Trace Mayer's 7 Bitcoin Network Effects
If you've seen any of his interviews on youtube, you know that Trace Mayer (@TraceMayer) is a very smart guy and a big proponent of Bitcoin. I totally respect this guy's opinion. If you're familiar with him, you probably also know that he talks about Bitcoin having 7 different and inter-related Network Effects.
Before we get into the Network Effects he talks about, lets first clarify what a network effect is.
Investopedia says, "The network effect is a phenomenon wherein increased numbers of people or participants improve the value of a good or service. Examples are Facebook, Ebay, the fax machine, telephone. If three people use it, it's not very useful. If 30 million people use it, it is extremely useful.
Network effects are so powerful, they are one of the key factors that Venture Capitalists look for in a new technology. Trace uses the example of Ebay.
When it first started, Ebay had one network effect. As an auction site, the more buyers and sellers there are, the more valuable the auction is. Then they merged with Paypal, and acquired a second network effect of simple online payments.
With just these 2 network effects, Ebay was unstoppable. Companies spent millions of dollars trying to take it down, to no avail. These 2 network effects were so powerful, Ebay proved resilient against very powerful opposition and attacks.
Again. Trace Mayer contends that Bitcoin has Seven (yes, Seven!) network effects working for it. They are inter-related and some are necessary for others to take effect. As we shall see, we are well on the way to all of them becoming a reality.
Trace Mayer's 7 Bitcoin Network Effects
Speculators - Speculators are any early user of bitcoin. They can use it in any way, including hodling, spending, acquiring, etc. We are still in the beginning phases. Worldwide use has grown incredibly over the past few years and we still have a long way to go.
Merchant Adoption - Merchants will adopt it because Speculators have it, and it's another way to get paid. We are seeing this more in 2018, although I would say it has not yet gained mainstream traction yet. We are close. Maybe 2019 will be the year that it becomes commonplace for merchants to accept it.
Consumer Adoption - Consumers will start to use it more because Merchants accept it. Again, we have not yet seen this take hold on any kind of scale, but it is inevitable.
Security - As adoption becomes more widespread, the price increases, making it more lucrative to mine. As more miners become involved in mining bitcoin, the network becomes more secure. Bitcoin is already the most secure network computer in the world. Even now, at this early stage of the game, bitcoin is so secure, a concerted effort by nation states and banks cannot take out bitcoin.
Developers - As the network becomes more secure, the best developers in the world naturally want to work on the most secure blockchain in the world. Right now, bitcoin has over 400 of the world's smartest people working on bitcoin. Unless they are tied down with other projects (like Elon Musk for example), the smartest people in the world want to be involved with Bitcoin. Not cryptocurrency, not altcoins. Bitcoin.
Financialization - This refers to "Big Money" financial institutions getting involved with bitcoin. This began around mid December of 2017 and now, mid 2018, we are seeing this further take hold. Recent announcements of Fidelity, Goldman Sachs and many others getting involved have recently made headlines. There's even talk of a strong possibility that a Bitcoin ETF will finally be approved.
World Reserve Currency - Ah, the Ultimate Adoption. Although it doesn't seem like it today, there is a very strong possibility, I would go so far as to call it an inevitability, that bitcoin will become the world reserve currency. Yes, replacing the Almighty USD. When imports and exports are traded with bitcoin, we have truly reached the big time. This goes far beyond Financialization. Think about oil, commodities and goods being traded between nations with bitcoin.
Now consider that there will only ever be 21 million bitcoin. That's it. That's the maximum amount of bitcoin there will ever be. In fact, there will be less usable bitcoin than that, due to lost private keys and other reasons.
That means bitcoin will become extremely valuable. Think about it, form your own opinions and take appropriate action.
Happy Hodling!