Less than 150 million wallets currently contain bitcoin, a cryptocurrency, compared to the more than 7.7 billion people living on the planet. Even though this does not imply that one wallet corresponds to one person, it is safe to assume that the vast majority of people on the planet do not currently own any bitcoin.
According to a study by Block and Wakefield Research that covered 14 nations, adoption of bitcoin is largely dependent on education. More knowledgeable Bitcoin users were found to be more upbeat about the currency’s future. In addition, it was discovered that people’s lack of knowledge was the main deterrent to purchasing the asset.
Although it is a revolutionary force, Bitcoin needs to be better understood and viewed in order for its rate of adoption to increase significantly. This can be accomplished by developing a bitcoin value proposition that is supported by data. Having a value proposition for bitcoin that is supported by evidence may also encourage significant investments from private, public, and governmental institutions.
Let’s use the example of a white paper published by Ark Invest and Block to better understand the significance of such a value proposition for bitcoin (then Square). The deployment of significantly more solar and wind energy capacity could be made possible by bitcoin, as this paper has demonstrated, making it essential to a future of abundant, clean energy. What if we could use the research’s findings to comprehend the speeding up of the switch to renewable energy sources and evaluate the quantifiable benefits that bitcoin can offer to society, consumers, businesses, policymakers, and financial institutions?
A case supported by evidence can be made by:
Why the United Nations Framework Convention on Climate Change and other important stakeholders should include bitcoin adoption in a strategy to eliminate carbon emissions.
Consumers: How supporting bitcoin mining and owning bitcoins contribute to the fight against global warming.
Merchants: How adopting bitcoin can help small, medium, and large businesses fight climate change.
Society: How the adoption of renewable energy driven by bitcoin can preserve the environment and bring prosperity through the creation of new jobs.
Financial institutions: Why bitcoin investments should be a key criterion for inclusion in any good ESG-type index.
In another case, I think bitcoin can provide everyone with high-quality, equitable healthcare in an affordable way, as I briefly discussed in my recently published article. I’ll go into more detail about this idea in later articles.
A framework that can be used to quantify bitcoin’s value proposition is required in order to facilitate the adoption of bitcoin on a global scale. The Ark Invest model is one cutting-edge framework that is currently available to estimate the value of bitcoin. Using a fundamental analysis of the network and adoption of bitcoin, this framework is a great way to determine its price and performance. Nevertheless, as Cathie Wood, who I consider to be the modern-day Benjamin Graham, might agree with me, occasionally price and network adoption may lag the long-term value of any asset. This might be especially true for a network effect-based generational innovation like bitcoin.
The proposal put forth in this article is highly complemented by the Ark Invest bitcoin valuation framework. Comparing the Ark Invest framework to Benjamin Graham’s framework for securities from “The Intelligent Investor” can help you understand this idea. A thorough qualitative and quantitative thinking framework is required in order to fully understand the growth potential of bitcoin, especially in light of its network effects. This framework can be used to fully understand bitcoin’s long-term value proposition.
The framework of three concentric circles presented below, which fully captures the long-term value proposition of bitcoin, is based on this extensive qualitative and quantitative thinking. For more information, refer to the first figure.
The central element of this framework is the first and innermost concentric circle. The three following major questions form the basis of this core:
What unmet need is there? The goal of bitcoin is this.
- Why is Bitcoin the only and best option to meet this unmet need? This is bitcoin’s potential.
The PESTLE (political, economic, social, technology, legal, and environmental) factors from Mike Morrison’s “Strategic Business Diagnostic Tools” make up the middle concentric circle. The PESTLE framework was initially proposed to comprehend how external factors affect an organization. The proposed framework, however, calls for the opposite, namely that the three questions in the innermost circle be answered in light of the PESTLE factors.
The stakeholders who can be directly and indirectly impacted by the adoption or non-adoption of bitcoin are represented by the outermost concentric circle. The three questions that were posed in relation to the PESTLE factors may have different answers depending on the stakeholder being evaluated. The answer may be different for society or consumers versus the financial institutions themselves when determining the economic benefits of addressing the unmet needs of today’s trust-based financial institutions.
Jack Dorsey wouldn’t want me to call this framework the “Blockhead Three Circles (BTC) Value Framework,” but given how important a role his ideas played in the development of my own, I feel compelled to do so.
What Uses Does This Framework Have?
With the help of this framework, it is possible to evaluate the overall long-term net benefit of bitcoin, qualitatively or quantitatively, for all important direct and indirect stakeholders, such as users, businesses, decision-makers, financial institutions, and society.
Such evaluations will have a positive influence on how people understand and perceive bitcoin, which can further its adoption across the globe.
What Will Happen Next?
Three significant actions are to follow:
Complete the proposed BTC Value Framework’s structure. Anyone who would like to offer feedback or input is welcome to do so via direct message on my Twitter. When it is published, I will add a link to this article to my profile.
Construct a free-to-use model based on the BTC Value Framework: Creating a model based on the framework suggested in this article and using it to help produce data to support the value of bitcoin adoption is one way to gain from it. I appeal to the Bitcoin community as a whole to help us develop this model. The “bitcoin standard” should be used to create this model, which should then be freely available to everyone in the world.
Accelerate the creation of data to determine the worth of bitcoin: As of right now, there are still few research studies determining the worth of bitcoin. It becomes obvious how serious the gaps in the value proposition of bitcoin are when we examine the existing literature through the prism of the proposed BTC Value Framework. Given this, a sustained, open-source, coordinated effort is required to develop the value proposition for bitcoin. This endeavor ought to be as open-source and inclusive as the creation of bitcoin’s technical foundation. Such an endeavor would raise the bar for scientific research in all fields.