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

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

Introduction:
The ownership economy has emerged as a powerful force in the world of web3, offering builders the opportunity to leverage market incentives and transform users into owners. Not only does this new paradigm have the potential to drive economic growth, but it also holds the promise of creating 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 is clear that this trend is reshaping the internet as we know it.

The Growing Market Capitalization:
As of April 26th, 2022, the market capitalization of tokens tracked by CoinMarketCap exceeds $1.76 trillion. While this may seem impressive, it pales in comparison to the global stock markets, which boast a market capitalization of over $100 trillion. Bitcoin and Ethereum, the two largest cryptonetworks, dominate the market capitalization, with Bitcoin at $725 billion and Ethereum at $337 billion. These established layer 1 blockchains have paved the way for the ownership economy to flourish.

The Rise of User Ownership:
One of the defining characteristics of the ownership economy is the transformation of users into owners. Metamask, a popular wallet used to connect to decentralized applications, boasts an impressive 32 million monthly active users as of February 2022. Similarly, Phantom, a wallet focused on Solana, has seen 2 million monthly active users in January 2022. Ethereum, with its average transactional users of 6 million and daily active transactional users of 400,000, has also been a key player in driving user ownership. These numbers highlight the growing interest and adoption of user-owned platforms and applications.

Challenges in Sustaining User Ownership:
While user ownership can jumpstart growth, sustaining it over the long term poses challenges. Merely giving users ownership through tokens is not enough to ensure a product's success. Strong product-market fit, solving a widespread need for users, is essential to sustain usage. Moreover, liquidity remains a key motivator for users in choosing one marketplace over another. The question arises whether ownership may actually undermine intrinsic incentives, causing users to engage with products in a more transactional manner. Balancing token incentives with preserving users' intrinsic motivation is crucial for the long-term sustainability of user-owned platforms.

New Token Distribution Designs:
To boost user loyalty, new token distribution designs are emerging. Axie Infinity's player retention has remained strong, suggesting that engagement is not solely driven by novelty. Liquidity mining programs, which reward users with ownership through tokens for providing liquidity, have been effective in driving short-term participation. However, long-term sustainability requires a shift towards emphasizing contributor growth rather than solely deepening liquidity. Curve's voting escrow contracts and Gro's vesting mechanism are examples of this transition, encouraging long-term engagement and loyalty.

Fostering Richer Ecosystems:
Shared ownership in the ownership economy reinforces network effects and discourages users from switching to other blockchains. The permissionless nature of these projects attracts users, creators, and developers, who then build around and on top of them. CC0 NFT projects, in particular, enable their intellectual property (IP) to be used in novel and generative ways, increasing its reach, relevance, and value. By allowing free use of assets, CC0 NFT projects redefine ownership and stimulate collaboration, creation, and building within the ecosystem.

User Participation in Value Creation:
The ownership economy allows users to become owners earlier in the life cycle of a company and participate in value creation. Web3 companies that launch a token do so, on average, 2.7 years after founding, whereas VC-backed companies typically go public around 5.3 years after securing their first VC investment. This shift in ownership dynamics is democratizing access to value creation and empowering users to have a stake in the success of the platforms they use.

Key Traits of Successful Founders in the Ownership Economy:
In the ownership economy, successful founders possess certain key traits that set them apart from the rest. These traits include execution and formidability, as they are not easily deterred by challenges and obstacles. Clear communication is another crucial skill, as founders must be able to explain their business in concise and compelling terms. Lastly, internal motivation plays a significant role, as top founders do not get discouraged when things go wrong. These traits enable founders to navigate the complexities of the ownership economy and drive their ventures towards success.

Conclusion:
The ownership economy is revolutionizing the internet, empowering users to become owners and participate in value creation. While challenges exist in sustaining user ownership and preserving intrinsic motivation, new token distribution designs are emerging to boost user loyalty. The fostering of richer ecosystems and the early participation of users in value creation further strengthen the ownership economy's potential for positive social change. As we move forward, it is crucial for builders and founders to embrace the ethos of the ownership economy and leverage its power to reshape the digital landscape.

Actionable Advice:

1. Prioritize strong product-market fit: While user ownership is essential, it must be coupled with a product that solves a widespread need for users. Token incentives should be optimized to preserve users' intrinsic motivation and sustain long-term usage.

2. Emphasize contributor growth: Instead of solely focusing on liquidity, new token distribution designs should prioritize the growth of contributors. This shift will foster user loyalty and create a sustainable ecosystem in the ownership economy.

3. Communicate clearly and concisely: Founders should develop the ability to explain their business in one to two sentences. Clear communication is crucial for attracting users and investors and driving the success of user-owned platforms.

In conclusion, the ownership economy is a transformative force in the world of web3, enabling users to become owners, fostering collaboration, and driving positive social change. By understanding and embracing the principles of the ownership economy, builders and founders can create impactful platforms and applications that empower users and shape the future of the internet.