Originally published on Twitter on October 20, 2021

NFT collections would do well to learn from Legos. Here’s how. 

Network effects

Legos have network effects. Each new user who buys them and each new collection purchased adds value to existing owners because they’re all interoperable and composable. 

Jørgen Vig Knudstorp, co-chairman of the LEGO Brand Group, spoke to the Harvard Business Review about this. “If a child already has a LEGO set, getting another LEGO product is more valuable than just the incremental purchase—it extends his or her platform for play in an exponential way. And it’s infectious: The more kids who get the LEGO habit, the more others want to as well, and they can mix and match their LEGO collections”

In addition, there’s also same-side network effects between multiple users: kids don’t want to play with, say, Mega Blocks if all their friends have Legos.

Importantly, the network effects and added utility are even true without additional users: even single player mode gets more valuable as you buy more products and have more combinations to access. 

We often talk about NFTs as “media legos,” but today the network effects of NFT collections mainly take the form of community and prices going up, rather than of actual utility and functionality increasing as new users join. 

If you need it, here’s a guide that breaks down 16 ways to measure network effects.

Other learnings

New generations of Lego players also get bootstrapped via hand-me-downs, making it easier to be inducted into the community.

There are also different price tiers of Legos, so price discrimination can happen between superfans and casual fans, but importantly there are low barriers to entry for newcomers. 

Today the most prestigious NFT collections are inaccessible to new users as a result of their success, and this form of bootstrapping doesn’t exist in a systematic way. NFT collections can take note from how Legos achieve high network effects, as well as how they garner new users and reduce friction. 

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Originally published on Twitter on October 20, 2021