As a tiny minnow in a vast ecosystem, it’s a useful exercise to spend time studying what the grand whales of the sea are doing. One of the largest players in the crypto ecosystem (at least in the United States) is Coinbase. What Coinbase does sends ripples across our growing ocean (one only needs to look as far as this week’s Ethereum flash crash to see the effects).
This medium article, written by the co-founder and CEO, lays out a four-step strategy to build up their company. What does it hinge on? Network effects.
https://medium.com/@barmstrong/what-is-coinbases-strategy-1c5413f6e09d
“An open financial system is difficult to get started because it requires a network effect.”
The problem with starting a brand new currency is getting other people to accept it. Any medium of exchange - whether crypto or printed or minted or whatever - is only as good as the value others assign to it.
Money is one of the most bizarre things. It doesn’t really exist as anything useful until people believe in and trust it. That’s what makes Bitcoin (and the cryptocurrency ecosystem) such a powerful story. The fact that it even exists is amazing.
Brian Armstrong goes on, “our strategy is to draw new users into the digital currency space via an initial use case (investment, or currency speculation) that does not require a network effect. This will create the critical mass of people required for the network effect to develop.”
What makes this network effect wonderfully powerful is that the network Coinbase is contributing to is an open network, and not a closed ecosystem. The network that Coinbase is growing is our network. Every day that Coinbase, or anyone in crypto, succeeds, the ecosystem is a little bit stronger.