The influence of regulation on the adoption process of disruptive innovations : a case study on Bitcoin : the influence of regulation on the creation of preference overlap with mainstream consumers for disruptive innova

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The influence of regulation on the

adoption process of disruptive innovations

A case study on Bitcoin: the influence of regulation on the creation of preference overlap with mainstream consumers for disruptive innovations .

Master Thesis

Name: Amauri de Best

Student No: 10894454

Contact info: amauri.debest@student.uva.nl

Master: Business Administration – Entrepreneurship & Innovation University supervisor P.J. Van Baalen

Second reader: W. Van der Aa

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Statement of originality

This document is written by Amauri de Best who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Acknowledgement

This thesis became a reality with the kind support and help of many individuals. First of all, I would like to express the deepest appreciation to my supervisor Dr. Van Baalen for the excellent guidance, patience, and feedback he provided me during this process.

Furthermore, I would like to thank all the interviewees that were willing to participate in my research, for their openness, new opinions and insights that were created regarding my topic. Without their advice and persistent help this thesis would not have been possible.

Perhaps most important of all, I would like to express my gratitude towards my mother, who has encouraged me in completing this thesis.

Last, but certainly not least, I would like to thank my friends: Jeroen van der Putten, Vincent van den Herik, Jouke Reitsma and Joost van Dongen, who have supported me to survive this Master.

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Abstract

The vast majority of previous research on DIT has mainly focused on the characteristics of the innovation itself and the industry while neglecting the role of the environment. This Master thesis has made an attempt to research the impact of the environment on one part of the disruptive process. More specific, it studies the influence of regulation on the creation of preference overlap with mainstream consumers. To investigate this question, a case study for Bitcoin in the Dutch banking industry has been conducted.

This thesis contributes to the existing literature in four ways. Firstly, it provides qualitative evidence indicating why Bitcoin is a disruptive innovation. Secondly, it builds on existing research to identify the perceived barriers to mainstream adoption of Bitcoin for the different use cases/functions of money: medium of exchange, unit of account and store of value. Thirdly, it identifies whether, where and how regulation can influence the process of creating preference overlap with mainstream consumers for disruptive innovations. Fourthly, this thesis provides a conceptual model for the disruptive process of Bitcoin, based on the DIT and the findings in this research.

This thesis finds that regulation is an important determinant in the creation of preference overlap for disruptive innovations, mainly because it enhances clarity and influences trust, not only for consumers but also for businesses. However, if the standards are too stringent, it the adoption process is negatively influenced. Finally, this thesis provides managerial implications for Bitcoin entrepreneurs.

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2.2.5 Disadvantages of Bitcoin ... 18 2.2.6 Regulation ... 18 3 Methodology ... 20 3.1 Research design ... 20 3.2 Operationalization ... 21 3.2.1 Disruptive conditions ... 21 3.3 Data collection ... 22 3.4 Sample selection ... 22 3.4.1 Sampling techniques ... 22 3.4.2 Interviewees selection ... 23 3.5 Analysis strategy ... 25

3.6 Quality of the research design ... 26

3.6.1 Reliability ... 26

3.6.2 Validity ... 26

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4.1 The disruptive potential of Bitcoin ... 28

4.1.3 Differences between the current Bitcoin adopters and mainstream consumers ... 33

4.1.4 Potentially overlapping value-networks ... 36

4.2 Barriers for the three functions of money ... 42

4.2.1 Medium of exchange ... 42 4.2.2 Store of value ... 46 4.2.3 Unit of account ... 48 4.2.4 Trust ... 49 4.3 Regulation ... 51 4.3.1 Regulatory actions ... 51 4.3.2 Ban cryptocurrencies ... 52

4.3.3 Consumer protection rules ... 53

4.3.4 Deposit insurance ... 55 4.3.5 Privacy requirements ... 56 4.3.6 Security standards ... 57 4.3.7 Regulation ... 58 4.3.8 Standards in general ... 60 4.3.9 Scalability ... 62 4.4 Conceptual model ... 63 5 Discussion ... 64

5.1 Bitcoin as disruptive innovation ... 64

5.1.2 Preference asymmetry ... 64

5.1.4 Preference overlap ... 65

5.2 Barriers to mainstream adoption ... 66

5.3 The influence of regulation ... 69

6 Conclusion ... 71

6.1 Managerial implications ... 72

6.2 Limitations of the research ... 73

6.3 Suggestions for further research ... 73

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Appendices ... 81

Appendix A – Interview guideline ... 81

Appendix B – Participants list ... 85

Appendix C – Tables ... 87

Appendix D – Quotes barriers mainstream adoption ... 89

Price volatility ... 90 Ease of use ... 90 Security risks ... 91 Cybercrime ... 91 Scalability ... 92 Decentralization ... 92 Partial anonymity ... 93 Issuing of credit ... 94 Backing of government ... 94 Irreversible payments ... 95

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1 Introduction

This thesis combines three literature streams; the Disruptive Innovation Theories (DIT), the Entrepreneurship Literature and the theory on Diffusion of Innovations (DOI). The DIT, established and popularised by Clayton Christensen, explains what type of innovations cause industry leading firms to fall. The theory describes three disruptive conditions that an innovation and its market have to meet; disruptive circumstances, asymmetric motivation, and overlapping value-networks (Christensen C. M., 1997; Christensen & Raynor, 2003). The latter two are explained by two other concepts; preference asymmetry and preference overlap (Adner, 2002).

Although Christensen received a tonne of praises and appreciation on his theory, there is also some critique. One limitation of the theory is that it does not consider the influence of the environment on the disruptive process, while in other research areas, the institutional environment and regulation are found to have a significant impact, for example on entrepreneurial opportunities and activity. Research by Chesbrough suggests that differences in the institutional environment can indeed play a determining factor in whether a market can be disrupted or not (Chesbrough, 1999a; Chesbrough, 1999b). The limited research on this topic has also been concluded in a reflective article on DIT of 2010 and recommends more research on the role of the environment on disruptive innovations (Yu & Hang, 2010, p. 449). This thesis zooms in on the influence of regulation on the disruptive process and, in specific, the creation of preference overlap with mainstream consumers. While regulation is of significant importance to entrepreneurs, it has been mostly neglected in the DIT and also in the research conducted by (Chesbrough, 1999a; Chesbrough, 1999b) it received little intention. Although regulation can constrain entrepreneurial opportunities (Carreras & Tafunell, 1997; Winston, 1998), sometimes regulation is also necessary for innovation, to go mainstream (Zhu & Kraemer, 2005). Regulation can provide entrepreneurs and consumers with some guidance and security, which can be argued to be especially important for the more risk-averse customer segments, as distinguished in the diffusion theory (Bass, 1969; Rogers, 1983; Moore, 1991).

