with our community, I have posted all data sources below for anyone else to build/update their dataset. Data can be spotty based on state restrictions on transparency or simply too small.
- The main official currency
- % urban population
- % of remittances/GDP
- Migration Network
- net migration%
- Adults with a bank account % of the population.
- Internet users % of the population.
- Active social media users, % of the population.
- Cell phone lines% pop.
- corruption rank
- government style
This is another guest from before Bitcoin and Baldness. The opinions expressed are their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.