"The Ownership Economy 2022 – Variant: Exploring the Intersection of User Ownership and NFTs"

"The Ownership Economy 2022 – Variant: Exploring the Intersection of User Ownership and NFTs"

Introduction:

The ownership economy has emerged as a powerful tool for builders to leverage market incentives and empower users as owners. This not only jumpstarts new networks but also holds the potential for positive social change through the wider distribution of wealth-building assets. In this article, we will explore the common points between the ownership economy and the world of NFTs, and how they contribute to shaping the future of the internet.

The Rise of the Ownership Economy:

The ownership economy has seen tremendous growth, with over 15,000 projects ranging from user-owned financial markets to user-owned social networks and digital assets. The transformation of users into owners is at the core of the ownership economy, and it is poised to define the future of web3 and the internet as a whole.

The Market Capitalization of Tokens:

As of April 26th, 2022, the market capitalization of tokens tracked by CoinMarketCap exceeds $1.76 trillion. While this is a significant figure, it is important to note that the market capitalization of global stock markets is still over $100 trillion. However, established layer 1 blockchains like Bitcoin and Ethereum have emerged as leaders, with market capitalizations of $725 billion and $337 billion respectively.

User Ownership and Sustainable Growth:

While user ownership can jumpstart growth, sustaining it proves to be more challenging. Simply giving users ownership through tokens is not enough to ensure the success of a product. Strong product-market fit, addressing widespread user needs, and providing liquidity are crucial factors for maintaining user engagement. Additionally, there is a concern that ownership might crowd out intrinsic motivations, leading to a more transactional and temporary user engagement. Token incentives should be carefully optimized to preserve users' intrinsic motivation.

New Token Distribution Designs for User Loyalty:

Traditional liquidity mining programs that reward users with ownership tokens for providing liquidity have not historically contributed to long-term sustainability. However, new token distribution designs are emerging that prioritize contributor growth over deepening liquidity. Axie Infinity's player retention and the introduction of lockup periods in Curve's voting escrow contracts are examples of these new designs. By boosting user loyalty, these designs contribute to the growth of the ownership economy's user base.

Fostering Richer Ecosystems through User Ownership:

Shared ownership reinforces network effects and creates a disincentive for users to switch to other blockchains. This permissionless nature of ownership economy projects attracts users, creators, and developers, who contribute to building and expanding these ecosystems. NFT projects with a CC0 (Creative Commons Zero) approach extend the possibilities of ownership by enabling free use of assets. This stimulates collaboration, creation, and building within the ownership economy.

User Ownership and Early Participation in Value Creation:

In the ownership economy, users have the opportunity to become owners earlier and participate in value creation. Web3 companies that launch a token do so, on average, 2.7 years after founding, whereas VC-backed companies go public approximately 5.3 years after securing their first VC investment. Ownership is becoming a key aspect of new experiences across various software product categories, aligning with Chris Dixon's prediction that what the smartest people do on weekends is what everyone else will do during the week in ten years.

NFTs and the Future of Digital Art:

NFTs have gained significant attention for their ability to sell digital art. They provide a means to financially support artists and enable creators to receive a percentage of the value when their work is resold. While NFTs can represent any digital file, the focus has primarily been on digital art. Some view NFTs as the future of fine art collecting, while others see them as collectibles akin to Pokémon cards. Additionally, attempts have been made to connect NFTs to real-world objects for verification purposes, such as Nike's CryptoKicks system for authenticating sneakers.

Preserving Digital Assets:

One of the challenges with digital assets is the potential for degradation over time. Bit rot, image deterioration, file format obsolescence, and forgotten passwords can all lead to the loss of digital assets. However, physical art in museums is also susceptible to damage and decay. The fragility of both digital and physical art highlights the importance of preserving and protecting artistic creations.

Actionable Advice:

• 1. Focus on strong product-market fit: To sustain user engagement in the ownership economy, it is crucial to address widespread user needs and provide a seamless experience that captures their attention.

• 2. Optimize token incentives: When implementing token incentives, consider factors such as timing, magnitude, eligibility, and their impact on users' intrinsic motivation. A careful balance is needed to maintain long-term engagement.

• 3. Embrace collaboration and building: Encourage collaboration and creation within the ownership economy by enabling the free use of assets and fostering an environment that supports building on top of existing projects.

Conclusion:

The ownership economy and NFTs are redefining the way users interact with digital assets and participate in value creation. User ownership offers the potential for positive social change and the wider distribution of wealth-building assets. By addressing the challenges of sustaining user engagement, embracing new token distribution designs, fostering richer ecosystems, and enabling early participation in value creation, the ownership economy can continue to evolve and shape the future of the internet.