The Ownership Economy 2022 – Variant: Exploring the Future of Web3 and User Ownership

The Ownership Economy 2022 – Variant: Exploring the Future of Web3 and User Ownership

Introduction:

The ownership economy has emerged as a powerful force in the world of web3, offering builders a unique tool to leverage market incentives and create new networks. Beyond its economic potential, the ownership economy also holds the promise of driving positive social change by redistributing 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 is evident that the future of the internet lies in transforming users into owners.

The Growth and Potential of the Ownership Economy:

As of April 26th, 2022, the market capitalization of tracked tokens in the ownership economy exceeds $1.76 trillion. While this figure pales in comparison to the global stock markets' $100 trillion market capitalization, it represents a significant milestone for a relatively nascent industry. Bitcoin and Ethereum, the two largest cryptonetworks by market capitalization, have paved the way for the ownership economy. Metamask and Phantom, popular wallets connecting users to decentralized applications, have witnessed millions of monthly active users, indicating growing adoption and interest.

Challenges in Sustaining User Ownership:

While user ownership can jumpstart growth and attract initial attention, sustaining it poses a more complex challenge. Simply granting users ownership through tokens is not enough to ensure long-term success. Strong product-market fit, addressing widespread user needs, is crucial for sustained usage. Additionally, liquidity remains a key motivator for users in choosing one marketplace over another. The introduction of ownership should not overshadow intrinsic incentives, as extrinsic motivations can undermine users' intrinsic motivation. To strike the right balance, token incentives should be optimized in terms of timing, magnitude, and eligibility, preserving users' intrinsic motivation.

New Token Distribution Designs for User Loyalty:

In the pursuit of enhancing user loyalty, new token distribution designs have emerged. Axie Infinity, a popular game, has achieved consistent player retention over time, indicating that engagement goes beyond novelty. While liquidity mining programs have driven short-term participation, they have not contributed to long-term sustainability. By focusing on contributor growth rather than solely deepening liquidity, new token incentives aim to foster long-term engagement. Curve's voting escrow and Gro's vesting mechanism are examples of such designs that encourage loyalty and sustained participation.

Fostering Richer Ecosystems through User Ownership:

Shared ownership reinforces network effects and discourages users from switching to other blockchains. The permissionless nature of web3 projects has attracted users, creators, and developers, leading to the emergence of vibrant ecosystems. CC0 NFT projects, by allowing free use of assets, extend the possibilities of ownership. This approach stimulates building, creation, and collaboration, increasing the reach and value of intellectual property. The ownership economy has the potential to redefine ownership in the digital realm and inspire new forms of collaboration.

Early Participation and Value Creation for Users:

The ownership economy enables users to become owners earlier in the process and participate in value creation. Unlike traditional VC-backed companies, which often go public years after their first investment, web3 companies that launch tokens do so much earlier. This shift in ownership dynamics has the potential to democratize value creation and provide users with a stake in the success of the products they use. As ownership becomes more prevalent across various software products, the concept of ownership is expanding beyond the bounds of web3.

The Dark Forest and the Cozy Web:

While the ownership economy is gaining traction, the concept of the cozy web offers an interesting contrast. Cozy web refers to the private, gatekeeper bounded spaces of the internet, where users have retreated in recent years. Venkatesh Rao coined this term to describe the fragmented nature of online interactions, characterized by cutting-and-pasting bits of text, images, URLs, and screenshots across live streams. The vision for the cozy web is to evolve into a personal blockchain, enabling context-permissioned, addressable, searchable, and interlinked clips.

Conclusion:

The ownership economy is poised to shape the future of the internet, with its potential to drive economic growth and social change. While user ownership can jumpstart growth, sustaining it requires strong product-market fit and a careful balance between extrinsic and intrinsic incentives. New token distribution designs are being developed to enhance user loyalty and long-term engagement. The ownership economy fosters richer ecosystems and empowers users to become owners earlier in the value creation process. As the ownership economy continues to evolve, it is essential to consider the contrasting concept of the cozy web and explore how these two paradigms can coexist and complement each other in the digital landscape.

Actionable Advice:

1. Focus on building products with strong product-market fit: Token incentives alone are not enough to ensure sustained usage. Solve a widespread user need and provide liquidity to attract users to your platform.

2. Design token distribution models for long-term user loyalty: Explore new token distribution designs that emphasize contributor growth rather than solely deepening liquidity. Encourage long-term engagement through lockup periods and vesting mechanisms.

3. Foster collaboration and building within your ecosystem: Shared ownership reinforces network effects and encourages users, creators, and developers to contribute to your project. Enable free use of assets to stimulate building, creation, and collaboration, increasing the value and reach of intellectual property.

In the ever-evolving landscape of web3, the ownership economy offers a unique opportunity for users to become owners and participate in the value creation process. By understanding the challenges and opportunities associated with user ownership, builders can create products that not only drive economic growth but also foster positive social change. The ownership economy is just the beginning, and as we navigate this new frontier, it is important to consider the contrasting visions of the cozy web and explore how these two paradigms can coexist and shape the future of the internet.