Cryptocurrency Competition and Market Concentration in the Presence of Network Effects


  • Konstantinos Stylianou Centre for Business Law and Practice, University of Leeds School of Law
  • Leonhard Spiegelberg Brown University
  • Maurice Herlihy Brown University
  • Nic Carter Coin Metrics



network effects, metcalfe, metcalfe's law, monopolization, concentration


When network products and services become more valuable as their userbase grows (network effects), this tendency can become a major determinant of how they compete with each other in the market and how the market is structured. Network effects are traditionally linked to high market concentration, early-mover advantages, and entry barriers, and in the market they have also been used as a valuation tool. The recent resurgence of Bitcoin has been partly attributed to network effects, too. We study the existence of network effects in six cryptocurrencies from their inception to obtain a high-level overview of the application of network effects in the cryptocurrency market. We show that, contrary to the usual implications of network effects, they do not serve to concentrate the cryptocurrency market, nor do they accord any one cryptocurrency a definitive competitive advantage, nor are they consistent enough to be reliable valuation tools. Therefore, while network effects do occur in cryptocurrency networks, they are not (yet) a defining feature of the cryptocurrency market
as a whole.

Author Biography

Konstantinos Stylianou, Centre for Business Law and Practice, University of Leeds School of Law

Konstantinos is an Associate Professor in Competition Law and Regulation, and the Deputy Director of the Centre for Business Law and Practice at the University of Leeds School of Law. His areas of focus are the law and policy of digital markets, blockchain and communications networks. He has worked on numerous projects funded by the European Union, the Swedish Competition Authority, Google, Facebook, Thailand’s National Broadcasting and Telecommunications Commission and others. He holds an S.J.D. from the University of Pennsylvania, where he studied as an Onassis Scholar, an LL.M. from Harvard University, where he studied as a Fulbright Scholar, and an LL.M. and LL.B. from Aristotle University. He has also been Visiting Scientist at Brown University Computer Science Department and a Visiting Scholar at Oxford University and TU Delft.


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How to Cite

Stylianou, K., Spiegelberg, L. ., Herlihy, M. ., & Carter, N. (2021). Cryptocurrency Competition and Market Concentration in the Presence of Network Effects. Ledger, 6.



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