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Andreas Tzionis
Andreas Tzionis

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Crypto's anti-network effect

Network effects

Much of this millenia's history has been marked by a single observation. Networks grow exponentially ie. Metcalfe's law. Not every industry benefits from network effects, but those who do enjoy unique economics and an extreme upside potential.

Crypto networks

Every crypto project is becoming a network in multiple ways. A blockchain natively needs an asset exchange, a naming system for human-friendly addresses and at least a bunch of protocols to support the ecosystem like liquid staking, lending platforms, NFT marketplaces, stablecoins and aggregators.

Adoption drawbacks

There's also a secondary effect where people joining an ecosystem early are disproportionally interested in its success. Yet, in general the bigger the ecosystem the more tokens are listed in exchanges, the more NFTs are listed in marketplaces and the more the people (in terms of addresses) you can interact with. That effect is arguably dominant in comparison to the early adopter effect mentioned before.

In short, one could expect "the bigger a network, the bigger it will become", even in crypto. But that's not the case.

Read more on:
https://www.tzionis.com/crypto-anti-network-effect

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