Blockchain Economics and Network Effects

Looking at the gargantuan market caps that the world’s biggest tech companies such as Facebook, Microsoft and Amazon have amassed, one wonders how they’ve managed to dominate within their respective environments, often in such a short period of time. Well it seems the answer lies – at least in part – in their ability to generate network effects. Also known as ‘network externalities’ and ‘demand-side economies of scale’, network effects are observed when a technology becomes more valuable as more people use it. The telephone is an example of the network effect, whereby more users who purchase telephones make them more…...