The theory on Diffusion of Innovations (DOI) shows that difference in preferences between segments is, in fact, normal for technical innovations. Despite some differences in customer characteristics along the segments, the concept overlap with the DIT, in particular, the process of creating performance overlap. Furthermore, the demand-based view on disruptive innovation by Adner (2002) helps to explain the link between these two theories,

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9 with his concepts of reference asymmetry and performance overlap (Adner, 2002). Moreover, the DOI provides segment sizes, which can help identify in which stadium an innovation is.

The central question in this thesis is:

“How does regulation influence the creation of preference overlap with mainstream consumers for disruptive innovations?”

To answer the central question, this conducts a case study for Bitcoin and its potential in the financial services industry study. Cryptocurrency and in particular the blockchain technology, on which it is built, is perceived as the most disruptive technology at the moment. However, because a technology with a financially attractive business model for incumbents is not disruptive (Christensen C. M., 2006), this thesis will test Bitcoin on the disruptive criteria, as no research has been found that has done so previously. Research shows that Bitcoin adopters are still a very homogenous group of consumers that appreciate the innovation for its concept or ideology (CoindDesk, 2015). The big challenge for cryptocurrency is to bridge the gap between those early adopters and mainstream consumers (Boersma, 2015).

This thesis seeks to contribute to the existing literature in four ways. Firstly, it investigates whether Bitcoin is a disruptive innovation according to theory. Secondly, it explores which (tangible or intangible) barriers/functionalities of Bitcoin need to overcome/improved for the different use cases/functions of money to be appealing to mainstream consumers. Thirdly, it identifies whether, where and how regulation can influence the process of creating preference overlap with mainstream consumers for disruptive innovations. Fourthly, this thesis provides a conceptual model for the disruptive process of Bitcoin, based on the DIT and the findings in this research.

The thesis is structured as follows. First of all, the thesis provides a short literature review of the DIT. Thereafter, the literature on cryptocurrencies is examined. The methodology follows in chapter three. In this chapter, the research design, data collection, sample selection, analysis strategy and the quality of the research are discussed. In chapter four, the results from the interviews will be analysed and presented. In the discussion, the significance of the findings is discussed. The conclusions of this study will be drawn in chapter six, together with the managerial implications and suggestions for further research.

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2 Literature review

2.1 Disruptive Innovation Theory (DIT)

One of the most discussed topics in innovation literature the past two decades is the Disruptive Innovation Theory (DIT), introduced and popularised by Christensen (1997; Christensen and Bower 1996; Christensen and Raynor 2003). This theory seeks to explain when and why great firms fail. Technical innovation can be categorised and distinguished in a variety of ways (Garcia & Calantone, 2002), but for answering this question, Christensen has provided a new one; sustaining versus disruptive innovation.

2.1.1 Disruptive process

Christensen defines sustaining technologies as “those that improve the performance of established products, along the dimension of performance that mainstream customers in major markets have historically valued” (Christensen, 1997, p. 11). Disruptive goods or services are simpler and cheaper; they decrease, instead of increase profit margins, initially underperform on the performance dimensions that are most important for mainstream customers, which make them uninteresting for the leading firms’ most profitable customers, and thus the leading firms. Consequently, disruptive products and services initially target emerging or insignificant markets (Christensen, 1997, p. 177).

Moreover, since good management listens to their customers (Berry & Parasuraman, 1997; Dale & Cooper, 1994), who initially do not want disruptive innovations, it is unnatural and uncommon for industry leading firms to invest heavily in disruptive innovations (Christensen, 1997, p. 12).This phenomenon is called asymmetric motivation. As a result, incumbents keep allocating resources to projects that improve established products along the same dimensions, while asking premium prices for it. However, over time, the disruptive innovation improves along the performance dimensions of the incumbent’s product, to the extent that it also satisfies the needs of mainstream consumers. When the mainstream consumers start to settle for simpler, cheaper products, instead of paying a premium price for an upgrade, incumbents are already too late to invest in the disruptive innovation and are forced to move market. Unfortunately for them, the entrants will also keep moving up-market, until the incumbents have no place to go; this is the disruptive process.

However, the disruptive process can only potentially occur under certain conditions. These determinants are discussed in the following sections.

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2.1.2 Disruptive circumstances

The two types of innovations, sustaining and disruptive, are based on the conditions of innovation summarised in “The Innovator’s Solution”. Sustaining circumstances; “when the race entails making better products that can be sold for more money to the attractive customers” and disruptive circumstances; “when the challenge is to commercialise a simpler, more convenient product that sells for less money and appeals to a new or unattractive customer set”. It is under the latter conditions that incumbents are likely to get beaten by entrant firms (Christensen, 2003, p. 47).

2.1.3 Newmarket and low-end disruption

Christensen distinguishes two types of technological disruptions, new-market disruption and low-end disruption (Christensen, 1997). While low-end disruptive innovations attack the lowest tiers of an existing market, new-market disruptive innovations compete with non-consumption at first, but both eventually look to move up-market (Schmidt, 2004). Low-end disruptions are unambiguously the result of a performance surplus; product performance surpasses the ability of consumers to utilise, due to a shortage of resources or knowledge, better known as “the law of diminishing marginal utility” in economics. When capacity needs are satisfied, other characteristics such as flexibility, speed, become increasingly important. New-market disruptions are more complicated; while the existing products are too expensive or complex for consumers to use, indicating a performance surplus, new-market disruptions, aim to fulfil the performance gap between non-consumption and consumption. Although the process between the two types somewhat differs, the challenge remains the same; “commercialising a simpler, more convenient product that sells for less money and appeals to a new or unattractive customer set” (Christensen & Raynor, 2003, p. 47).

2.1.4 Asymmetric motivation

Besides the disruptive circumstances, there is another indispensable condition, the earlier described phenomenon, asymmetric motivation (Christensen, 1997, p. 12). As mentioned above, asymmetric motivation arises when the existing mainstream and high-end customers are, at first, not interested in disruptive innovations. Therefore, the incumbents have to look down-market, where customers are found that are financially relatively uninteresting to exploit because of the lower product margins. In contrast, the entrants come from nothing; they start with the least demanding customers their only way is up. However, asymmetric motivation does not automatically lead to disruption. The purpose of “The Innovator’s

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12 Solution” is to help managers of large firms recognising disruptive innovations and to survive them (Christensen & Raynor, 2003).

