The Valuation of Network Effects in Cryptocurrencies and Blockchains

Network effects are paramount in cryptocurrencies and blockchains, just like in telephone and social networks: the higher the number of users, the more valuable the networks are. Blockchain networks follow Metcalfe’s law and their variants (Reed, Sarnoff, Beckstrom, Odlyzko, Gompertz, …): thus, the first metric to conquer is to reach the higher possible number of users.

Several recently published studies model the interrelationship between network effects and price:

And according to the previous valuation models based on network effects, what would be the extrapolated market capitalization of an ID-enabled cryptocurrency?

Note that the previous chart only displays the extrapolated market capitalization for 1 billion users according to the Wheatley et al. model (constant green line, top of the chart): the extrapolation is four orders of magnitude higher than the current market capitalization of Bitcoin.

In our blockchain, you can send to and receive from more than the 1 billion users of Electronic Passports: our blockchain also includes National Identity Cards such as the ones from the European Union (almost 500MM).

DISCLAIMER: This is not investment advice. In addition to network effects, there are other relevant valuation KPIs and metrics: the only goal of this blog post is to highlight the importance of network effects.