Ethereum Has a Stronger Network Effect Than Bitcoin

An in-depth analysis from IntoTheBlock took a look at the network effects of Bitcoin and Ethereum and found that it was much easier to calculate and track on Ethereum.

Ethereum’s role as the facilitator of decentralized finance has the potential to amplify its network effects and attract more users, while Bitcoin’s sparsely connected nature meant it has a much lower network effect value.

Looking at Cryptocurrencies Through Network Value

While cryptocurrencies seem to have been analyzed through every metric imaginable, network effect isn’t something frequently applied to digital assets.

The analysis applied Metcalfe’s Law, which states that the value of a network is proportional to the square of the number of its active users and is used to analyze modern tech networks such as Facebook and WeChat. 

When applied to Bitcoin, Metcalfe’s Law came to an interesting conclusion. According to a paper from the Swiss Finance Institute, instead of being proportional to the squared…