Diffusion of innovation is a theory that seeks to explain how, why, and at what rate new ideas and technologies spread.
Potential adopters evaluate an innovation on its relative advantage (the perceived efficiencies gained by the innovation relative to current tools or procedures), its compatibility with the pre-existing system, its complexity or difficulty to learn, its trialability or testability, its potential for reinvention (using the tool for initially unintended purposes), and its observed effects.

These qualities interact and are judged as a whole. For example, an innovation might be extremely complex, reducing its likelihood to be adopted and diffused, but it might be very compatible with a large advantage relative to current tools. Even with this high learning curve, potential adopters might adopt the innovation anyway.
[Ref: Wikipedia]

Let me go over now, how each factors may affect the diffusion of digital currencies

1. Relative Advantage
   This is one factor that will support the widespread diffusion of digital currencies. This can be proved by the number of digital currencies and ICO’s introduced in the last two to three years. Also, the fact that the use was not limited to financial industry but more and more industries are being disrupted and every day new concepts in a different industry is coming up. The Bitcoin and Block chain are now being used and conceptualized in several industries like Supply Chain, Identity Management, Land and Paper registries, Energy sector, Music industry and many more. The widespread use and growth of this technology in different industry is due its relative advantage with how the process works today which is centralized, controlled database, close architecture, data not easily visible to third parties to process and communicate, etc.Example: The Dubai Block chain 2020 vision to introduce block chain and distributed ledger to remove papers and manual work in the government alone is expected to save billions of euros to the government if UAE.
2. Compatibility
   In my opinion, compatibility could pose some issues but is not a big challenge to overcome. Security is a definitely a challenge that is prohibiting organizations with secure data to go to block chain but at the same time, technical solutions such as private blockchains are coming up and possibility to separate secure versus non secure data are being worked on.Even though different concepts and new tools enable blockchain in the background, they function very well with a lot of open source platform and technologies and API’s integrated with existing systems and architecture.
3. Complexity
   Block chain and digital currency is a newer concept and a very different concept from a technical point of view. The mass current developers of the technology are from the pre-internet era (the mainframe process) or from the internet era (java and internet technologies, client server architecture, central database etc). So from technology point of view, it is new and different however over the period of last ten years there has been widespread adoption of block chain technologies and there are many companies, including IBM, Microsoft and Facebook that are building their own block chain solutions or trying to move some of their operations on block chain. And of course, open platforms such as Hyper Ledger, Ethereum etc are being built to support easy development of block chain solutions.
   From a business perspective, also it is complex since it is disrupting the industry and the way business operates. So, adoption may not be too fast but the benefits and ROI are leading in that direction already.
4. Triability (Testability)
   A lot of industries are trying to innovate from the benefits that block chain and digital currencies is proving to have potential in.
   With several pilot project and POC’s going on, in my opinion, Triability is not going to inhibit the diffusion of digital currency. With some open platforms available, one can create his own coin in matter of hours with understanding of block chain. So, technology is going to help fast pace the triability of the concept in different industry.
5. Observability
   This factor is one which is going to help diffusion in a big way. And this is already happening as we have seen that the potential for re-invention is huge. Bitcoin was invented for the financial industry but is now being tried in almost all industries. Re-invention is happening every day the way this platform could be used in doing things more effectively and save millions of dollars. So, in my opinion, the observed effects that we are seeing right now after some years of adoption is exciting and is driving the diffusion in so many different industries.
   We can site the use of this technology in the Energy sector which is again a whole new way we can look at using and distributing energy.

Conclusion: There are more factors to support the diffusion of innovation in digital currency than factors that inhibit it.

Reference: Initial description of “innovation diffusion” is taken from Wikipedia.

[Saif Akhtar is a technologist in love with Blockchain innovation & disruption ]