"The Ownership Economy 2022 – Variant: How User Ownership is Transforming the Internet"

"The Ownership Economy 2022 – Variant: How User Ownership is Transforming the Internet"

In the fast-evolving landscape of the digital world, a new concept has emerged that holds the potential to revolutionize the way we interact with technology and create positive social change. This concept is known as the ownership economy, and it is centered on transforming users into owners. By giving users ownership in the products and services they use, the ownership economy aims to not only incentivize growth but also distribute wealth-building assets more widely.

The ownership economy has gained significant traction, with more than 15,000 projects now operating within this framework. These projects range from user-owned financial markets to user-owned social networks, investment clubs, and digital assets. The products and services that will shape the future of the internet, often referred to as web3, are those that empower users by transforming them into owners.

One of the key indicators of the growth and potential of the ownership economy is the market capitalization of tokens. As of April 26th, 2022, the market capitalization of tracked tokens exceeds $1.76 trillion. While this may seem substantial, it is important to note that the market capitalization of global stock markets surpasses $100 trillion. However, established layer 1 blockchains like Bitcoin and Ethereum lead the way in terms of market capitalization, with Bitcoin valued at $725 billion and Ethereum at $337 billion.

User ownership has proven to be a powerful tool for jumpstarting growth, but sustaining it can be a more significant challenge. Simply giving users ownership is not enough to ensure long-term success. Tokens can be effective in capturing user attention and driving initial adoption, but they must be coupled with a strong product-market fit to sustain usage. Tokens should not be the core value unless it's in the realm of decentralized finance (DeFi). Progressive decentralization, where ownership is gradually transferred to users, makes more sense in most cases.

For users of marketplaces, liquidity remains a significant motivator in choosing one platform over another. The presence of a counterparty for desired transactions is crucial. Additionally, there is a concern that ownership may crowd out intrinsic incentives, leading users to engage with products in a more transactional and temporary manner. Extrinsic motivations, such as token incentives, should be optimized to preserve users' intrinsic motivation and ensure long-term engagement.

In terms of boosting user loyalty, new token distribution designs have emerged. Axie Infinity, a popular game, has demonstrated strong and consistent player retention over time, indicating that engagement goes beyond novelty. While liquidity mining programs have driven short-term participation in new products, they have not historically contributed to long-term sustainability. However, recent token incentives are focusing more on contributor growth rather than solely deepening liquidity. This shift is crucial for growing the ownership economy's user base.

User ownership not only fosters richer ecosystems of projects and contributors but also reinforces network effects and creates a disincentive to switch to other blockchains. The permissionless nature of these projects attracts users, creators, and developers, who then build around and on top of them. Additionally, projects that enable free use of assets extend the definition and possibilities of ownership, stimulating building, creation, and collaboration.

One of the significant advantages of the ownership economy is that it allows users to become owners earlier and participate in value creation. Web3 companies have started launching tokens an average of 2.7 years after their founding, whereas VC-backed companies typically go public around 5.3 years after securing their first VC investment. Ownership is becoming a cornerstone of new experiences across all software product categories, as predicted by Chris Dixon's adage.

In conclusion, the ownership economy is redefining the way we interact with technology and the internet. By transforming users into owners, this concept offers a powerful tool for incentivizing growth and distributing wealth-building assets more widely. However, sustaining user ownership requires a strong product-market fit and a careful balance between extrinsic and intrinsic motivations. To thrive in the ownership economy, businesses should focus on boosting user loyalty, fostering richer ecosystems, and allowing users to become owners early on. By embracing these principles, we can shape a future where users truly have ownership and agency in the digital world.