From Our CEO: Incumbents and Insurgents in the Era of Blockchain Innovation
Main Takeaways
This past weekend, the number of registered users on Binance reached 200 million. The explosive growth of our user base mirrors the accelerating rate of adoption of digital assets and blockchain.
This process bears meaningful similarities to past cycles of technological disruption, from which we can learn as we race toward the one billion milestone.
Already, blockchain and Web3 have more to show in terms of real-life usage and utility than any of the paradigm-changing technologies of the past in the similarly early stages of their development.
Similar to previous cycles, incumbents are facing a strategic choice between embracing innovation and risking obsolescence.
Binance’s user count reached an astounding 200 million people. Not only does this represent a great achievement for our community – it is a momentous event for the entire blockchain industry as well as a significant milestone in the history of innovation.
Throughout human history, technological innovation has continually disrupted established industries and reshaped economies. Time and again, this process pitted incumbents, the established players, against insurgents, the innovative newcomers. A commonly observed pattern is incumbents’ initial indifference to the new technology, followed by its gradual adoption, which forces the established hegemons to adapt or face obsolescence.
Today, the rise of blockchain technology and the transition of the dominant internet paradigm from Web2 to Web3 represent the latest wave of disruption. History doesn't repeat itself, but it often rhymes, so there are parallels to be spotted and lessons to be learned as we examine how the current blockchain-led cycle of innovation stacks up against the historical ones. As we celebrate our 200 million users, where are we in the current iteration, and what is Binance’s place in it?
Acceleration of Tech Disruption Cycles
The pace of technological innovation has accelerated with each successive cycle. The first sparks of the Industrial Revolution, beginning in the 1760s with the steam engine, took many decades to tangibly transform industries. The breakthrough experiments and inventions in the field of electricity research and electrical engineering in the early decades of the nineteenth century did not result in widespread electrification until the early 1900s.
Fast forward several more decades, the Internet revolutionized the world more rapidly. Still, starting with ARPANET in the 1960s and 1970s, it remained the realm of academics and hobbyists until the emergence of the World Wide Web (essentially, Web1) in the early 1990s catalyzed mass adoption on a global scale thanks to the layer of utility and accessibility it added to the existing Internet infrastructure. After that, it only took the technology several years to fundamentally transform communication, commerce, and entertainment.
Today, the blockchain and Web3 are advancing at an unprecedented pace. Bitcoin, introduced in 2009, laid the groundwork for a new asset class that captured global mainstream attention in less than a decade. The time between the emergence of the technology and wide deployment of accessible consumer applications based on it has been remarkably short. Already, millions of people around the world use digital assets to efficiently transfer value online, engage in decentralized finance (DeFi) activities, and benefit from various smart contract-powered functionalities, from digital art to decentralized autonomous applications.
Some people remain unconvinced, arguing that real-world utility is slow to materialize. However, if you put things into historical perspective, blockchain and digital assets have more to show – and over a remarkably shorter time – in terms of real-life usage and driving consumer value than any of the paradigm-changing technologies of the past. And still, we are very early in the game, with enormous upside potential and a steepening adoption curve suggesting that we are confidently headed toward the mainstream.
Diffusion of Blockchain Innovation
I believe that the growth of Binance’s user base is a good enough proxy for demonstrating the exponential nature of digital assets’ adoption.
Launched in July 2017, Binance locked in the status of the world’s largest crypto platform by trading volume within six months. Yet, it wasn’t until May 2021 – almost four years – that we achieved the milestone of 50 million users. The next one hundred, going from 50M to 150M, took way less time and was chalked off after just 26 months, in June 2023. Then, it took us less than a year to break the 200 million threshold.
Every time I look at this curve, Everett Rogers’ classic diffusion of innovation theory comes to mind. According to the theory, diffusion is the process whereby an innovation is communicated over time among the participants in a social system in a sequence of stages: knowledge, persuasion, decision, implementation, and confirmation.
People progress through these stages at different rates, leading to varying adoption times. Rogers categorizes adopters into five groups based on their readiness to embrace new technology: innovators (approximately 2.5%), early adopters (13.5%), early majority (34%), late majority (34%), and laggards (16%). Innovators are the first to adopt and are willing to take risks, followed by early adopters who are often opinion leaders stimulating even further adoption.
Even if all crypto users were Binance users (which is clearly not the case), 200 million people is already a slightly greater share of the global population than 2.5%. In reality, we are many more than that. By all means, the innovators are already in, with early adopters currently joining the movement en masse and spreading the word as we advance toward an early majority – the advent of which, as some theorists concluded, marks the beginning of mass, or self-sustained adoption. With a curve this steep, we might get there sooner than we think.
Cooptation or Obsolescence
Historically, incumbents often dismissed new technologies and the insurgents advancing them, only to later recognize the innovations’ utility and value. When Alexander Graham Bell invented the telephone in 1876, telegraph companies showed little interest, seeing it as an odd novelty. However, the telephone's ability to provide instant voice communication soon demonstrated its value, leading to widespread adoption. Similarly, personal computers were initially seen largely as toys for hobbyists, with widespread skepticism about the personal computer's utility. However, the rise of productivity software and the Internet transformed PCs into essential tools for business and personal use.
In the current era, blockchain technology faced initial skepticism from traditional financial institutions. However, its unique value proposition – disintermediation, transparency, and security – has driven increasing adoption, both by individual users and companies.
When new technology proves its worth, incumbents face a critical decision: adapt or become obsolete. The transition from horse-drawn carriages to automobiles in the early 20th century forced carriage companies to adapt or close. Similarly, the rise of digital photography saw Kodak fail to adapt, leading to its decline, while companies like Canon and Nikon thrived by embracing the new technology.
While there are detractors still, many of today’s incumbents have chosen to proactively adapt to the wave of blockchain-led disruption rather than ignore or fight it. Financial giants like BlackRock and Fidelity spearheading the recent spot bitcoin ETF rush are perhaps the most vivid example. Many other major players in their respective fields, from JP Morgan to IBM, are exploring blockchain technology and integrating it into their operations to enhance efficiency and security. Those that fail to adapt may face obsolescence as decentralized systems gain prominence. The current blockchain revolution mirrors past innovation cycles, where incumbents either co-opt new technology or risk being left behind.
As blockchain and Web3 technologies continue to evolve, incumbents must recognize the potential for disruption and act swiftly to integrate these innovations into their processes. The future will likely see a blend of cooptation and competition as blockchain reshapes the financial landscape as well as numerous other industries. If the pace of Binance community’s growth is anything to go by, this future is just around the corner.