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A Summary of

Bitcoin network effects

by
Elad Gil
Elad Gil
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Bitcoin is considered technologically outdated compared to other cryptos, yet its network effects will maintain its status as the primary value store in the short term.

What Bitcoin's Network Effects Consist of

  1. The largest user base adoption and institutional investors.
  2. Bitcoin is listed on all major exchanges, which creates large-scale market liquidity.
  3. The first cryptocurrency to have derivatives, custody solutions, and vaults.
  4. Mainstream media has made Bitcoin synonymous with crypto.

Is Bitcoin's Slow Change A Feature or a Bug?

  • Bug - new forms of innovation will cause migration off of Bitcoin to another cryptocurrency.
  • Feature - lack of innovation leads to greater stability, which is good for value storage.

How Bitcoin Could Fail

  1. Network degradation due to bad software performance or fees.
  2. Attacks via internal civil war or external government action.
  3. Dilution of what Bitcoin means as more forks are created.
  4. Mining power centralization - e.g., A state taking control of Bitcoin's network.
  5. The unknowns.

What Could Replace Bitcoin?

  1. A derivative of Bitcoin - most likely.
  2. Ethereum - second largest market cap.
  3. Privacy tokens - additional features for anonymity.
  4. Stable coin - ensures inflation-adjusted stability.
  5. Parachain - allows for cross-chain transactions.
  6. Something that doesn't exist yet.
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