Still, even when incumbents succeed in recognising the disruptive innovation and the incumbent’s senior management wants to change (Henderson, 2006); the organisation’s inertia still has to be overcome. This resistance to change is created over time by human resources and their allocation processes (Christensen & Bower, 1996; Christensen, 2006; Denning, 2005; Govindarajan & Kopalle, 2006; Nelson & Winter, 1982), organizational structure (Cohen & Klepper, 1996; Tsai & Wang, 2005) and culture (Christensen & Raynor, 2003; Henderson, 2006; Tushman & O'Reilly, 1996), which has led to the idea that small and new firms use their R&D investments more effectively when launching new products (Lee & Chen, 2009; Lejarraga & Martinez-Ros, 2008).

2.1.5 Overlapping value networks

The last important factor that drives the disruptive process is overlapping value networks. The concept of value networks was first established in Christensen & Rosenbloom (1995). In his later work, Christensen (& Raynor, 2003) defined a value network as: “the context within which a firm establishes a cost structure and operating processes and works with suppliers and channel partners in order to respond profitably to the common needs of a class of customers.” (Christensen & Raynor, 2003, p. 62). As long as the new product does not substitute the old value network for the mainstream customers, there is no disruption. Newmarket disruption creates a whole new value network since it initially competes with non-consumption. However, after time, the products improve enough in performance to lure customers from the original value network to the new one. The disruptive innovation does not enter the old value network; rather, it lures customers out of the old value network into the new one, simply because these customers find the new product more convenient. Per definition, disruptive innovations are first adopted by the least-demanding consumers and later by the mainstream. Because the value networks do not overlap initially, the incumbents do not perceive new-market disruptive innovations as a threat until the disruptive process reaches its final stages.

Pure end disruptions do not create a new value network; they solely have a low-cost business model which attracts customers from the least demanding tiers and, if the product improves, could also attract mainstream customers. However, pure low-end or new-market disruptions are rare; in fact, many are a combination, which makes them hybrids. Not only can new-market disruptions move up-market, but low-end disruptions can also create new markets by serving people who historically did not consume (Christensen & Raynor,

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13 2003). Although this is part of the disruptive process and essential for market disruption, it is not a criterion for disruptive innovation because, more often than not, a disruptive innovation does not succeed in its pursuit of creating overlapping value networks and remains inferior.

Performance overlap and preference symmetry

Adner (2002) introduces two new constructs to explain two of the underlying theoretical drivers of Christensen’s DIT, namely overlapping value networks and asymmetric motivation. While focusing on the demand side of technology competition, Adner identifies two elements that characterise segment preferences: performance symmetry and preference overlap (Adner, 2002). Preference symmetry is about the relative value that different segments place on performance improvements. For instance, segment “A” does not want to pay more for improved camera quality but segment “B” does, therefore the preferences are not symmetric. Performance overlap refers to the overlap in functional preferences between two segments. For instance, to which extent the preferred phone’s camera quality in segment “A” matches the preferred phone’s camera quality in segment “B”.

Performance (a)symmetry and overlap especially play a critical role in new technological innovations with which firms look to pursue different market segments (Adner, 2002). Initially, there is preference asymmetry since there are different market segments. It then depends on which innovation has, or can establish the largest performance overlap with the rival’s market preferences; the innovation that is relevant for most consumers has the greatest incentive to invade the other’s market. For instance in the case of disruptive innovations, which thrive in situations where consumers’ requirements are exceeded, and price becomes increasingly important.

When there is no preference asymmetry in the first place, the industry’s leading firms would have equal incentives to invest in the innovation as entrants; no asymmetric motivation. Furthermore, if the new innovation does not create an overlap in functional preferences with the old one, there is no overlapping value-network created. In both situations, it is therefore highly unlikely that the innovation causes the leading firms to fail; no disruption.

The creation of preference overlap (Adner, 2002) and the creation of overlapping value networks (Christensen & Raynor, 2003) are in fact the same. There is chosen to use the term preference overlap because it is, in combination with preference symmetry, less ambiguous than overlapping value networks.

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2.1.6 Critiques on the DIT

As mentioned, the Disruptive Innovation Theory has been widely extensively covered in business publications and cited by thousands of scholars in numerous research areas. Nevertheless, the theory has also received some critiques by researchers. Danneels (2004) argues that Christensen does not establish clear criteria to determine whether or not a technology is “disruptive” or not: “What makes a technology disruptive?” “What are the exact criteria for identifying a disruptive technology” (Danneels, 2004, p. 248). Moreover, he challenges the predictive use of the DIT, questioning whether the theory can make ex-ante predictions about particular businesses and industries, because Christensen’s disruptive model is derived from historical data “it may simply be the case that some firms are lucky in their technology choices and others unlucky” (Barney, 1999, p. 15) as cited in (Danneels, 2004, p. 250).

Christensen (2006) admits that the label disruptive technology is not accurate because it composes two different phenomena; low-end disruption and newmarket disruption. When one technology replaces another, this does not mean that the market is disrupted. Hence, Christensen has replaced disruptive technology with disruptive innovation since The Innovator’s Solution. Subsequently, Christensen argues that building upon historical data is not a weakness; rather a simple consequence of inductive theory building (Christensen C. M., 2006).

Moreover, disruptiveness is somehow assumed to be measured by the actual disruptive impact an innovation has on the industry, which indeed can only be determined post hoc. Critics seem to have interpreted that if a market leader gets dethroned by a technology or innovation, it was disruptive. However, this is not the case, as Christensen notes, he has never done this. “The model was derived from histories, but the definition of disruptiveness exists independent of the outcome (Bower & Christensen, 1996)”, as cited in (Christensen C. M., 2006, p. 41).

“A disruptive innovation is financially unattractive for the leading incumbent to pursue, relative to its profit model and relative to other investments that are competing for the organisation’s resources” (Christensen C. M., 2006, p. 49). It does not state that a disruptive innovation will per definition dethrone market leaders, or, even be adopted by mainstream consumers. This is dependent on two other criteria: First, whether the disruptive innovation is able to create overlapping value networks and second, on the responses of the incumbents (Christensen & Raynor, 2003).

