"The Ownership Economy 2022 – Variant: Exploring the Potential and Challenges of User Ownership"

"The Ownership Economy 2022 – Variant: Exploring the Potential and Challenges of User Ownership"

Introduction

The ownership economy has emerged as a powerful force in the digital landscape, offering builders the opportunity to leverage market incentives and transform users into owners. This shift not only has the potential to drive growth but also to create positive social change through the wider distribution of wealth-building assets. With over 15,000 projects in the ownership economy, ranging from user-owned financial markets to social networks and digital assets, it's clear that the next generation of the internet will be defined by products and services that empower users to become owners.

The Market Capitalization of the Ownership Economy

As of April 26th, 2022, the market capitalization of tokens tracked by CoinMarketCap exceeds $1.76 trillion, showcasing the immense value and potential of the ownership economy. While this figure pales in comparison to the over $100 trillion market capitalization of global stock markets, it's important to note that the ownership economy is still in its early stages. The largest cryptonetworks, such as Bitcoin and Ethereum, have market capitalizations of $725 billion and $337 billion, respectively. These established layer 1 blockchains have paved the way for the proliferation of user ownership.

User Ownership as a Growth Catalyst

User ownership has the potential to jumpstart growth by capturing user attention and incentivizing initial adoption. However, sustaining this growth is more challenging. Simply giving users ownership is not enough to ensure the success of a product. Strong product-market fit, addressing a widespread need for users, is crucial for sustaining usage. Additionally, liquidity remains a significant motivator for users in choosing one marketplace over another. The question of whether ownership crowds out intrinsic incentives is also pertinent, as extrinsic motivations can undermine intrinsic motivation. Token incentives need to be optimized to preserve users' intrinsic motivation and encourage long-term engagement.

New Token Distribution Designs and User Loyalty

Token distribution designs play a vital role in boosting user loyalty. While liquidity mining programs have driven short-term participation in new products, they haven't historically contributed to long-term sustainability. Axie Infinity's player retention exemplifies the importance of engagement beyond novelty. To foster long-term engagement, token incentives are transitioning from solely deepening liquidity to emphasizing contributor growth. Lockup periods and vesting mechanisms are being introduced to encourage users to remain engaged over extended periods.

Fostering Richer Ecosystems through User Ownership

Shared ownership reinforces network effects and creates a disincentive for users to switch to other blockchains. Permissionless projects have attracted users, creators, and developers, who have begun building around and on top of them. CC0 NFT projects, in particular, extend the definition and possibilities of ownership by enabling free use of assets. This approach stimulates building, creation, and collaboration, ultimately enriching the ecosystem.

Early Participation in Value Creation

The ownership economy allows users 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 keystone of new experiences across all categories of software products, signaling a shift towards a more inclusive and participatory economy.

The Double-edged Sword of Exclusivity

While exclusivity can be a valuable proposition, it also poses challenges for communities reliant on financial exclusivity. The Social Token Paradox highlights the issue of diminishing returns on exclusivity as new members join, leading to decreased social utility. Financially-derived exclusivity limits the size and growth potential of a community. However, membership based on accomplishment or performance can offer a socially valuable signal and align long-term players. By diversifying the criteria for membership, social token communities can expand their networks while maintaining value beyond financial dependencies.

Conclusion

The ownership economy is reshaping the digital landscape, empowering users to become owners and driving positive social change. While challenges exist in sustaining user ownership and navigating the complexities of token incentives, the potential for growth and the creation of richer ecosystems is immense. As the ownership economy continues to evolve, it will be crucial to prioritize strong product-market fit, foster user loyalty through innovative token distribution designs, and explore alternative forms of value beyond financial exclusivity. By embracing these principles, the ownership economy can unlock its full potential and redefine the future of the internet.

Actionable Advice:

1. Prioritize strong product-market fit: Ensure that your product solves a widespread need for users to sustain usage and engagement.

2. Innovate token distribution designs: Emphasize contributor growth and long-term engagement over short-term liquidity by introducing lockup periods and vesting mechanisms.

3. Diversify criteria for membership: Explore membership based on accomplishment or performance to align long-term players and maintain social value beyond financial exclusivity.

Remember, the ownership economy is still in its early stages, and there's ample opportunity for builders and users to shape its future. By embracing user ownership and leveraging the potential of tokens, we can create a more inclusive and equitable digital landscape.