Here is an article from a paper i am working on, regarding the adoption of crypto. Enjoy, like and share if you liked it :)

What Does Metcalfe's Law Mean?

Metcalfe’s Law is a concept used in computer networks and telecommunications to represent the value of a network. Metcalfe's Law states that a network's impact is the square of the number of nodes in the network. For example, if a network has 10 nodes, its inherent value is 100 (10 * 10). The end nodes can be computers, servers and/or connecting users.

History of Meltcalfe’s Law

Metcalfe’s Law was conceived by George Gilder but is attributed to Robert Metcalfe, co-inventor of Ethernet (1980). It speaks to both the growth in the number of connections as well as the value. Given that the Internet as we know it today was not around when the Law was formulated, he referred to the value of devices in general.

Over time Metcalfe’s Law was linked with the Internet's substantial growth and how it works in-line with Moore’s Law. The concept is similar to the business concept of a "network effect" in that the value of a network provides both additional value and a competitive advantage.

Metcalfe's law characterizes many of the network effects of communication technologies and networks such as the Internet, social networking and the World Wide Web.

In a working paper, Peterson linked time-value-of-money concepts to Metcalfe value using Bitcoin and Facebook as numerical examples of the proof and in 2018 applied Metcalfe's law to Bitcoin, showing that over 70% of variance in Bitcoin value was explained by applying Metcalfe's law to increases in Bitcoin network size.

Metcalfe explained that whilst the cost of the network was directly proportional to the number of cards, the value of the network was proportional to the square of the number of users. Or in other words, the value was due to the connectivity between users, enabling them to work together and achieve more than they could alone.

Linear businesses gained a competitive advantage by buying assets, controlling supply chains, and driving transactions. Digital companies gain competitive advantages through building network effects, relationships and interactions.

The network effects could be Direct or Indirect :

Direct (same-side, or symmetric) network effects happen when an increase in users directly creates more utility for all of the users, that is, a better product or service. Facebook, Tinder.

Indirect (cross-side, or asymetric) network effects happen when an increase in users indirectly create more utility for other types of users. Airbnb and Uber, where more hosts and drivers creates more utility for guests and passengers.

Network effects typically account for 70% of the value of digitally-related companies.