Network Effect

A network effect describes the phenomenon where the value and utility of a network increase as it expands from an initial small user base to a large one. The internet serves as a prime example of a network effect. Initially, with a limited number of users, its overall power and usefulness were minimal. However, as the user base grew, the internet’s utility and significance increased exponentially. In the context of blockchain, protocols like Bitcoin and Ethereum exhibit strong network effects due to their size, trustworthiness, and the benefits they provide to a vast number of users.