What is the S-Shaped Curve? Adoption of Cryptocurrencies And Networks

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By Connor
Estimated reading: 7mins
S Shaped Curve

Any new technology that emerges on the market proceeds through a specific life cycle before it gets adopted at scale. Usually, the adoption graph resembles an S-shaped curve pictured below.

Such a graph is mostly generalized, of course. Yet, it may give some idea of how widely a given technology is adopted at a specific moment and what one can expect in the upcoming years.

Assuming that blockchain follows the same S-curve adoption path, it would be interesting to analyze its current status and make forecasts about the pace of its development.

S Shaped Curve Chart

What is an S-Shaped Curve?

An S Shaped Curve, aka S-Curve Adoption, refers to a graphical representation of the adoption and growth of a particular technology or innovation over time. It illustrates the pattern of how a technology evolves, gains traction, reaches maturity, and eventually levels off.

First, the number of adopters grows slowly. At this, different internal and external factors can both speed up and slow down this process. If the technology is easy to use and provides some ponderable benefits right from the very start, its adoption will spike at once, and vice versa.

Then the technology enters an acceleration phase and grows exponentially. Having reached a certain market share, the rapid growth stops as the general adoption stabilizes across the population.

Generally speaking, the S-shaped curve falls apart into the five key stages with the following participants:

  1. Innovators are the technology pioneers that always stay at the forefront of progress. Entering the race at the early stages of the S curve, they do not fear to experiment and are always eager to try new products or services.
  2. Early adopters don’t pursue any profits as it’s difficult to predict the ROI at this stage. Instead, they seek to solve some of their own concrete problems. Typically, they make up around 10% of the target audience and act as influencers who educate others about innovations.
  3. The early majority waits until the new technology gains traction and goes mainstream. On a corporate ladder, they are the decision-makers and those involved in project management. Usually, they have higher social and economic statuses than those who join the adoption race at later stages. At this, they represent around 40% of the target market.
  4. The late majority waits until the products get developed further, reach the mass market, and show real cash flow. They are the last ones to adopt the new technologies as they make up around 30-40% of the target audience.
  5. Laggards do not accept any technological changes at all. The only reason for them to spend time and money on something new is the lack of any other choice. The remaining 10% of the market is the hardest segment to work with as these users are the least profitable and the most difficult for companies to support.

How Does the S-Shaped Curve Relate to Crypto?

Blockchain represents an innovative means of storing information and sharing value. Being drastically different from traditional centralized solutions, it follows exactly the same S-shaped curve in its development and adoption.

The early spikes and falls

When the concept of Bitcoin emerged in 2008, there were just a few pioneers who dared to move the technology further. One may say that these early adopters have won the lottery, though. According to Bloomberg, they still control most of BTC.

As Bitcoin hit the headlines in 2017, the first wave of early adopters joined in. ICOs became the key trend of that year making investors dizzy with the promise of easy profits.

Many experts compared that bullrun with the dotcom bubble that took place in 1999-2000 and predicted the crash of all these startups. Their forecasts proved to be correct pretty soon as 80% of the projects turned out to be scams. 

Further Adoption

Yet, after a sharp decline in 2018 and a long-lasting crypto winter, the technology didn’t evaporate. More than that, Bitcoin reached new heights in 2021 while new blockchain-based solutions such as NFTs, liquidity pools, and DEXes stepped in.

The overall number of digital assets grew exponentially with every new bullrun as well. As of June 2013, CoinMarketCap featured only 26 officially registered coins. In January 2018, their number exceeded 1,400. In February 2022, there were already 22k+ digital assets.

How many of these projects will remain alive in a decade is another question to answer. To tell the truth, the chances of the majority are negligible.

Yet, those who survive are sure to become those early adopters who pave the way for all the rest.

At What Stage of the S-Shaped Curve Do Cryptocurrencies Reside?

To answer this question, let’s first define the measurable metrics to rely on.

Blockchain adoption implies various activities with crypto such as investing or using it for daily purchases. At this, the best index to study would be the number of addresses that regularly perform any of these activities. 

If we take a look at the graph of active BTC addresses, we will see that it strongly resembles the S-shaped curve mentioned above:

S Shaped Curve Bitcoin
Glassnode: the number of active BTC addresses seems to have reached its highest by January 2023

At the first glance, it may seem that the curve has reached its peak and is not going to grow anymore. However, if we take a look at the bull run that took place at the end of 2017, we will see practically the same pattern:

Glassnode: the picture was pretty much the same at the beginning of 2018

Has Bitcoin adoption reached its highest? Or will the pattern repeat itself in the upcoming years again and again?

At the time of writing, the number of active BTC addresses hovers around 1 million. In comparison with nearly 8 billion of the global population, this is just a drop in the ocean, even if we take 1.4 billion unbanked people out of the equation.

It’s relevant to assume that Bitcoin still has a long way to go before it gains traction sufficient to call it a settled technology. At the time of writing, blockchain resides somewhere between “innovators” and “early adopters”.

Crypto vs Other Inventions on the Adoption Curve

How long it will take blockchain to get adopted at scale and cryptocurrencies to become an integral payment solution in our daily lives? This is the next question to answer.

Blockchain is surely a novelty, and it would be difficult to make any long term forecasts. Yet, we can take a look at the cumulative data of other innovative technologies that saw the light in the past few decades such as TV, electricity, internet, mobile phones, and automobiles. Thus, we can at least make assumptions with respect to their behavior.

S-Shaped Curve Technology

According to the graph above, the Internet grows most rapidly of all. Compared with all other innovative technologies, its curve was much steeper.

What about Bitcoin? It closely follows the Internet along its growth curve. Many online influencers argue that it may even outpace it soon.

It took the Internet only ~7.5 years to grow its userbase from 130 million to 1 billion users. According to the forecasts made in 2021, Bitcoin would need only 4 years to cross this line. In reality, we’ve gained this number in only 2 years.

S Shaped Curve Internet

Bottom Line

Bitcoin, as the first and the most popular cryptocurrency, stays at the forefront of blockchain adoption. Together with Ethereum, it moves along the S-curve much further than all other innovative elements.

BTC, as well as the majority of other pioneering projects in blockchain, has a lot of issues that will slow down its adoption in time. Yet, the blockchain in general still has many other solutions to offer its users. 

At this, we can be sure that the technology still has many more years ahead to evolve, and therefore many more opportunities to pursue.

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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