K-Factor, the Viral Coefficient and Bitcoin

The K-Factor, otherwise known as the viral coefficient, is a method to describe the rate at which a product or idea grows.

A K-Factor of less than one means that the growth level is falling (exponentially) and a K-factor of greater than one means that it is growing — again, exponentially.

A viral coefficient showing growth is illustrated in the Google Trends chart for Bitcoin over the past year:

That shows a K-Factor that is greater than 1.0.  The spikes are from individual events: Slashdot (July, 2010), Dollar parity / Slashdot (February, 2011), What is Bitcoin video, plus the association with Google through BitcoinJ project (March, 2011) but over time the curve is exponential and shows sustained viral growth.

Those who have even heard of Bitcoin at this point are generally only those who would be categorized as either innovators or early adopters.  For many technology-centric endeavors, crossing the chasm to grow beyond serving the early adopters is the biggest challenge.

As long as there is continued interest in the benefits that Bitcoin offers the project will continue to see improvements with futher developments to its core and great additions made throughout its ecosystem.  With a solid project underneath, the ability for Bitcoin to cross the chasm, autonomously, will occur because Bitcoin sells itself.

This is evidenced by the promotion of Bitcoin we are seeing occur today in the press and also at the grass-roots level.

The attention Bitcoin gets in the press is because Bitcoin is a story that we want to hear.  It resonates with so many for so many reasons. In Monday’s EconTalk podcast, economist Russ Roberts said about Bitcoin: “it’s cool—it’s very cool.”  

Economists don’t normally use words like “cool” when talking shop.  When Steve Gibson gets giddy about Bitcoin, that’s expected — he’s a geek and Bitcoin employs some cool technologies.  When corporations start getting on board though that causes Bitcoin’s message to spread further.  To those who already believe in Bitcoin’s potential, seeing these corporate endorsements simply emboldens them and encourages them to participate further.

There’s no reason to believe that the current high K-Factor will drop anytime soon.  Instead, it appears to be accelerating even, as more and more attention is received each day.

Unlike commercial promotions, there’s no temporary, short-term incentive being offered which might explain the boost in adoption.  There’s no marketing budget that one could credit for gaining the success that Bitcoin has achieved thus far.  Every advance in Bitcoin’s traction comes from it serving individual’s self-interests.

Nobody paid Travel Lists, an independent travel guide, to start accepting Bitcoin for payment however every review submitted to the site exposes Bitcoin as part of the payment process.  Donations to LMPTFY likely couldn’t be accepted through any other payment network but having chosen Bitcoin the site now advertises the option to its visitors through a pile of Bitcoins displayed on its homepage.  Without using bitcoins earned from their mining, some young teens would not have the ability to purchase the prepaid cards used in playing their favorite online game.

Bitcoin is fuel to these people and they are the ones who are driving Bitcoin forward because, if for no other reason, nothing else comes even close in comparison to Bitcoin in serving their needs.

Make no mistake however.  The energy propelling Bitcoin forward comes not just from the Bitcoin client which allows anyone from anywhere to begin using the currency in a matter of minutes.  The energy comes not just from the recognition that Bitcoin is a payment network that requires no approval process and costs just a tiny fraction compared to the alternatives.

Bitcoin’s energy comes from the liberating concept of it being a global, decentralized currency.  It comes from the realization that we might not always have to be, for the rest of our lives, servant to the banks and their fees.  It comes from the hope that we might finally have an invention that gives us the ability to control our governments instead of them controlling us.

As this idea spreads and continues to grow exponentially it will not be long before those attached to the status quo will be raising the questions “Where did this come from?” and “How did we not see it coming?”.  The data showing Bitcoin’s growth is out there for all to see.  Maybe they just weren’t paying attention.

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