The network effect is the idea where a product’s value increases with the number of users that use it. This is true for social media platforms, online video games and blockchains. Many products focus most of their time getting users to sign up to their platform since if they like the product, they will share it with friends, and their friends will share it with theirs etc… This is extremely important for natural and economical growth of products and is part of most teams’ strategies.
In blockchain, the network effect also takes place and has a big role and different blockchains are fighting for the market share of users to use their blockchain instead of others.
In blockchain, I believe there is a much more important precedent to the network effect, which is the builder’s effect.
The builder’s effect statement is simple: “The value of a product increases with the quality of the builders on it.”
The builder’s effect works best on blockchains for the reason that the builders are not a team employed by the blockchain, but are separate teams with separate products all building on the same infrastructure, they use the infrastructure and tools provided to then build their own products on that blockchain. In that sense, these builders are considered the “users” of the blockchain infrastructure (the product).
These builders then build their own products that the real ‘users’ would hop on to use on the blockchain. This is why the blockchain, to increase its efforts on increasing its value, should focus on the first degree of users (the builders) rather than the second degree that other platforms focus on.
Great builders will build great products that will attract more users. This is true for 2 reasons:
Great builders have a better vision, are more determined to build it with a better use case.
Great builders are popular and they have a tribe of users that will use their products.
So I believe that blockchains should focus less on attracting users and more on attracting new developers into their space and have all the infrastructure and documentation ready to support them.
When a new developer (in blockchain, could have 10 years of Web-2 experience) decides to risk it all to start a career in blockchain, they are looking for a good space with precedent so they can feel safe in that move.
This is where blockchains should put their focus. Ethereum is the best blockchain by TVL and users for a reason, this is where all new developers start their journey, and this is where the smartest developers decide to build.
I believe that this is changing and the fight for builders will intensify soon.
Are you part of a blockchain interested in strategies and building tooling and content required to get more high quality developers? Athena Consulting can help. Send me a message or visit our website now.