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15 Moreover, he illustrates four cases in which his model is used by executives to forecast, and successfully anticipate on the impact of technology. A true anomaly would be as an incumbent tackles disruption by successfully developing and commercialising a disruptive innovation themselves in the same business unit as it relies on for its sustaining innovations.

Another is if a new entrant dethrones the market leaders with a product that allows the incumbents to gain greater profit margins in their sales to their high-end customers. However, because such research has not been found, this article builds on Christensen’s model to determine what innovations are most likely to cause great firms to fail.

Although DIT can help executives make ex-ante predictions about innovations and give them broad managerial implications on how to respond, research suggests that there is another factor that influences the chance a disruptive innovation indeed disrupts the market. Chesbrough (1999a; 1999b) observes the institutional differences between the US, Japan (and Europe) and its impact on their respective hard drive industries (Chesbrough, 1999a). The venture capital market, the buyer-supplier structure and the technical labour market are proposed as three factors influencing incentive constraints of incumbents (causing asymmetric motivation) and appropriability constraints (access to complementary assets) for start-ups. There was found to be a correlation between the success of entrants versus incumbents and the identified institutional differences. However, in the markets where the incumbents created new spin-offs or subsidiaries to commercialise the disruptive innovation, they persevered, which directly supports Christensen’s theory. Nevertheless, this does not contradict the suggestion that differences in the institutional environment influence the incumbents’ ability to successfully create new spin-offs and subsidiaries or entrepreneurial activity (Chesbrough, 1999b).

The lack of insight regarding the role of the environment in the disruptive process was also concluded by Yu & Hang (2010) in their review on the DIT, one which they based the following question further research: “What are the environmental determinants of disruptive innovations?” (Yu & Hang, 2010, p. 449). Although there is limited research in the disruptive innovation literature on the influence of the environment, this has been extensively covered in the entrepreneurship literature.

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16 2.2 Disruption in financial services

“Fintech” and “disruption” over the past few years have grown to be two of the greatest buzz words: “Fintech is disrupting financial services” “banks are getting disrupted by fintech”, are the catchy headlines of reports and articles, written by finance journalists and consultants. While to soe extent this might be true, since there are some technologies with disruptive potential, fintech is such a broad term that the accuracy is rather low. Fintech companies can on average be put as high growth potential startups considering the enormous investments the past few years in this niche industry (Appendix C), but that does not make them disruptive. Of all the technologies used by fintechs (fintech companies), only a few are considered to have disruptive potential.

2.2.1 Blockchain

The technology that has been argued to have the most disruptive potential at the moment is blockchain. “The blockchain is, at a very high level, a decentralised ledger, or list, of all transactions across a peer-to-peer network. This is the technology underlying Bitcoin and other cryptocurrencies, and it has the potential to disrupt a wide variety of business processes” (PwC, 2016).

This blockchain technology enables the creation of new decentralised value networks, such as the Bitcoin network, allowing people to transfer digital money over the Internet without the need for a third party. Banks and brokerages for decades have made a living off providing this trust to consumers and corporates. Blockchain and cryptocurrencies could significantly alter the need for their intermediary function, creating major challenges for banks. While the potential of blockchain goes far beyond cryptocurrencies and the financial services industry, this study focuses on cryptocurrencies, because thus far it is the only new product innovation that uses the blockchain technique on a large scale. Besides, theory suggests focusing on disruptive innovations, not disruptive technologies, because a radically different technology with a financially attractive business model for incumbents is not disruptive (Christensen C. M., 2006).

2.2.2 Characteristics of cryptocurrencies

Cryptocurrencies can be defined by four characteristics: 1) the decentralised network, 2) peer-to-peer approach; direct transaction between two parties, 3) the use of public internet, 4) the use of public-key cryptography (Baur, Bühler, Bick, & Bonorden, 2015). These characteristics are the fundaments on which the first and widest adopted cryptocurrency is

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17 built, resulting in some significant beneficial aspects: Transactions are fast (no intermediary and active 24/7), cheap (no dependency on a third party), have no single point of failure (the blockchain ledger is distributed over millions of computers) and easy to audit (transactions are public). Other aspects are irreversible transactions, partial anonymity and decentralisation, which some perceive as an advantage, while others perceive it to be negative (Spenkelink, 2014). Although cryptocurrencies have very similar characteristics, they do differ from each other. Therefore this thesis uses Bitcoin as the main research case.

2.2.3 Usage scenarios for Bitcoin

While, as mentioned above, the underlying blockchain technology of Bitcoin has the potential to be used for much more, this thesis focuses specifically on Bitcoin as money/payment method. Money is considered to have three functions: medium of exchange, unit of account and store of value (Mankiw, 2009). When comparing Bitcoin to fiat currencies (cash) and gold, previous research indicates a relatively high functionality on medium of exchange (non-perishable, insensitive for counterfeiting, fungible and highly divisible, no transportation costs), low on store unit of account (high volatility) and medium as a store of value (high volatility) (Ametrano, 2014; Spenkelink, 2014). However, this research did not include other forms of payment such as debit/credit cards. Nonetheless, the possibilities for at least two of the three functions of exchange are promising.

2.2.4 The adoption of Bitcoin

The potential of cryptocurrencies has not remained unnoticed; the value of the first cryptocurrency, Bitcoin, is $695 (Blockchain.info, 2016) at the time of writing (15-6-2016) and the amount of blockchain wallet owners has increased exponential since the end of 2011, currently at 7,625,500 wallet owners (Blockchain.info, 2016). While Bitcoin is by far the most popular and valuable cryptocurrency, there are numerous alternatives for Bitcoin (altcoins) that have the same characteristics and therefore can be used for the same means (CoinMarketCap, 2016). Despite the high potential of cryptocurrencies, only 0,125% of the world population (2016) and just under 1% of the US consumers (2015) have ever owned a Bitcoin wallet (Blockchain.info, 2016; Schuh & Shy, 2015). To illustrate; the daily amount of transactions is still around 230,000, which is peanuts compared to Visa’s 150 million transactions per day (Visa, 2016). Coindesk (2015) gained insight in what type of people have thus far adopted Bitcoin. Of the 3515 Bitcoin users in the survey, is 56% between 19-34 years old, 90% male considerable tech-savvy (CoindDesk, 2015). Based on the relatively low adoption rate of a rather homogeneous group, it can be concluded that Bitcoin and

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18 cryptocurrencies are still in the early market (innovators) segment of the adoption process (Bass, 1969; Mahajan, Muller, & Srivastava, 1990; Moore, 1991).

