Imagine that your business was 9 years old. You\’d started it as a side project, a bit of fun you were having in your spare time while you were still working a regular job. When you told people what you were doing, most rolled their eyes and wished you luck. They didn’t get it.
A few people, though, did get it. Some of them joined you. They gave you their time in return for some of the profits in the future. Others became your customers. They told their friends, and the business began to take off.
Nine years later, that little business has become a giant with a market capitalization of more than $277 billion. It’s been used by more than 15 million people> and invested in by many, including me. It’s traded on futures markets and it’s frequently on the front pages of business newspapers and magazines.
If that described your company, you’d certainly think of it as a success. But all of those descriptions match Bitcoin — and Bitcoin can just as easily be described as a failure. The project hasn’t turned out to be anything like its creators imagined. When Satoshi Nakamoto published the paper that outlined the blockchain, he described Bitcoin as a \”peer-to-peer electronic cash system.\” Wired called it \”the ultimate democratic tool.\” Others have seen it as a threat to central banks.
None of those things have come true … at least not yet. Steam recently announced that it would no longer accept Bitcoin as a payment method “due to high fees and volatility.” The transaction fee of $0.20 that Steam’s customers needed to pay when the company started to accept the cryptocurrency had risen to $20. The rate of volatility meant that the amount of Bitcoin could change dramatically between a customer starting a transaction and completing it. They would often either need a refund or have to send more money. Either way, they would be hit by another fee.
As long as the value of Bitcoin can rise or fall by dozens of percents in a matter of days, no one will want to exchange it for goods.
A system that’s meant to be democratic and entirely under the control of its users has now become dominated by China. A study in January 2017, debunked the idea that China’s exchanges make up 98% of Bitcoin volume. It concluded that the number was only 80%.
And as for the chance to wrestle control of money from government-influenced central banks, the Fed hasn’t gone anywhere and neither has any other central bank.
But while Bitcoin might not have turned out quite the way its early adopters imagined it, there’s no question that it’s been a massive success, used by millions and awash with value. There are lessons there for every entrepreneur.
The first lesson is that you can grow big with a product that has niche appeal. Satoshi Nakamoto\’s paper wasn’t aimed at the general public. He didn’t launch Bitcoin with a giant media event, a massive advertising buy and a PR campaign designed to generate interest. He put an idea out to his fellow geeks and started a discussion.
It took time to take off. The massive rises we’ve seen recently in Bitcoin’s prices are new. Bitcoin was trading at 6 cents in July 2010. It took almost a year to reach a dollar and nearly three years to hit three figures. Bitcoin was always generating interest, but for most of its life, it’s been under the radar. That gave the developers and the supporters time to improve the exchanges, build better mining hardware and speed up transactions. It’s not only possible to start slow and build out from a niche — it can also help to create a better product with mass appeal.
The second lesson is that before you break out, you need to be ready to scale. As Bitcoin prices reached the $10,000 mark in early December, Coinbase, one of the biggest exchanges, kept breaking down. The blockchain that governs Bitcoin might be spread across the network but the software needed to keep new customers flowing in and providing access to current customers is managed by private companies.
A business can survive scaling problems. Twitter’s Fail Whale used to be a common site on the social media platform. It’s now extinct, while Twitter is still going strong. But each scaling failure harms the brand and puts off customers. Entrepreneurs hoping for large-scale success need to be able to look months down the road and be ready to scale up, even if they have to do it quickly and massively.
But the most important lesson that Bitcoin teaches entrepreneurs is that the product you create is never yours. Once you’ve put a product into the real world, it belongs to its customers, and they get to define it. You might think you’ve built a \”dispatch service that connects us on our phones using text\” or a new kind of currency designed for international digital transactions. Users might well decide that you’ve built a place to share memes or an asset that can be used to store value, like gold.
For any successful company, the customers always outnumber the employees. There’s no point in arguing with them. You have to be able to adapt, to follow the market, to understand the benefit that your customers actually see in your product and to make sure that the infrastructure can support supplying it, even as it grows.
For entrepreneurs, Bitcoin shows that success can look very different from the starting plan.