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The Roundtable: How the Network Effect Explains the Bitcoin Boom

As user bases increase, cryptocurrencies can experience non-linear growth.

Bill Barhydt and Mark Lopresti joined Roundtable at the BattleFin conference in Miami to discuss investment, value, and regulation in the cryptocurrency market. In this segment, they highlight the importance of network effects in understanding sudden rises in value. 

Many onlookers have been perplexed by Bitcoin's exponential growth over the last decade, doubting the reliability of a currency whose value increased so quickly. Barhydt explains that the key to its growth lies in the network effect: the principle that a product's value grows along with its user base.

"The exponential growth in adoption is why we're getting this this 10-year run up in price. It's still the best performing asset class of the last 11 years, no doubt. There's a reason for it. It's the number of users," he explains.

He notes that the phenomenon is counter-intuitive, perhaps contributing to skeptics' suspicion about Bitcoin's reliability.

"Network effects basically are the equivalent of compounded interest," he says. 

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"Human beings struggle with that. We like to think linearly. Exponential growth is you take one step, then you take two, and by the tenth time you're doing that, you're actually taking a million steps. That's very difficult to get your brain around."

Watch the full discussion below:

Roundtable Guests:

Bill Barhydt, CEO, Abra

Marc Lopresti, Co-founder, BattleFin