Metcalfes Law Vs Crypto Currency
Metcalfes Law states that the value of a community on a network grows when the square of the networks users increases.
Robert Metcalfe is the co-inventor of our ever popular Ethernet Protocol the we use. TCP/IP (Transmission Control Protocol / Internet Protocol )
Metcalfes law is also used in the financial world to describe trends in the markets when certain things happen.
The particular thing I’m talking about is Crypto Currencies, like Bitcoin and Ethereum. The rise in popularity of this new financial industry is still in it’s infancy stages and is a rare time in our digital age for such opportunities. Disruptive changes like crypto currencies don’t happen often. The last world changing disruptive technology was the internet itself.
A basic example is one telephone is useless. Two telephones now have a small value because now two people can communicate. If ten people have telephones, there are ninety communication possibilities. ( I read that somewhere, I don’t know exponential math very well )
While I believe that getting in the crypto game right now and certainly before the end of 2018 is a good move on anybody’s part, don’t take Metcalfes Law to heart.
Even Robert Metcalfe himself agrees that there are some flaws and limitations to his accredited law. Not everybody or everything in a network community are of equal value, and there is also the saturation point of a community that can peak and eventually fall, or burst. Maintaining a high value network or community will take some struggles and growing pains. If a company can get past that point and create critical mass then they will probably be around for a long time.
You can see how Facebook, Google, Amazon, and other large entities have been compared with Metcalfes Law as they gain value in their user base. Not all business entities were able to get past the point of maintain a high value network and are long gone from the dot com boom of the nineties.
In the case of Blockchains like Bitcoin, Ethereum, and all the other crypto currencies, Metcalfes Law can be considered, as more users are coming online to the blockchain and making transactions. This will only increase the value of the blockchains in the years to come.
While the gold rush is on, there is going to be some serious cash being made. A lot of that cash won’t be made by the gold diggers, it will be made by those that provide the tools and services, the picks and shovels for the people claiming their piece of the crypto pie!