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

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

Introduction:
The ownership economy is a powerful tool that not only allows builders to leverage market incentives to jumpstart new networks but also has the potential 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 user-owned social networks and digital assets, it is clear that the next generation of the internet will be defined by products and services that transform users into owners.

The Growth of the Ownership Economy:
As of April 26th, 2022, the market capitalization of tracked tokens in the ownership economy is $1.76 trillion, compared to over $100 trillion in global stock markets. Leading the market capitalization are established layer 1 blockchains like Bitcoin and Ethereum. Additionally, popular wallets like Metamask and Phantom have reported millions of monthly active users, indicating the growing interest in user ownership.

Challenges in Sustaining User Ownership:
While user ownership can initially jumpstart growth, sustaining it over the long term can be more challenging. Simply giving users ownership is not enough to ensure a product's success. Tokens can capture user attention and drive initial adoption, but strong product-market fit is crucial for sustained usage. Users need to see the value in a product and have their needs met in order to continue using it. Additionally, liquidity and the presence of a counterparty for transactions play a significant role in motivating users to choose one marketplace over another. It is also important to consider whether ownership incentivizes users in a transactional and temporary way or if it crowds out intrinsic motivations. Token incentives should be optimized to preserve users' intrinsic motivation.

Innovative Token Distribution Designs:
New token distribution designs are emerging to boost user loyalty and long-term engagement. Axie Infinity's player retention has remained strong, suggesting that engagement goes beyond the novelty of a game. While liquidity mining programs have driven short-term participation in new products, they have not contributed to long-term sustainability. Token incentives are now placing greater emphasis on contributor growth rather than just liquidity. Curve's voting escrow and Gro's vesting mechanism are examples of these new approaches.

Fostering Richer Ecosystems through User Ownership:
Shared ownership reinforces network effects and creates a disincentive to switch to other blockchains. Permissionless projects in the ownership economy attract users, creators, and developers who build around and on top of them. CC0 NFT projects, in particular, enable the free use of assets, expanding the possibilities of ownership and stimulating collaboration and creation.

Early Participation in Value Creation:
The ownership economy allows users to become owners earlier in the process and participate in value creation. Web3 companies that launch a token do so on average 2.7 years after founding, while VC-backed companies go public approximately 5.3 years after securing their first investment. Ownership is becoming a keystone of new experiences in all categories of software products, extending beyond the realm of cryptocurrency.

Composable Membership and Social Capital:
Composable membership plays a crucial role in generating social capital within a community. While having a token brings a community together with a financial stake, composable membership holds a community together long term with social capital. Membership, identity, and relationships form the basis for reputation scores, allowing for creatively weighted incentives.

Conclusion:
The ownership economy in Web3 is reshaping the way we interact with the internet and creating opportunities for users to become owners and participate in value creation. However, sustaining user ownership and fostering long-term engagement requires strong product-market fit and optimized token incentives. Additionally, composable membership and the generation of social capital play a vital role in building thriving communities within the ownership economy.

Actionable Advice:

1. Focus on building products with strong product-market fit that solve widespread user needs in order to sustain user ownership.
2. Design token incentives that prioritize long-term engagement and contributor growth rather than solely deepening liquidity.
3. Foster a sense of composable membership within communities by prioritizing membership, identity, and relationships, which can enhance social capital and prevent social forks.