Recently people are talking a lot about network effect. Metcalfe states "the effect of a network is proportional to the square of the number of connected users of the system." It means if we increase number of users of a network, we can increase much more value for the ecosystem. In the other hand, we also know that despite some networks has a lot of users; but with many inactive users, the network cannot bring enough value to its users and it gradually collapse.

So, how can we apply it to an ecosystem of a cryptocurrency network and make it more value to its users? Let's look at the anatomy of the network effect.


Diagram of a healthy Network Effect 

In this diagram, to create a healthy network effect, we don't just only need number users, but we also need user interactions, and select appropriate users for the network.

For a growing cryptocurrency, it need not only to increase number of users, but it also need to keep its users frequently interacting with other users.

In addition, its users also need to contribute value to the system. For example miners secure the network, developers improve system software, traders sell and buy and keep the currency in its flow.

Beyond that, a cryptocurrency does not exist alone. It has to compete with other cryptocurrencies and the demand for it isn't stable. Therefore, a healthy network not only requires large number of users, but also need large number of faithful users. The faithful users keep interacting with each others, keep referring the cryptocurrency to new users, and continue hold it for longer time.

More over, a healthy system needs many of tech savvy users, because this kind of users can better understanding the complexity of the system, and they can explain to new users.

To keep the ecosystem of a cryptocurrency healthy, we need to cultivate three most important pillars above.

In the next article, I will show you the importance of miners in the ecosystem of a cryptocurrency.