In October 2014, all 4,494 undergraduates at the Massachusetts Institute of Technology were given access to Bitcoin, a decentralized digital currency. As a unique feature of the experiment, students who would generally adopt first were placed in a situation where many of their peers received access to the technology before them, and they then had to decide whether to continue to invest in this digital currency or exit. Our results suggest that when natural early adopters are delayed relative to their peers, they are more likely to reject the technology. We present further evidence that this appears to be driven by identity, in that the effect occurs in situations where natural early adopters' delay relative to others is most visible, and in settings where the natural early adopters would have been somewhat unique in their tech-savvy status. We then show not only that natural early adopters are more likely to reject the technology if they are delayed, but that this rejection generates spillovers on adoption by their peers who are not natural early adopters. This suggests that small changes in the initial availability of a technology have a lasting effect on its potential: Seeding a technology while ignoring early adopters' needs for distinctiveness is counterproductive.
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We rely on economic theory to discuss how blockchain technology and cryptocurrencies will influence the rate and direction of innovation. We identify two key costs that are affected by distributed ledger technology: 1) the cost of verification; and 2) the cost of networking. Markets facilitate the voluntary exchange of goods and services between buyers and sellers. For an exchange to be executed, key attributes of a transaction need to be verified by the parties involved at multiple points in time. Blockchain technology, by allowing market participants to perform costless verification, lowers the costs of auditing transaction information, and allows new marketplaces to emerge. Furthermore, when a distributed ledger is combined with a native cryptographic token (as in Bitcoin), marketplaces can be bootstrapped without the need of traditional trusted intermediaries, lowering the cost of networking. This challenges existing revenue models and incumbents's market power, and opens opportunities for novel approaches to regulation, auctions and the provision of public goods, software, identity and reputation systems.
This paper uses data from the MIT digital currency experiment to shed light on consumer behavior regarding commercial, public and government surveillance. The setting allows us to explore the apparent contradiction that many cryptocurrencies offer people the chance to escape government surveillance, but do so by making transactions themselves public on a distributed ledger (a `blockchain'). We find three main things. First, the effect of small incentives may explain the privacy paradox, where people say they care about privacy but are willing to relinquish private data quite easily. Second, small costs introduced during the selection of digital wallets by the random ordering of featured options, have a tangible effect on the technology ultimately adopted, often in sharp contrast with individual stated preferences about privacy. Third, the introduction of irrelevant, but reassuring information about privacy protection makes consumers less likely to avoid surveillance at large.