2.2.5 Disadvantages of Bitcoin

Bitcoin does not seem ready for mainstream adoption at the moment. For starters, it is not even close to being able to process that amount of transactions; its maximum throughput is 7 transactions per second, while Visa can handle peaks of 56,000 transactions per second. In order for Bitcoin to be able to serve mainstream consumers, the Bitcoin protocol has to go through some fundamental changes (Croman, et al., 2016). Besides scalability of Bitcoin, there are some other concerns about Bitcoin.

While the irreversibility of the payment is beneficial for merchants, for consumers it can be very inconvenient, especially since the ease of use (another disadvantage) of Bitcoin is still low. The decentralised aspect is mostly valued by people who do not trust (central) banks, but having no insurance on your stored value in Bitcoin or another cryptocurrency is not desirable either. Particularly, because the bankruptcy of Mt. Gox two years ago and the recent Ethereum hack displayed that cybercrime and security risks are still big concerns (Spenkelink, 2014). Price volatility is another perceived disadvantage, especially since mainstream consumers tend to be more risk-averse than early adopters (Rogers, 1983). Other concerns are regarding tax duties and terrorist financing due to the anonymity of cryptocurrencies. However, this will soon change because the anti-money laundering directive (AMLD) will apply for wallet providers and digital currency exchanges, at the latest by 2nd quarter of 2017 (Europea Commission, 2016).

2.2.6 Regulation

Wallet vendors and cryptocurrency exchanges having to comply with this AML directive is huge because cryptocurrency has been relatively unregulated thus far. However, due to its growing adoption, regulation was already considered to be a matter of time because governments have regulated the issuer of money for the past 500 years (Middlebrook & Hughes, 2014). Although wallet providers and exchange companies are not the issuing credit, they are providing consumers and businesses with a store of value and a medium of exchange. Therefore, by regulating it, governments can protect consumers, prevent criminal activity and enforce citizens’ tax duties.

Previous research indicates that while Bitcoin users are highly against government regulation, they do seem to realise that it does need some consumer protection (De Filippi, 2014; Gao, Clark, & Lindqvist, 2016). Considering that the current users are much more

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tech-19 savvy and less risk-averse than mainstream consumers, regulation could, in fact, be helpful in the adoption process if it helps to provide some stability in the industry.

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3 Methodology

In this section, the methodological choices within this research are explained and justified. 3.1 Research design

There are multiple research gaps between the entrepreneurship literature and DIT and, more specifically, regarding Bitcoin/cryptocurrency. For starters, research has not tested Bitcoin for disruptive innovation on the premises of the DIT. Secondly, there has been done very limited research on the influence of the institutional environment on the disruptive process (Yu & Hang, 2010), while in this has been much wider elaborated in the entrepreneurship literature. However, no researchers have succeeded in integrating the entrepreneurship literature on environmental determinants and its influence on the entrepreneurial process with the DIT, even though the first link was established many decades ago (Schumpeter J. A., 1934). Thirdly, while there has been conducted some research on the disadvantages and barriers of Bitcoin, it does not distinguish the barriers for the different use-cases. Lastly, although there has been much discussion about regulating cryptocurrency, there is still little research on how it would affect the perceived barriers to mainstream adoption.

Therefore, there is chosen to conduct an exploratory research. An exploratory research has the main purpose to provide more insights about the topic that helps to build on the understanding of the context (Mortelmans, 2007). Furthermore, research by Saunders and Lewis (2012) state that this research design is especially useful for exploring new phenomena, because it creates new insights and obtains different views on the topic (Saunders & Lewis, 2012).

Furthermore, it is decided to conduct a case study; the newness of the subject area makes a case study the ideal methodology for this research (Eisenhardt K. M., 1989). More specific, this thesis conducts a holistic single case study for the influence of regulation on the perceived barriers of Bitcoin, in which the unit of analysis is the Dutch payment system. This method is very well suited for gaining a better in-depth, understanding of a phenomenon (Siggelkow, 2007). However, it must be noted that to richly describe a phenomenon, a multiple-case study in general funds a better base for theory building, because it makes the results more generalizable to similar cases (Yin, 2003). A case study approach is conducted with an interpretive perspective, in which the adoption process of Bitcoin and the influence of regulation on the barriers to mainstream adoption are in the Dutch financial services industry are explored. The interpretive paradigm has been adopted since this study assumes that social reality is highly subjective (Gephart, 2004).

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21 3.2 Operationalization

To answer the research questions, the theoretical constructs are operationalized to create understandable and measurable data for the participants and the researcher. Therefore, this paragraph translates the different theoretical constructs to measurable variables. An inductive approach is used to develop a better understanding of how regulation affects the creation of preference overlap with mainstream consumers. This outcome is not solely interesting for the DIT, but it is also adds to the Bitcoin/cryptocurrency literature.

There are three criteria an innovation has to match in order to be considered a disruptive innovation: disruptive circumstances, asymmetric motivation and overlapping value networks (Christensen & Raynor, 2003). Adner (2002) has added two underlying mechanisms that explain asymmetric motivation and overlapping value networks, namely preference overlap and preference symmetry. This thesis uses these constructs instead of the term overlapping value networks; there is chosen use “preference overlap” instead of “value networks” because preference overlap is easier to translate to the DOI and therefore is less likely to be misinterpreted. Moreover, preference asymmetry is used to validate the answers that are given regarding asymmetric motivation.

During the interviews, the participants were implicitly asked whether Bitcoin matches the criteria for disruptive innovations. They were informed that the disruptive potential of Bitcoin was discussed, but they were not directly asked about their perception of Bitcoin as a disruptive innovation. Instead, the disruptive criteria were operationalized to Bitcoin and its place in the banking industry.

3.2.1 Disruptive conditions

The first condition is disruptive circumstances or in this case: “Can Bitcoin/cryptocurrency lower the costs and margins on transactions?”

The second condition is asymmetric motivation: “Does the current payment system led by banks have fewer incentives to invest in cryptocurrencies compared to new entrants?”

The third condition is preference asymmetry: “Do current Bitcoin adopters and mainstream consumers attach different relative value to performance improvements for money?”

The fourth condition is preference overlap: “Does Bitcoin have the potential to be used as a medium of exchange, store of value and unit of account instead of cash, credit/debit cards and cheques?”

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22 However, before preference overlap can be established, the literature review shows that Bitcoin has to overcome multiple barriers (Spenkelink, 2014). The case study looks to find out what barriers have to be overcome for each of the three functions of money. Finally, this thesis looks to explore:

“How does regulation influence the creation of preference overlap with mainstream consumers for disruptive innovations?”

