10 lines
816 B
Markdown
10 lines
816 B
Markdown
# Network Effect
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A network effect is a property of a technical or financial system in which the utility of the system is proportional to the number of participants using it.
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A [currency's](currency.md) efficacy as [money](money.md) is in-part generated by its network effect giving rise to its widespread acceptance. It's efficacy as money is also linked to its price stability.
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A payment network arises out of network effects of collection of interconnected [banks](bank.md) which operate in conjunction a [central bank](central-banks.md) to do clearing and issue a [currency](currency.md). This is an example of a centralized hub-and-spoke model which forms the basis of all modern financial systems.
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See also [decentralization](decentralization.md) and [recentralization](recentralization.md).
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## References |