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Metcalfes Law

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updated 08 Feb 2023

Metcalfe's Law is a principle in networking that states that the value of a network is proportional to the square of the number of nodes (users, devices, etc.) in the network. In other words, the value of a network grows exponentially as more people or devices join it.

The law was named after Robert Metcalfe, who invented the Ethernet computer networking standard and is widely credited with developing the concept of the network effect. According to Metcalfe's Law, the value of a network to its users increases as more people or devices join the network because the number of possible connections between them grows exponentially.

For example, consider a social network with just two users. The value of the network to each user is limited to the value of connecting with just one other person. If a third person joins the network, the value of the network to each of the three users increases significantly because each user now has the potential to connect with two others. The more users that join, the more valuable the network becomes to each individual user.

Metcalfe's Law is often cited as an explanation for the rapid growth and success of many digital networks, including the Internet, social networks, and online marketplaces. It is also used as a tool for evaluating the potential value of new networks and for making investment decisions in technology startups.

Resources

Metcalfes Law Explained