3.3 Data collection

In order to answer these questions regarding Bitcoin, this case-study uses semi-structured interviews. Semi-structured interviews can be defined as: “a method of data collection in which the interviewer asks about a set of frames using some predetermined questions, but varies in order in which the themes are covered and questions asked” (Saunders & Lewis, 2012, p. 151). Although the question order might vary per interview and some freedom in questions is needed because of the different backgrounds participants, have (in section 3.4 the sampling of the experts and their background will be elaborated), the vast majority of the questions is predetermined (Appendix D). The semi-structured interview design is beneficial because it gives the possibility to adjust the question order to the available time and situation.

Therefore, interviews were able to be conducted in two parts, while maximising the time. The interviews were conducted face-to-face or via Skype and lasted between 50 and 85 minutes. The duration of the interviews increased over time, the main reason for this was that it allowed me to reflect and validate the insights gained in previously interviews in the subsequent ones.

3.4 Sample selection

3.4.1 Sampling techniques

When conducting qualitative research, there always is a threat for biased answers, but by approaching a diverse group of highly knowledgeable experts, the bias can be limited (Rowe & Wright, 2001; Eisenhardt & Graebner, 2007). Therefore, there is chosen to use a heterogeneous purposive sampling technique, selecting experts with functions at different types of companies. According to Saunders and Lewis (2012), using this sampling technique, “the sample will have sufficiently diverse characteristics to prove the maximum variation possible in the data collected” (p.139). Furthermore, a typical case sampling technique is used by selecting more objective experts, in the form of consultants. However, because people with expertise on Bitcoin/cryptocurrency as well as (its) regulation/policy/compliance in The

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23 Netherlands are scarce, the sample population is rather low. With LinkedIn limiting me to third-degree connections, my personal sample selection was even lower, especially since I did not have many connections in that field at the time. Therefore, also the snowball technique was used. Nonetheless, a diverse group of experts on this topic has been compromised.

3.4.2 Interviewees selection

According to Rowe & Wright (2001), it is best to use between five and twenty interviews in order to establish solid expert judgement. During the participant selection, the abovementioned guidelines are taken into account. First, all selected participant have in-depth knowledge about cryptocurrencies and the underlying blockchain technique. Second, the participants have in-depth knowledge about the current regulation on Bitcoin in The Netherlands and follow the trends outside The Netherlands as well. Moreover, because the adoption process is dependent on a large number of factors (Spenkelink, 2014), selecting a heterogeneous expert group derived from different industries is even more important. In table 3.1 the different industries of the participants are presented. Although the merchants are part of the payments stakeholder network, they have limited knowledge about Bitcoin and its regulation. In general, payment providers such as BitPay are responsible for making payments with Bitcoin possible at websites of merchants. Therefore, merchants are not represented in this thesis. Furthermore, consumers have even less knowledge of Bitcoin and its regulation. Although their opinion and perception on perceived barriers of Bitcoin and its regulation would be interesting, it does not fit this research format and is therefore also excluded.

# of interviewees Industry Company

1 Banking ING

1 Bitcoin exchange Bitonic

1 Bitcoin PSP BitPay

1 Central Bank De Nederlandsche Bank

2 Consulting Deloitte, KPMG

1 Payment Consulting Innopay

Table 3.1 - Participants' industry

Since limited experts could be found, the order of interviewing becomes more important, especially because the gained insights are used in the subsequent interviews. First, the most extreme cases are interviewed. Namely, the participants who are directly influenced by regulation and therefore are likely to be the most biased due to their position: Bitcoin PSP, banks and Bitcoin exchanges. After having established a wide view on the difficulties and challenges of the different actors in the market the Dutch Central Bank is interviewed. The

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24 interview with DNB is particularly valuable because it builds an understanding of why things are the way they are, what the difficulties there are in regulating Bitcoin, and therefore what aspects are likely to be regulated and what not. Thereafter, the (payment) consultants are interviewed, who are less, if at all, dependent on the Bitcoin regulation, but are expected to have in-depth knowledge about it to consult their clients. During these last three interviews, the aim is to add nuance, come to a shared understanding, towards a conclusion. The interview participants in order, including their function and interview specification, are presented in table 2. More information about the participants and their relation to Bitcoin and its regulation are provided in Appendix B.

Name Function Industry Date & duration

Timo Dijkstra Compliance Specialist

EMEA at BitPay

Bitcoin Payment Service Provider

1 July 55 min. Robert Jan Vrolijk Blockchain expert at

ING1

Banking 5 July

66 min. Daan Kleiman

part 1

Strategy at Bitonic Bitcoin exchange 8 July 49 min.

Mirjam Plooij Policy Advisor at

DNB2

Dutch Central Bank 8 July 72 min. Daan Kleiman

part 2

Strategy at Bitonic Bitcoin exchange 11 July 36 min.

Dennis de Vries Senior Manager at

KPMG Consulting 11 July 53 min. Jacob Boersma part 1 Managing Consultant at Deloitte Consulting 14 July 42 min. Jacob Boersma part 2 Managing Consultant at Deloitte Consulting 15 July 37 min.

Gijs Burgers Senior Consultant at

InnoPay

Payments consulting 19 July 83 min.

Table 3.2 Interview participants

1

Robert Jan Vrolijk speaks on a personal title, he is not speaking on behalf of ING nor does he speak in general about the vision ING has on cryptocurrencies, it is all on his personal interest.

2

Mirjam Plooij speaks on a personal title, she is not speaking on behalf of DNB nor does she speak in general about the vision DNB has on cryptocurrencies, it is all on her personal interest.

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25 3.5 Analysis strategy

All conducted interviews are in accordance with the participants recorded and transcribed. Thereafter, in order to build theory from the collected data, this can be defined as: “a set of well-developed concepts related through statements of relationship, which together constitute an integrated framework that can be used to explain or predict phenomena” (Strauss & Corbin, 1998), the following steps were taken.

First, the data was open-coded (Strauss & Corbin, 1998), also known as initial coding (Charmaz, 2006). All transcripts were read and coded without using pre-determined categories. Second, the open coded data was placed in tables to distinguish the topics. Third, the data was analysed using focused coding (Charmaz, 2006).

