Just watch a episode of Numbers which gave me a thought about this. How does social network like Facebook and other know who to target for maximum onboardning?
In 2004, a scrappy startup called Facebook launched, growing to over 2.9 billion monthly active users by 2022, largely due to network effects.
The phenomenon where a product becomes more valuable as more people use it. Meanwhile, Web3, the decentralized internet powered by blockchain, boasts a $2 trillion market cap in 2025 but struggles to achieve mainstream adoption. Despite its technological promise, Web3’s complex user experiences and fragmented ecosystems hinder its growth. To unlock its potential, Web3 must adopt Web2’s proven strategies for building network effects, blending decentralization with user-centric growth tactics to rival the internet giants of today.
What Are Network Effects?
Network effects occur when a platform’s value grows exponentially with its user base. They come in two flavors:
- direct (e.g., WhatsApp becomes more useful as more friends join)
- indirect (e.g., eBay attracts more buyers as more sellers list products, and vice versa).
Web2 giants like Twitter/X, Uber, and Amazon mastered these dynamics to dominate their markets. For example, Twitter/X’s simple interface and viral features like retweets created a self-reinforcing loop, growing its user base to over 500 million monthly active users.
Network effects create winner-takes-all dynamics, making platforms sticky and hard to displace. Web3, however, has largely failed to harness these forces, focusing on technical innovation over user growth. To compete, Web3 must learn from Web2’s playbook while staying true to its decentralized roots.
Web3’s Adoption Challenges
Web3’s promise to deliver decentralized apps (dApps), user-owned data, and trustless systems. This hasn’t translated into mass adoption yet. Key barriers include:
Complex User Experience:
Setting up a crypto wallet, managing private keys, and paying gas fees deter non-technical users. Compare this to Google’s one-click sign-in.Fragmented Ecosystems:
Competing blockchains like Ethereum, Solana, and Polygon lack interoperability, fragmenting users and liquidity.Speculative Focus:
Many Web3 projects prioritize tokenomics over building sticky platforms, alienating mainstream audiences.
For instance, decentralized social platforms like Mastodon or Lens Protocol struggle to match Twitter/X’s scale, with user counts in the low millions compared to X’s hundreds of millions. Web3’s total market cap, while impressive at $2 trillion, pales against Apple’s $3.5 trillion valuation, underscoring the gap in mainstream impact.
Web2 Tactics Web3 Should Adopt
To ignite network effects, Web3 projects can borrow five proven Web2 strategies, adapted for decentralization:
1. Simplify User Onboarding
Web2 platforms like Netflix thrive because signing up is effortless.
Web3’s clunky UX—think Metamask’s 12-word seed phrases—repels newcomers. Solutions like social logins for wallets (e.g., Web3Auth) or gasless transactions via layer-2 networks (e.g., Arbitrum) can make dApps as intuitive as Web2 apps. For example, the game Axie Infinity simplified onboarding with free starter NFTs, driving millions of users during its 2021 peak.
2. Create Viral Growth Loops
Dropbox grew from 100,000 to 4 million users in 15 months by offering free storage for referrals. Web3 can replicate this with token-based incentives. Uniswap, for instance, rewarded liquidity providers with UNI tokens, creating a flywheel where more traders attracted more liquidity, growing its total value locked to $7 billion by 2025. Projects like Stepn, a move-to-earn app, used NFT rewards to drive viral adoption, though sustainability remains a challenge.
3. Build Cross-Platform Interoperability
Web2 thrives on APIs that let apps integrate seamlessly—think Google Maps powering Uber’s navigation. Web3’s siloed blockchains hinder network effects by locking users into specific ecosystems. Protocols like Polkadot and Cosmos aim to solve this by enabling cross-chain data and asset transfers. A user swapping tokens on Ethereum’s Uniswap should seamlessly interact with Solana’s Serum, creating a unified Web3 experience that amplifies network effects.
4. Leverage Community-Driven Marketing
Reddit’s subreddits and Twitter/X’s hashtag-driven conversations show how communities drive engagement. Web3’s decentralized autonomous organizations (DAOs) can replicate this. Friends With Benefits (FWB), a social DAO, grew to thousands of members by rewarding community contributions with tokens, fostering organic growth. Web3 projects should empower users to create content, host events, and spread the word, turning users into evangelists.
5. Prioritize Scalability and Speed
Amazon’s fast, reliable platform keeps users coming back. Web3’s high gas fees and slow transactions (e.g., Ethereum’s 15-second block times) frustrate users. Layer-2 solutions like Optimism and zkSync reduce costs and speed up transactions, making dApps competitive with Web2. For example, Polygon’s low-cost transactions helped it host over 1,000 dApps by 2025, attracting millions of users.
Case Studies: Successes and Missed Opportunities
Uniswap: A Network Effect Win
Uniswap, a decentralized exchange, leveraged indirect network effects by incentivizing liquidity providers with fees and tokens. As more users traded, liquidity grew, attracting more traders—a virtuous cycle. By 2025, Uniswap’s daily trading volume exceeds $1 billion, proving Web3 can scale with the right incentives.
OpenSea: A Cautionary Tale
OpenSea dominated NFT marketplaces in 2021 but lost share to Blur by 2023. Its failure to reward loyal users with tokens or build strong community ties weakened its network effects. Blur’s gamified incentives and creator royalties stole market share, showing how Web2-style user engagement can make or break Web3 platforms.
Twitter/X: The Web2 Benchmark
Twitter/X’s simplicity—140-character tweets, retweets, and hashtags—created a viral platform where each user’s activity amplified the network’s value. Web3 social platforms like FarCaster could emulate this by making posting and sharing as frictionless as tweeting, paired with token rewards for engagement.
Risks of Over-Adopting Web2 Tactics
While Web2 strategies can supercharge Web3, there are risks. Centralizing platforms to mimic Web2 giants like Facebook could betray Web3’s decentralized ethos, eroding user trust. Over-relying on token incentives, as seen in 2021’s DeFi bubble, can fuel speculation and crashes—Terra Luna’s collapse cost investors $40 billion. Web3 must balance growth with principles like user sovereignty and transparency, ensuring incentives align with long-term value creation.
The Path Forward
Web3 stands at a crossroads. Its decentralized vision could reshape the internet, but without mass adoption, it risks remaining a niche technology. By adopting Web2’s network effect strategies—simplified UX, viral loops, interoperability, community marketing, and scalability—Web3 can bridge the gap to mainstream users. Imagine a decentralized social platform as intuitive as Twitter/X, a marketplace as seamless as Amazon, or a financial system as accessible as PayPal, all while preserving user ownership.
I want Inleo to be one of the projects that breaks through the noise and creates some momentum. But today it’s really hard to stand out. Maybe the Web2 playbook doesn’t work anymore, but what Web3 plays have we seen that worked well? Use those, adapt, try new stuff.
