This post is a spiritual successor to The Smart Contract Network Effect Fallacy.

Bitcoin has a network effect. Many crypto evangelists assert that the network effect of Bitcoin is so strong that hyperbitcoinization is inevitable.

But this is not quite right. Bitcoin’s network effect as digital gold is not what many assert that it is. Network effects are nuanced, and generally misunderstood.

In this essay, I’ll explore the network effects of Bitcoin as digital gold, and as digital cash. I’ll also explore other competitive moats that are not network effects.

For general background, I recommend this Medium post, this a16z slideshow, this Techstars post, and this post on data network effects. For longer-form reading on network effects and technology platforms more generally, I recommend Platform Scale and books by the author Sangeet Choudary. …

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Cryptocurrencies and blockchains are not yet mature. Like computers from the 80s and 90s, although they technically work, they’re fragile in practice. As such, most of their users are technical, and tend to focus on technical challenges rather than go-to-market challenges.

The technical people building these systems tend to believe, either wholly or at least partially, “if you build it, they will come.” Against all odds, this actually worked for Bitcoin after its creator left the project without providing any future guidance in 2011.

Many think this was also true for Ethereum, but this patently false. Despite being worth hundreds of million of dollars, Vitalik Buterin, the leader of Ethereum, basically lives in an airplane, flying around the world evangelizing, even though he obviously prefers deep research over public speaking. He works insane hours while perpetually fighting jet lag. While building what would be the first release of Ethereum, he somehow found the time and energy to learn Chinese in an effort to bring Ethereum to China. Beyond Vitalik’s evangelizing, the Ethereum Foundation pours resources into grassroots community building around the world. …

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There are a few commonly cited arguments on why it makes sense to build social media platforms on top of blockchains, and how these benefits will enable upstart social media protocols to displace incumbents.

In this essay, I’ll make the case that despite the benefits of moving social media onto blockchains, it’s unlikely that this will happen, at least directly. I’ll then explore alternative options for blockchain-based social apps.

The Problem: Incumbents Are Rent-Seekers

Facebook, Google, Twitter, Reddit, and Snapchat unilaterally control their respective platforms. These companies generate billions in revenue by selling ads alongside user attention. Content creators generally don’t share in the profits from ad sales, except on YouTube and Twitch, where creators can share in profits, but only above certain thresholds, and even then YouTube and Twitch take 25–45% of ad revenues. …

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