Open Money is network money

The network effect is one of the ways that Open Money systems grow

One of the most interesting facets of Open Money is the way that it grows.

Network effects are powerful, and they are also intuitively easy to understand.

Our current money system is closed, and it doesn’t really matter if more people join your bank or leave your bank to go to another bank because it doesn’t materially change your experience.

But consider payment apps. If you are trying to send someone money, you first have to make sure they have the app you want to use—Venmo, PayPal, CashApp, WeChat, or another. If the person you are trying to send money to has the same app, it works seamlessly, making it easy to complete the transaction.

If someone wants to send you money, you are likely willing to set up a new app because you want to receive the funds. That’s a network effect—the network gets bigger with each person that joins, primarily because it becomes more useful.

Open Money systems are closer to the network effects of payment apps. They get more useful the more people that use them — and even more interesting, the more people that build on them.

But what makes Open Money different from traditional payment apps is that the more people who join an Open Money network, the more secure it becomes. This not only increases the value from a usefulness perspective but also enhances its overall utility.

Each additional participant adds to the resilience of the network. Unlike centralized systems where an attack can focus on a single point of failure, Open Money systems distribute trust and verification across a wide range of nodes. This means that the system becomes harder to attack, manipulate, or control by a single entity. More users mean more nodes, more validation, and ultimately more decentralization.

This resilience creates a reinforcing feedback loop. As the network becomes more secure, it becomes more attractive to new users who want to participate in a system they can trust. More users lead to more utility, and more utility leads to even greater adoption. This virtuous cycle accelerates the growth of Open Money systems, making it a self-reinforcing phenomenon.

Another key advantage of network effects in Open Money is composability. Unlike closed financial systems, Open Money is an open protocol—anyone can build on top of it. This allows for innovation to flourish as developers create new financial tools, applications, and services that interoperate seamlessly with the core infrastructure. The more developers who build on Open Money, the richer the ecosystem becomes, attracting even more participants.

In contrast to legacy financial institutions, which are slow to innovate and resistant to change, Open Money grows dynamically, adapting to new needs and possibilities as they emerge. This openness and flexibility mean that its network effects are not just about user numbers but about the continuous expansion of possibilities.

Ultimately, the power of network effects within Open Money systems goes beyond mere growth; it fosters resilience, innovation, and inclusion. As the network scales, it offers a viable alternative to traditional financial systems — one that is borderless, permissionless, and open to all.

This post is part of the Open Money project, an ongoing series that forms the basis of a longer work. Subscribe to get a weekly update as it unfolds.

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