When a product or network becomes more valuable as more people use it.
Network effects occur when each additional user increases the value of a network for all participants. In cryptocurrencies, more users can attract more merchants, developers, and liquidity providers, creating a positive feedback loop.
"As more merchants accept BCH, more users are incentivized to hold and spend it, which in turn encourages more merchants to accept it."
Types include direct (more peers = more value), two-sided (users and merchants), and data/standards effects (shared protocols and tooling). Strong developer ecosystems and wallet compatibility reinforce these effects.
"Standardized address formats and wallet compatibility make it easier for new users to join, amplifying BCH’s network effects."
Proxies include active addresses, transaction volume, merchant count, and liquidity. Market cap can reflect both adoption and speculation; pairing it with usage metrics gives clearer insight.
"A rising market cap with stagnant transaction volume may indicate speculation more than real network effects."
All terms and definitions may update as the Cryptionary improves.