Network effects: ethereum
Modelling evolving decentralization through network valuation
Author’s Note:
This writing is part two of two: the first piece serving as a foundational walkthrough on network effects while focusing on Bitcoin. If you have technical or mathematical questions about this writing, I would highly recommend that you start with the piece attached below.
When discussing the network effects of bitcoin in the previous piece, I reasoned through data that as the Bitcoin network has evolved from a payment system into a store-of-value network, it is justifiable to consider all bitcoin holders as users rather than only those actively transacting on the network. Although some prominent figures argue that ether may become a better store-of-value than bitcoin, its long-term value proposition still hinges on active usage, and thus we should constrain our analysis to active addresses rather than non-zero addresses1.