The Ownership Economy 2022 – Variant: Unlocking the Potential of User Ownership

The Ownership Economy 2022 – Variant: Unlocking the Potential of User Ownership

In recent years, the concept of the ownership economy has gained significant traction in the world of technology and finance. At its core, the ownership economy offers a powerful new tool for builders to leverage market incentives to jumpstart new networks. However, it also holds the potential to create positive social change through the wider distribution of wealth-building assets. Simply put, the ownership economy is all about transforming users into owners.

Today, there are more than 15,000 projects in the ownership economy, ranging from user-owned financial markets to user-owned social networks, investment clubs, and digital assets. These projects are reshaping the landscape of web3 and the next generation of the internet. According to CoinMarketCap, the market capitalization of over 19,000 tracked tokens is currently valued at $1.76 trillion. While this may seem substantial, it pales in comparison to the over $100 trillion market capitalization of global stock markets.

The ownership economy is driven by established layer 1 blockchains like Bitcoin and Ethereum. Bitcoin, launched in 2009, boasts a market capitalization of $725 billion, while Ethereum, launched in 2015, has a market capitalization of $337 billion. The popularity of decentralized applications (dApps) is also on the rise, with wallets like Metamask and Phantom reporting millions of monthly active users.

While user ownership has the potential to jumpstart growth, sustaining it is more challenging than initially anticipated. Merely giving users ownership is not enough to ensure a product's success over its competitors. Tokens can be effective in capturing user attention and bootstrapping initial adoption, but they need to be coupled with strong product-market fit. Solving a widespread need for users is crucial for sustained usage.

Liquidity remains a significant motivator for users in choosing one marketplace over another. The presence of a counterparty for desired transactions is a key factor for users. Additionally, there is a concern that ownership may crowd out intrinsic incentives to use a product, leading to more transactional and temporary engagement. Extrinsic motivations can undermine intrinsic motivation, especially when users previously found the behavior intrinsically rewarding. Therefore, token incentives should be optimized to preserve users' intrinsic motivation.

New token distribution designs are emerging to boost user loyalty. Axie Infinity, a popular blockchain-based game, has managed to maintain strong player retention over time, suggesting that engagement goes beyond novelty. While liquidity mining programs have driven short-term participation in new products, they have not contributed to long-term sustainability. However, recent research indicates that token incentives placing greater emphasis on contributor growth and long-term engagement are becoming more prevalent.

User ownership fosters richer ecosystems of projects and contributors. The permissionless nature of blockchain projects attracts users, creators, and developers, leading to the creation of a vibrant ecosystem. CC0 NFT projects, in particular, have the potential to extend the definition and possibilities of ownership. By enabling free use of assets, these projects stimulate building, creation, and collaboration.

One of the key advantages of the ownership economy is that it allows users to become owners earlier and participate in value creation. Web3 companies are launching tokens just 2.7 years after founding, compared to VC-backed companies that often go public after 5.3 years. Ownership is becoming a keystone of new experiences across all categories of software products.

In conclusion, the ownership economy presents a unique opportunity for users to become owners and participate in the value creation of various projects. However, sustaining user ownership requires more than just token incentives. Strong product-market fit and the preservation of intrinsic motivation are critical factors. To succeed in the ownership economy, builders should focus on long-term engagement, foster richer ecosystems, and provide early ownership opportunities for users. By doing so, the ownership economy has the potential to revolutionize industries and create a more inclusive and equitable future.