The interviews were divided into three parts, covering three different, but related topics to answer the three research questions of this thesis, while all are using grounded theory to analyse them. In the first part, the disruptive potential of Bitcoin was discussed. The analyses are included in the result section. In the second part, the barriers to mainstream adoption are discussed. The quotes that were used to draw conclusions for this question can be found in appendix D. To illustrate the coding for the last question: “How can regulation influence the creation of preference overlap with mainstream consumers for disruptive innovations?” the table that helped to identify the regulatory actions can be found in the table below. In the left column, the different regulatory actions are stated. Also, the middle column counts the number of sources that mentioned the specific regulatory measures in the left column. Finally, in the right column, the amount of references from the sources are summed up. Importantly, a number of references can be higher than the number of sources, because the interviewee can repeat the regulatory actions.

Regulatory actions Sources References Ban cryptocurrencies 3 6

Consumer protection rules 5 11

Deposit insurance 2 2

Define security standards 3 8

Standards in general 6 20

Privacy requirements 5 12

Regulation 4 10

Allocate investigation capacity* 1 1

Regulatory sandbox* 3 6

Start own cryptocurrency* 5 9

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26 3.6 Quality of the research design

In order to assess the quality of this study, several authors, such as Saunders & Lewis (2012) and (Rowley, 2002) emphasise that is important to evaluate the reliability and validity. In addition, Rowley (2002) state that three tests have been widely used to establish the quality of empirical research, namely: internal-, external validity and reliability (table 3). In the next paragraphs, at first attention is paid to the reliability, thereafter, the validity is handled. Construct validity Establishing correct operational measures for the concepts being studied.

Internal validity Establishing a causal relationship whereby certain conditions are shown to lead to other conditions.

External validity Establishing the domain to which a studies’ findings can be generalised.

Reliability Demonstrating that the operations of a study can be repeated with the same results.

Table 1.3 Three tests to assess the quality of research (Rowley, 2002). 3.6.1 Reliability

In support of Rowley (2002), Bryman (2008) define reliability as the stability of the measurements and the degree to which a study can be replicated. According to both authors several steps can be taken to enhance the reliability of a study, e.g. thorough documentation of procedures and appropriate recording keeping.

To ensure the reliability of this research, the following steps are undertaken. At first, clear semi-structured interview questions are developed based on the criteria of Christensen (2003). Secondly, all respondents gave permission to record the interviews, with the end result that all interviews are recorded and transcribed. At last, the analysis and coding of the data are done by clear steps (paragraph 3.5), which enables other researchers to replicate the same research.

3.6.2 Validity

In support of Rowley (2002), Bryman (2008) highlight the importance of validity to enhance research’s quality. The author makes the same distinction between internal and external validity. Bryman (2008) state that internal validity refers to whether causal relations are valid and external validity refers to the degree in which the results can be generalised to a broader context.

To ensure the internal validity of this research a conceptual model has been developed, which is derived from several validated theories (p.18). Thereafter, based on the conceptual model propositions have been formed, which are tested and assessed within the semi-structured interviews. Due to the fact that semi-semi-structured interviews are held, extra questions

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27 can be asked to investigate whether respondents’ answers can be clearly matched to theoretical concepts.

According to the literature, external validity occurs to be a problem in qualitative research, due to small samples, especially in holistic case study designs. This is also the case within this investigation, due to the fact that there are only seven interviews held, it is hard to achieve data-triangulation.

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4 Results

In this chapter, the most important results from the interviews are presented. The results are divided into two parts, following the two research questions.

First, the difference in preferences between early Bitcoin adopters and mainstream consumers are presented. Second, the disruptive potential of Bitcoin will be analysed, based on the disruptive circumstances, asymmetric motivation and potentially overlapping value-networks.

In, paragraph 4.2, the influence of regulation on the perceived barriers to mainstream adoption of Bitcoin is analysed. First, the perceived barriers to mainstream adoption are analysed for each of the three functions of money. Thereafter, the influence of regulation for the different barriers is explained.

4.1 The disruptive potential of Bitcoin

The first research question that this thesis seeks to answer is: “Is Bitcoin a disruptive innovation?” To answer this question, this section displays the characteristics of Bitcoin, in regard to the disruptive characteristics as described in paragraph 2.1: Disruptive circumstances, asymmetric motivation, preference asymmetry potentially and overlapping value-networks.

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4.1.1 Disruptive circumstances

“When the challenge is to commercialise a simpler, more convenient product that sells for less money and appeals to a new or unattractive customer set” (Christensen & Raynor, 2003, p. 47).

Quotes Open coding Closed coding Construct

“Why is email free, while payments have a trillion dollar revenue stream?

Both structured data transfers.” Dennis de Vries

“The banks have their way of deducting money from the main amount; they have their way to generate revenues and the costs of let's say cryptocurrencies payments, blockchain technology, distributed ledger are far less. Robert Jan Vrolijk

High transaction

costs

Lower margins

“The systems that banks use have become so complex the past years. Building a new system on new software and technology is per definition more efficient.”

Daan Kleiman

"People think transaction costs might go up as the number of new Bitcoin that enters the system is halved every 4 years. So from that perspective, I think the current system as it is right now might not lower transaction costs. But, what we also see is a very new technology and we see a lot of things build around it. And this is just the first step…” Timo Dijkstra

“Bitcoin is the most widely used cryptocurrency around, but I think it is a horrible payment instrument, it is really not meant for payments.” Gijs Burgers Not yet good enough Simpler / more convenient Disruptive circumstances

I don't think in the long run Bitcoin is very efficient, but cryptocurrencies, if they are setup in an efficient way, they couldlower the costs and margins on transactions.” Mirjam Plooij “Not really payments itself, solely because here in The Netherlands and in large parts of Europe, payments are really well arranged, also between banks. For other parts of the world, that is different of course.”Jacob Boersma

“It has started in the financial services industry, but I am convinced that that the implementation in financial services is the most difficult and therefore will only be in the last stage.” Dennis de Vries Other markets first Emerging or insignificant markets “If you look at countries that are less developed

and have less developed payment systems I think that's where digital currencies solve a real problem. If you have a currency that's very volatile, like in Argentina or Venezuela, there it solves a real problem and I think that's the use case where you really need to look at…” Timo Dijkstra

“A lot of people perceive money as just, well "it's

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30 To determine if there are disruptive circumstances for payments, the experts were asked about the potential of Bitcoin to lower the costs and margins on transactions. In their responses, three aspects were identified: First, the experts conclude that the current banking system is not efficient in terms of transactions and the Bitcoin technology has the potential to lower the costs. Second, while the potential is there, the current Bitcoin system is not able to be used for payments on a large scale; in fact, Bitcoin is considered to be a horrible means of payment by some. The experts agree that Bitcoin has to improve a lot over time, in order to succeed:

