Bitcoin is a currency, but it’s also just computer code. You can’t physically hold your Bitcoin, touch it, or hide it under your mattress. You have your private key, and the blockchain confirming how much Bitcoin you hold at any given time, and that’s it. So, born from computers, Bitcoin is just another technology; like an iPod, a car, or a Hoverboard.

So, how do we approach understanding Bitcoin and its potential growth? Do we study it like we do any other currency and look at it economically? Highs and lows, demand and supply; this is about money! Or, do we look at it as a technology, going through its natural stages? You can listen to your entire music library, you can go anywhere, you can fall and break your arm; this will change the world!

No one has a good answer for how to approach it. If you look at it from the technological perspective then you can go back and look at just about any technology and most have gone through a consistent cycle identified by the advisory firm Gartner. This cycle is called a hype cycle and it is broken down into five Phases; Technology Trigger, Peak of Inflated Expectations, Trough of Disillusionment, Slope of Enlightenment, and finally the Plateau of Productivity.

Let’s look at a general graph that visually represents this cycle:

hcg

These phases represent the adoption (socially, commercially, etc.) and maturity of specific technologies. Most importantly is the ‘hype’ aspect of it all, how much is the media paying attention and how much is the general public paying attention. It starts with the trigger; some breakthrough kicks off, usually with unknown commercial applications. Next is the expectations of this new technology becoming realised; strong publicity takes hold talking of early success and adoption. The trough of disillusionment comes after; everyone’s heads start to come out of the clouds when they begin to realise that this new technology is not without its issues. We slide into the slope of enlightenment now; the technology, despite prior failures, is still being adopted socially and commercially. And finally the Plateau of Productivity; this technology has become a part of our lives and now it just needs to be further refined and built upon as its acceptance is pretty much guaranteed.

Let’s compare the Gartner Hype Cycle to the historical price of Bitcoin up to the day of this writing:

coindesk-bpi-chart

Some argue that the price of Bitcoin, a currency based on technology, is following the Gartner Hype Cycle and that is reflected through its price value. The two graphs do look smiliar, so far. Economists argue that this is just a pattern-seeking way of looking at a currency, viewed by technologists. Yes, the graphs might look the same but to an economist that doesn’t mean anything. The Gartner Hype Cycle is not scientific in nature; there is no data (numbers, dates, price fluctuations, etc.) to back the Cycle up, it is more of a philosophical approach to predicting emergent technologies. And, some would say most importantly, there is no phase represented after that Plateau of Productivity. Economists can find many instances of a technology moving into a new phase of growth based on technoligical and market advances.

Applying the Gartner Hype Cycle to Bitcoin assumes that Bitcoin is solely a technology and not a currency. But its purpose, the reason it was created, was to be a digital currency.

Only the future will tell whether the technologists who believe Bitcoin is following the Gartner Hype Cycle are right. Until then, how about you check out some casino games?