The most used applications on the internet today as network applications,

For example, Facebook, Instagram to connect with people close to us and share pictures with them, its a social platform connecting people.

take another example of Uber, it is a social platform which connects riders and drivers. Craigslist, Amazon connects sellers and buyers. YouTube lets to share your video content with others. Emails, WhatsApp, etc. lets you have a quick chat with your family and friends.

All of the internet you see is some form of a network, a network of people who want to sell services, connect with others, share content, chat etc.

Each of these networks started with humble beginnings , most of these platforms first had to attract users so that that the network effects can kick off.

A network begins to become more valuable as more participants join the network and participate in the growing of the network. It is said that the value of a network is equal to the square of the number of people on the network.

Imagine a single person having a phone, the phone will not be of much value.. whom are you going to call?

It is evident that the network participants add value to the network and help the network grow, but are they getting the rewards for it? are network participants getting enough value from the corporate networks.

Corporate networks first try to attract the users and after the network effects kick-in, they start extracting the value of the network, the value of the networks accrues to the few people who own the company owing the network.

YouTube first started as a video content sharing platform. It attracted the users by making video content sharing free. hosting videos and sharing them was an expensive task back then. It attracted users by making it free. Now youtube takes 45% of the revenue and share the 55% with the content creators. This is the most generous in the industry.

Similarly there is an attract extract cycle for other corporate networks ,

The early adopters of the network did not get any benefit in kickstarting the networks.

Think about the Apple store and the Android Play store. It is a a network of developers who create apps, games and users who download these apps and make purchases. The industry standard is taking 30% of the money earned from in app payments.

Due to this reason , we are not able to pay directly on the app for the services like Netflix , Spotify , any other subscription that you like.

The extract cycle does not stop there, the corporate network try to extract even more value, for eg. If you want to grow within Youtube you might have to start advertising so you can grow , there have been instances where after a certain number of followers the algorithm does not promote them to more audience, to reach the audience and keep growing , creators have to run adds to promote their content.

Amazon is a marketplace, but there have been instances where , Amazon comes up with an underpriced version of the highest rated product. on top of that if a seller wants to show their product on top , they have a pay Amazon to promote their products. As famously said by founder of Amazon , "Your margin is my opportunity".

The networks effects lock in their users and even if the rules of the platform is not favorable to you, you have two options , quit the platform and lose on the network you build or compromise.

I compared this to the take rates of some of the blockchain networks , the most famous blockchain network Ethereum , has a take rate of around 0.05% and similar numbers for a majority of blockchain networks.

How do you find the take rate of a blockchain network ? The way I used is find the total gas fees paid divided by the values transferred over the network. there can be some other way as well, but i used this methods, a quick google search will give these numbers.

The network participants in most of the blockchain platforms get tokens , which they own, which incentivizes them to contribute to the network in a meaningful way , the network participants get to take the upside of the network which they helped create.

There are also tokens which governs who can change the rules of the blockchain networks , usually called governance tokens. the owners of the governance tokens decide if they want change the rules of the networks. its not some CEO in a board room, deciding on the fate of the network participants.

The corporate network take rates eventually hits the users either in the form of higher costs or inconvenience. I believe blockchain networks can solve these issues, but let me know your thoughts on this.

Thanks all for reading :)