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What makes Bitcoin so powerful? Why do crypto enthusiasts dream about mass adoption of cryptocurrencies like Bitcoin and Ethereum? Why does the price of Bitcoin seem to rise when more people buy it? And why does Bitcoin remain the number one crypto when it longer has the best technology? These are all common questions asked by those who are new to the strange world of cryptocurrency. The answer to these questions can be summarized in one phrase: network effect.
What is Network Effect?
Those of you familiar with computer science already know the power of network effect. Itâs why we still use old internet protocols like TCP/IP even though computer scientists can build something better. For the rest of us itâs easier to explain ânetwork effectâ with popular social media sites like Facebook.
Why is Facebook a multi billion dollar company?
- Itâs not because their technology is hard to replicate. You could hire a handful of undergrads from a Computer Science school and they could make something similar to Facebook.
- Itâs not because their technology is the best in the world. There are other social media sites that have better technology and no one thinks of Facebook as âcutting edgeâ.
- Itâs not because they offer the best social media platform. Many people prefer Instagram, Snapchat, Twitter, and a variety of other social media platforms.
What makes Facebook so powerful is that billions of people are on Facebook.
- Do you want to see your nephewâs baby photos? They are on Facebook.
- Do you want to catch up with your old friend from high school? They are on Facebook.
- Do you want to join a cryptocurrency club? They are on Facebook.
Everyone is already on Facebook and this is why everyone continues to use it, join it and develop itâs business. This is the magic of network effect.
Bitcoin and Network Effect
Bitcoin is the dominant cryptocurrency largely because of itâs network effect. Bitcoin has the most users, developers, merchants, and institutional investors. This is one of the reasons why Bitcoin is the most expensive cryptocurrency and has the highest market cap (the other reason is itâs low supply). When someone new enters cryptocurrency the first coin they buy is Bitcoin and sometimes itâs the only coin.
This is also why crypto holders want more people to join the crypto movement. Itâs not because itâs a pyramid scheme; itâs because more people equals a more powerful network effect. And a powerful network effect is good for everyone.
If you are interested in learning more about Bitcoin and other cryptocurrencies you should check out the OKEx Academy. The OKEx Academy has everything from introductions to cryptocurrency to updates on the latest cryptocurrency news. If you are new to cryptocurrency or just want to brush up on a few concepts check it out today.
The Power of Network Effect was originally published in OKEx Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.