Here are the main unique types of defensibility ranked by strength of defensibility
1. Network Effects

2. Economies of Scale (demand side or supply side)

3. Regulation

4. Technology

5. Brand

It is so clear most people in crypto have no idea what a Network Effect is

And in all fairness, this is a point commonly missed by others outside of crypto, too. Many people conflate these as identical to their own detriment

Aggregators (of which I’m a huge fan) don’t have network effects. They have demand-side economies of scale

https://learnings.substack.com/p/most-aggregators-dont-have-network

A Network Effect is when the marginal utility of each new user of the system grows with each new user. This means U(n)>U(n-1). Metcalfe’s law is a good example of this.

https://en.wikipedia.org/wiki/Metcalfe%27s_law

In crypto, network effects emerge for Project A when two unrelated protocols B and C can better interact because they both utilize Project A. If one used Project D, which is a competitor to Project A, then they would lose the ability to interact or interact at the same degree.

Network effects are *not* demand side economies of scale. Demand side economies of scale is something closer to Netflix, who can bid more on licensing content because they have the most users over which to spread the costs of the content acquisition.

In both cases, a service becomes more attractive the the next marginal user as more people use it.

Network effects comes from *the user* bringing capability to the network (content in social media, cars in ride share, etc).

Demand side economies of scale come from *the entity* increasing utility received by the customer by offering better/same service for the same/less amount of money.

Companies or tokens that rely on demand side economies of scale can still make an enormous amount of money and have great defensibility.

But you may be making a categorical mistake if you value something on having network effects when it doesn’t.