I’ve written about network effects in my guide to marketing. Cryptocurrency certainly has network effects built-in, they are better if more people use them. Could you imagine a new form of paper money that only had one user? What good would it be? Convincing others to join is part of a currency.
This brings me to a question, why have cryptocurrencies seemingly stalled out?
One thought is that they’ve reached everyone, but I don’t own any. So, that’s not the case.
Another thought is there is some resistance to the story. For the fax machine, which exists in every company I’ve ever worked at, the story is clear, “If I have one, and you have one, I can send a document to you in seconds.”
When trying to explain cryptocurrency, the story isn’t clear. I’ve heard several different stories.
Let’s compare the definitions of the fax machine with cryptocurrency both from wikipedia.
A fax is the telephonic transmission of scanned printed material.
That seems pretty straight-forward. I’m sending you a document over the phone.
Cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies use decentralized control as opposed to centralized digital currency and central banking systems.
That’s a mouthful. It’s not easy for someone to decipher that value of cryptocurrency, and people don’t buy what they don’t understand.
The people I know who have bought crypto have done it because of the following stories:
“If you find others who use crypto, you can travel the world and not lose money on the exchange rate.”
“It’s exploding in value, and now is the time to get in on it.”
The second line is more popular than the 1st and that’s the problem. The fax machine became popular because people used it what it was meant for and saw value, not because people saw that they could make money in Xerox stock. Cryptocurrency is growing in value far more by people investing in it and holding on to it, far more than people exchanging their dollars for a more global currency they can use, and that’s the problem. How many stores around the world accept multiple currencies? Not very many.
That’s the uphill battle cryptocurrency faces. Is any store going to stop accepting dollars and instead accept crypto? And there isn’t one, there are many dozen different coins. Unless they all unite, nothing is likely to happen. These are like company store money, people don’t want to invest in currency that limits where it can be spent.
If cryptocurrency technology is to see it’s potential, it has to start being utilized as intended, not as an investment vehicle. It also has to unite all cryptocurrencies together and form some sort of global regulation that stops the formation of new cryptocurrencies.
That’s a tough road.