“Either Bitcoin will have to improve a lot, especially in terms of scalability, but in other issues as well, or some other cryptocurrency will come up and replace Bitcoin. Both could happen, but if Bitcoin does not manage to improve, that in the end, I think people will look back on it and say: "that was a very good first cryptocurrency, but in the end, we moved to different versions".” Mirjam Plooij

The last identified aspect of Bitcoin’s potential is the perceived use-case for emerging or insignificant markets. With its one trillion dollar revenue stream, payments is considered one of the world’s largest industries. For something that is considered as “just there”, that is pretty high. Moreover, the European banking industry is arguably the cheapest and most secure, which gives consumers here very few incentives to switch. However, in other regions where the banking system is less stable or secure, Bitcoin has a better use case. To conclude, experts suggest that Bitcoin will initially be commercialised outside the European banking industry, namely in unstable countries like Argentina or Venezuela or even outside the financial services.

The interviews suggest that there indeed is a disruptive challenge in financial services, as Bitcoin and the industry match the conditions for disruptive circumstances.

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4.1.2 Asymmetric motivation

Quotes Open coding Closed coding Construct

“Banks have more to lose obviously because banks have a strong market position, some banks still want to increase their market share and grow even more, but new companies have nothing to lose and everything to win.” Mirjam Plooij

“Banks have a whole existing payment system in place where they earn thousand billion dollars in annual revenue.” Dennis de Vries Banks have everything to lose Risk

“Why would banks invest in cryptocurrencies while they already own the system which is used in 99% if not 100% of the cases for payments?” Gijs Burgers

“Banks are not the ones to start this, it came for outside, and banks also are already regulated and have to deal with compliance. These days you see banks looking into this sort of thing, this has to do with perceived competition from elsewhere. So, then the existing of the other companies creates incentives for banks to either do the same sort of thing or do something else that competes with it.” Mirjam Plooij

Banks will

follow Defend Asymmetric motivation

“Higher incentives for new entrants, at least at first, and then banks have to respond somehow if they actually feel the treat.”

Mirjam Plooij

Respond when threatened

“Not at all actually. Banks are looking at blockchain now as a technology, apart from cryptocurrencies, but that is mainly because they are closely watched by the regulator, regarding doing business with cryptocurrency companies.”

Jacob Boersma

“I think new entrants have more to gain. I think the big benefit that they have is they don't have to deal with legacy systems, which is really a big plus for them. They're much more agile because they're new and on the regulatory side they're much more burdened than the new entrants.” Timo Dijkstra

Flexibility Inertia

Regarding asymmetric motivation, the experts were asked whether banks and new entrants have equal incentives to invest in cryptocurrencies. That answer is no, which in a large part has to do with the current market position of banks. As mentioned above, the global payments

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32 industry accounts for an annual one trillion dollar revenue stream. Banks have the power to create money, and the banking system is used for nearly all payments. Stepping away from that system would put their business in jeopardy.

However, the margins on transactions are not likely to last for much longer anyway:

“You have the Payment Services Directive 2, which will be enforced in two years, that really puts an even higher burden on banks. They will get a lot more obligations to open up their data, and they cannot even really charge them directly for these services. It forces banks to really think through their business model and how they can actually make money out of this. So they need to do something.” Timo Dijkstra

One of the goals of this directive indeed was to enhance competition on the payments level, and cryptocurrency companies enforce competition even more:

“It creates incentives for banks to innovate, which is a good thing, banks also need to innovate. But, the incentives are different, banks want to survive.” Mirjam Plooij

Nonetheless, this does not mean banks are willing to invest in cryptocurrencies just yet: “Banks like the system, because the system is far ahead of the current corresponding banking system, but the cryptocurrency Ripple itself, they don't really like it because Ripple, the company itself, has 70 billion in store.”

Robert Jan Vrolijk

Instead, banks are looking into blockchain; the underlying technology of Bitcoin.

“You can read it in the news; all banks are actually looking at “how can we apply not really Bitcoin, but more blockchain, the technology behind it to optimise our processes and?”Timo Dijkstra

In conclusion, banks are aware of the potential of the technology and are in fact looking into it. However, with regard to Bitcoin, as well as other existing cryptocurrencies (i.e. Ripple); banks have no incentive to invest in it, while for new entrants it is a tremendous opportunity. Therefore it can be concluded there is indeed asymmetric motivation.

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4.1.3 Differences between the current Bitcoin adopters and mainstream consumers 4.1.3.1 Most important reasons current Bitcoin adopters

Quotes Open coding Closed

coding

Construct

“The more technical people really like the technology behind it's, the developers, the coders.”

Timo Dijkstra

“There are people that are just very enthusiastic about technology, and they think it's very interesting from that point of view, to have this kind of alternative means of payment.” Mirjam Plooij

Technological interests

Technological enthusiasts

“Pure interest-based, simply because they can.” Jacob Boersma

“I don't trust the government, so therefore I will hold 50% of my savings in Bitcoin.”

Gijs Burgers

“Decentralisation, owning value outside the current system”.

Daan Kleiman

Lack of trust _Anarchists Early market

innovators

“Not being very at ease with the current financial system and everything around it.”

Robert Jan Vrolijk

“Groups that are in there for the investment value.”

Dennis de Vries

“Speculate on price increases.” Jacob Boersma

Investment _{Risk seekers}

“In Bitcoin, there is much more uncertainty, so it is more like an investment than a savings account for example.”

Mirjam Plooij

“Illegal use is even a third because they don’t really fit under anarchists.”

Timo Dijkstra

“There is the use in the kind of illegal sector”

Mirjam Plooij Illegal use Criminals

“Technological interests or bad interests, that are the two main drivers.”

The current Bitcoin adopters can be categorised into four different groups: First the technological enthusiasts, who have adopted it purely from an interest standpoint. Second the anarchists, who lack trust in the current financial system, including the banks and governments. They especially value the decentralised aspect of Bitcoin. Third the risk seekers, they perceive Bitcoin as an investment opportunity. Lastly, criminals are drawn to cryptocurrencies because of the anonymous aspect.

The influence of regulation on the adoption process of disruptive innovations : a case study on Bitcoin : the influence of regulation on the creation of preference overlap with mainstream consumers for disruptive innova