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 is a powerful concept that not only provides builders with a tool to leverage market incentives but also holds the potential for positive social change through the wider distribution of wealth-building assets. In this article, we will delve into the current state of the ownership economy, its impact on the market, and the implications it has for users and builders alike.

The Rise of the Ownership Economy:

With over 15,000 projects in the ownership economy, ranging from user-owned financial markets to user-owned social networks and digital assets, it is clear that the products and services defining web3 and the next generation of the internet are those that transform users into owners. The market capitalization of tokens tracked by CoinMarketCap has reached $1.76 trillion, showcasing the growing interest and value in the ownership economy. Notably, Bitcoin and Ethereum, two established layer 1 blockchains, have emerged as the largest cryptonetworks by market capitalization.

User Ownership as a Growth Catalyst:

While user ownership can jumpstart growth, sustaining it is more challenging. Merely giving users ownership is not enough to ensure a product's success over its competitors. Strong product-market fit, addressing widespread user needs, is essential for sustaining usage. Additionally, liquidity remains a significant motivator for users when choosing a marketplace. However, there is a concern that ownership may crowd out intrinsic incentives, leading to more transactional engagement. Token incentives need to be carefully optimized to preserve users' intrinsic motivation by considering factors such as timing, magnitude, and eligibility.

New Token Distribution Designs for User Loyalty:

Traditional liquidity mining programs, rewarding users with ownership through tokens for providing liquidity, have been successful in driving short-term participation in new products. However, they have not contributed to long-term sustainability. Research shows that a significant percentage of yield farmers exit within a short period after entering a farm. To drive long-term engagement, new token distribution designs are emerging, focusing on contributor growth rather than solely deepening liquidity. Examples include Axie Infinity's consistent player retention and projects like Curve and Gro introducing lockup periods and vesting mechanisms to encourage long-term engagement.

Fostering Richer Ecosystems of Projects and Contributors:

Shared ownership in the ownership economy reinforces network effects and creates a disincentive for users to switch to other blockchains. The permissionless nature of these projects attracts users, creators, and developers to build around and on top of them. CC0 NFT projects, in particular, extend the definition of ownership by allowing free use of assets, stimulating building, creation, and collaboration. This approach increases the reach, relevance, and value of intellectual property.

Early Ownership and Value Creation:

The ownership economy enables users to become owners earlier in the lifecycle of a product and participate in value creation. Web3 companies, on average, launch a token 2.7 years after founding, significantly earlier than VC-backed companies that go public around 5.3 years after securing their first VC investment. Ownership is becoming a keystone in new experiences across all categories of software products, reflecting Chris Dixon's prediction that ownership will extend to various products and networks in the future.

Actionable Advice:

1. Focus on Strong Product-Market Fit: To sustain user ownership, it is crucial to prioritize strong product-market fit and solve widespread user needs. Tokens alone cannot guarantee a product's success if it does not address intrinsic motivations and provide value to users.

2. Design Token Incentives for Long-Term Engagement: Instead of solely deepening liquidity, consider new token distribution designs that emphasize contributor growth. Lockup periods, vesting mechanisms, and other strategies can encourage long-term engagement and loyalty.

3. Foster Collaboration and Building: Embrace the permissionless nature of the ownership economy to create richer ecosystems of projects and contributors. Encourage the free use of assets and stimulate collaboration to extend the reach and value of intellectual property.

Conclusion:

The ownership economy is revolutionizing the way we interact with products and networks, transforming users into owners and allowing them to participate in value creation. While user ownership can jumpstart growth, sustaining it requires a strong product-market fit and careful optimization of token incentives. The emergence of new token distribution designs focused on long-term engagement indicates a shift towards building a loyal user base. By fostering collaboration and extending the definition of ownership, the ownership economy has the potential to drive positive social change and create a more inclusive and equitable future.