Flywheels
Network security is ensured by network effects.
Last updated
Network security is ensured by network effects.
Last updated
According to the example above, the popular lending protocol Compound can create a positive flywheel by attracting Lenders. Lenders make funds and assets available for Borrowers to use for loans, meaning that the more Lenders come to the protocol, the more assets are available, and the more Borrowers will come to use those assets, attracted by stable interest rates. More Borrowers means more interest and returns for Lenders, attracting more Lenders to provide more assets. And so on the flywheel goes.
Using a similar logic, we can analyze several flywheel effects we expect to see in the Ally ecosystem.
When users interact with Ally, they view advertisements and generate impressions. Users and impressions attract Advertisers willing to pay to showcase their ads. This, in turn, generates advertising fees for Users, further drawing additional users to Ally. As the user base grows, Ally generates more impressions, thereby attracting more and larger Advertisers, resulting in even greater advertising revenue for users.
This flywheel is mutually beneficial for Users seeking a high-quality product and Contributors who enhance the product's functionality.
As more Users utilize Ally, they generate more impressions and advertising revenue. This means that the Ally DAO, specifically the DeveloperDAO, will have more budget for developing add-ons. This will attract developers to build on top of Ally, thereby creating more value for Users and ultimately attracting more Users to the protocol.
A positive network effect exists between Users and Affiliates associated with the MarketingDAO.
When more Users join the protocol due to advertising efforts by Affiliates, it leads to increased revenues and popularity for the protocol. This, in turn, expands the budget available to the protocol and MarketingDAO for advertising campaigns, further incentivizing additional affiliates to participate.
It's important to remember that this positive network effect is stronger when the protocol provides transparent and favorable terms to affiliates while ensuring high-quality services for users.
