The cryptocurrency folks claim that the growth of Bitcoin is due to its "network effect." However, I believe they are confusing the real network effect with an ordinary S-curve due to product adoption rates. The wikipedia article on network effect used to be accurate, but now the crypto crowd has hijacked that and turned it into a lot about the crypto "network effect" with little justification -- just assertions.
Here is the problem. The network with fax machines are the fax machines that need to communicate. The network for Facebook is all of the members who want to talk to other members. In both cases, the value of the product grows as the number of nodes on the network grows.
For crypto, what is the network? It can't be the blockchain. That is just the storage medium. It cannot be the owners of crypto. They just buy and sell like they do with any other product. And that would lead to an ordinary product adoption S-curve.
I believe crypto is just an ordinary product adoption S-curve. IF, and it is a big if, it has a network, that should amplify the exponential growth portion of the S-curve as an addition to the exponential growth at the bottom of an S-curve..
This matters because if you are buying crypto based on growth due to the network effect, then you may be truly fooling yourself.
I believe crypto is a very high beta liquidity play with no network effect.
I have not been able to get the crypto crowd to point to the network they mean. Some have even hinted that: S-curve = network effect. I think they do this because they have no better answer.
Does anybody have a suggestion on how to settle this question? Does cryptocurrency exhibit a network effect or not? Or is it just a product adoption S-curve.
I spoke with Dr. Craig Wright, one of the developers of Bitcoin, on Twitter about this around five years ago and he said there is no network effect. But the crypto crowd paid no attention to that.
Here is the problem. The network with fax machines are the fax machines that need to communicate. The network for Facebook is all of the members who want to talk to other members. In both cases, the value of the product grows as the number of nodes on the network grows.
For crypto, what is the network? It can't be the blockchain. That is just the storage medium. It cannot be the owners of crypto. They just buy and sell like they do with any other product. And that would lead to an ordinary product adoption S-curve.
I believe crypto is just an ordinary product adoption S-curve. IF, and it is a big if, it has a network, that should amplify the exponential growth portion of the S-curve as an addition to the exponential growth at the bottom of an S-curve..
This matters because if you are buying crypto based on growth due to the network effect, then you may be truly fooling yourself.
I believe crypto is a very high beta liquidity play with no network effect.
I have not been able to get the crypto crowd to point to the network they mean. Some have even hinted that: S-curve = network effect. I think they do this because they have no better answer.
Does anybody have a suggestion on how to settle this question? Does cryptocurrency exhibit a network effect or not? Or is it just a product adoption S-curve.
I spoke with Dr. Craig Wright, one of the developers of Bitcoin, on Twitter about this around five years ago and he said there is no network effect. But the crypto crowd paid no attention to that.