Many network effect businesses require users to create a profile that's visible to other nodes in the network. Networks with profiles tied to a node's real identity, like your real personal name or real company name, are typically more effective at building network effects than networks with pseudonymous profiles (e.g. user-generated handles like "Tiger123").

It's not a coincidence that the three largest and most successful social networks in the Western World - LinkedIn, Facebook, and Twitter - are also the first that successfully offered real identity profiles at scale (although Twitter does allow the use of pseudonymous handles, the identities people use are usually tied to their real-world identity, e.g. "@realDonaldTrump"). All the hundreds of social networks that launched before real names became acceptable eventually died.

Real Identity is also critical in two-sided marketplace and platform network effect businesses where trust and reputation facilitate the liquidity of transactions.

One caveat: there are some applications, in crypto or government spy work, where anonymity is a necessary feature of the network. Typically, however, such networks collapse in short order for three reasons: a) when the anonymity of the network breached and trust in the system ends, b) when what is being transferred between nodes becomes too low quality as anonymous free riders drag the network down, and 3) as the anonymous network becomes unacceptable to the rest of the world and authorities of various kinds (such as governments) step in.

And let's be clear, with Telegram, for instance, while users' messages are encrypted, they use it because it allows them to connect to real identities, not anonymous people. Privacy is different from anonymity.

For more on this subject, see our essay "Does Real Identity Matter for Networks?"