"The Ownership Economy 2022 – Variant: Boosting Productivity and Wealth Distribution"

"The Ownership Economy 2022 – Variant: Boosting Productivity and Wealth Distribution"

The ownership economy has emerged as a powerful tool for builders to leverage market incentives and jumpstart new networks. Beyond its economic potential, it also holds the promise of creating positive social change through the wider distribution of wealth-building assets. The ownership economy is characterized by the transformation of users into owners, and it encompasses a wide range of projects, including user-owned financial markets, social networks, investment clubs, and digital assets.

As of April 2022, the market capitalization of tokens tracked by CoinMarketCap exceeded $1.76 trillion, highlighting the significant growth and potential of the ownership economy. Established layer 1 blockchains like Bitcoin and Ethereum dominate the market, with market capitalizations of $725 billion and $337 billion, respectively. The popularity of decentralized applications is also evident, with Metamask boasting 32 million monthly active users and Phantom reporting 2 million monthly active users.

While user ownership can jumpstart growth, sustaining it poses challenges. 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 crucial for sustained usage. Additionally, liquidity remains a key motivator for users of marketplaces, emphasizing the importance of a robust counterparty presence. It is also essential to consider whether ownership may overshadow intrinsic incentives for product usage, leading to a more transactional and temporary engagement. Optimizing token incentives, including timing, magnitude, and eligibility, is crucial to preserving users' intrinsic motivation.

New token distribution designs are emerging to enhance user loyalty and long-term engagement. Axie Infinity's player retention has remained strong, indicating that engagement is not solely driven by novelty. Liquidity mining programs have historically driven short-term participation but have not contributed to long-term sustainability. Curve's voting escrow contracts and Gro's vesting mechanism are examples of token incentives emphasizing contributor growth over liquidity deepening. This shift reflects the imperative transition to grow the ownership economy's user base.

The ownership economy fosters richer ecosystems of projects and contributors by reinforcing network effects and creating a disincentive to switch to other blockchains. These permissionless projects attract users, creators, and developers, who build upon them. CC0 NFT projects, in particular, enable the free use of assets, expanding the definition and possibilities of ownership. This approach stimulates building, creation, and collaboration, further enhancing the ownership economy's potential.

One of the key advantages of the ownership economy is the opportunity for users to become owners earlier and participate in value creation. Web3 companies now launch tokens 2.7 years after founding, compared to VC-backed companies going public approximately 5.3 years after securing their first investment. Ownership is no longer limited to specific categories of software products but is extending to various products and networks, as predicted by Chris Dixon's adage.

Inefficient knowledge sharing presents a significant challenge for large businesses, costing them an average of $47 million in productivity annually. This loss stems from knowledge workers wasting 5.3 hours each week waiting for information or recreating existing institutional knowledge. To remain competitive, businesses must provide tools to preserve institutional knowledge and foster a culture of teaching among employees.

Calculating the annual productivity loss involved multiplying the number of employees, average hourly wage, weekly hours spent inefficiently, weeks per year, utilization assessment rate, and adoption assessment rate. Inefficient onboarding costs were determined by factoring in the number of employees, annual employee turnover, average hourly wage, months to proficiency in a new job, weekly hours spent inefficiently, utilization assessment rate, and adoption assessment rate. These calculations revealed an average cost of $42.5 million in annual productivity loss and $4.5 million in inefficient onboarding, totaling $47 million in annual costs.

The ownership economy, with its emphasis on user ownership and value creation, has the potential to address the inefficiencies and costs associated with knowledge sharing in large businesses. By empowering users to become owners, it encourages a culture of knowledge sharing and collaboration, thereby enhancing productivity and reducing costs.

In conclusion, the ownership economy presents a transformative opportunity for builders, users, and businesses. To harness its full potential, three actionable pieces of advice can be followed:

1. Prioritize strong product-market fit: While user ownership is valuable, it must be coupled with a product that solves a widespread user need. Tokens alone are not sufficient to drive sustained usage.

2. Design token incentives for long-term engagement: New token distribution designs should focus on contributor growth rather than solely deepening liquidity. Lockup periods and vesting mechanisms can encourage users to remain engaged over an extended period.

3. Foster a culture of knowledge sharing: Businesses should invest in tools and platforms that preserve institutional knowledge and promote a culture of teaching among employees. This will enhance productivity and generate long-term value.

By embracing the ownership economy and implementing these strategies, builders, users, and businesses can unlock the full potential of this transformative paradigm and drive positive social and economic change.