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Negative network externalities, in the mathematical sense, are those that have a negative effect compared to normal (positive) network effects. Just as positive network externalities (network effects) cause [[positive feedback]] and [[exponential growth]], negative network externalities are also caused by positive feedback resulting in [[exponential decay]].<ref>{{Cite book|first1=Carl|last1=Shapiro|first2=Hal R.|last2=Varian|date=1999|title=Information Rules|publisher=Harvard Business School Press}}</ref> Negative network effect must not be confused with negative feedback.<ref>{{Cite book |first1=Harald |last1=Øverby |first2=Jan A. |last2=Audestad |date=2021 |title=Introduction to Digital Economics |publisher=Springer |isbn=978-3-030-78237-5}}</ref> Negative feedback is the forces that pull towards equilibrium and are responsible for stability.
{{Non sequitur|date=December 2023|post-text=(see [[Talk:Network effect#Unclear formulation in section Negative network externalities|talk]])|reason=It is not clear how this sentence fits into the rest of the section and article.|text=Besides, Negative network externalities has four characteristics, which are namely, more login retries, longer query times, longer download times and more download attempts.}}<ref>{{Cite journal|last1=Asvanund|first1=Atip|last2=Clay|first2=Karen|last3=Krishnan|first3=Ramayya|last4=Smith|first4=Michael D.|date=June 2004|title=An Empirical Analysis of Network Externalities in Peer-to-Peer Music-Sharing Networks|url=http://pubsonline.informs.org/doi/abs/10.1287/isre.1040.0020|journal=Information Systems Research|language=en|volume=15|issue=2|pages=155–174|doi=10.1287/isre.1040.0020|issn=1047-7047|access-date=2020-10-30|archive-date=2020-01-23|archive-url=https://web.archive.org/web/20200123013801/https://pubsonline.informs.org/doi/abs/10.1287/isre.1040.0020|url-status=live|url-access=subscription|doi-access=free}}</ref> Therefore, congestion occurs when the efficiency of a network decreases as more people use it, and this reduces the value to people already using it. [[Traffic congestion]] that overloads the freeway and [[network congestion]] on connections with limited bandwidth both display negative network externalities.<ref>{{Cite journal|last1=Zhang|first1=Mengyuan|last2=Yang|first2=Lei|last3=Gong|first3=Xiaowen|last4=He|first4=Shibo|last5=Zhang|first5=Junshan|date=August 2018|title=Wireless Service Pricing Competition Under Network Effect, Congestion Effect, and Bounded Rationality|journal=IEEE Transactions on Vehicular Technology|volume=67|issue=8|pages=7497–7507|doi=10.1109/TVT.2018.2822843|s2cid=52003270|issn=0018-9545}}</ref>
[[Braess's paradox]] suggests that adding paths through a network can have a negative effect on performance of the network.<ref>{{cite web |last1=Lin |first1=Henry |last2=Roughgarden |first2=Tim |last3=Tardos |first3=Éva |last4=Walkover |first4=Asher |title=Stronger Bounds on Braess's Paradox and the Maximum Latency of Selfish Routing |url=http://theory.stanford.edu/~tim/papers/mcbp.pdf |website=Stanford Theory |publisher=Society for Industrial and Applied Mathematics |access-date=16 September 2014 |archive-date=25 January 2015 |archive-url=https://web.archive.org/web/20150125041819/http://theory.stanford.edu/~tim/papers/mcbp.pdf |url-status=live }}</ref>
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[[Cryptocurrency|Cryptocurrencies]] such as [[Bitcoin]] and smart contract blockchains such as [[Ethereum]] also exhibit network effects.
[[Smart contract]] blockchains can produce network effects through the social network of individuals that uses a [[blockchain]] for securing its transactions. Public infrastructure networks such as [[Ethereum]] and others can facilitate entities that do not explicitly trust one another to collaborate in meaningful way, incentivizing growth in the network. However, as of 2019, such networks grow more slowly due to missing particular requirements such as [[Privacy concerns with social networking services|privacy]] and [[scalability]].<ref name=ssrn20190209>{{cite journal |title=Blockchain Valuation: Internet of Value, Digital Networks and Smart Transactions |last=Moro Visconti|first=Roberto |website=SSRN |date=9 February 2019 |doi=10.2139/ssrn.3533860 |s2cid=219348292 |access-date=26 May 2023 |url=http://dx.doi.org/10.2139/ssrn.3533860 |url-access=subscription |doi-access=free }}</ref>
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