- Network effects mean the more people use a technology, the exponentially moe useful it becomes.
- There are one-sided networks (telephones) and two-sided networks (marketplaces). There are also direct and indirect network effects (if one group benefits from the growth of another group).
- Bitcoin's network effects as a payment network and store of value are currently stalling.
- Bitcoin will need to separate its base layer use case (SoV) from its P2P payments use case (L2) to develop stronger network effects.
- Ethereum paradoxically suffers from negative network effects because more demand for blockspace results in higher gas fees and slows down the network.
- Successful scaling and increased composability would yield direct positive effects.
- Ethereum will need to better define its value pitch to develop stronger network effects.