At its core, the ownership economy not only offers a powerful new tool for builders to leverage market incentives to jumpstart new networks—it also holds the potential to create positive social change through the wider distribution of wealth-building assets.

There are now more than 15,000 projects in the ownership economy, from user-owned financial markets to user-owned social networks, investment clubs, and digital assets.

Simply put: the products and services that will define web3—and the next generation of the internet—are those that transform users into owners. We call this the ownership economy.

As of April 26th, 2022, the market capitalization of the over 19,000 tokens tracked by data aggregator CoinMarketCap is $1.76 trillion. For comparison, the market capitalization of global stock markets is over $100 trillion.

The largest cryptonetworks by market capitalization are established layer 1 blockchains: Bitcoin ($725 billion), which was launched in 2009, and Ethereum ($337 billion), which was launched in 2015.

Metamask, a wallet that is used to connect to decentralized applications, recently announced that it had 32 million monthly active users as of February 2022, and Phantom (a wallet currently focused on Solana) announced monthly active users of 2 million in January 2022.

In the fourth quarter of 2021, Ethereum had monthly average transactional users of about 6 million and daily active transactional users of about 400,000.

there were approximately 2.5 million average daily active users interacting with the smart contracts tracked by DappRadar.

1. User ownership can jumpstart growth, but sustaining it is more challenging

the average cost to acquire an app user was $3.52 in 2019.

it is clear that simply giving users ownership is not sufficient to ensure that a product wins out over its competitors. Tokens can be useful in capturing user attention and bootstrapping initial adoption, but they need to be coupled with strong product-market fit—solving a widespread need for users—in order to sustain usage.

For users of marketplaces, liquidity—the presence of a counterparty for one’s desired transaction—is still the strongest motivator to choose any marketplace over another.

There is also the question of whether ownership actually crowds out intrinsic incentives to use a product, causing users to engage with products in a more mercenary, transactional (and likely temporary) way.

According to some studies, extrinsic motivations can undermine intrinsic motivation, especially when users previously found that behavior intrinsically rewarding.

token incentives should be optimized in terms of timing (via progressive decentralization), magnitude, eligibility, and other factors so as to preserve users’ intrinsic motivation.

2. New token distributions designs are boosting user loyalty

Axie Infinity’s player retention has remained strong and consistent over time, suggesting that engagement is not simply a function of the game’s novelty.

While liquidity mining programs (rewarding users with ownership via tokens for providing liquidity) have become pervasive and driven short-term participation in new products, they have not historically contributed to long-term sustainability.

According to research from Nansen, "A whopping 42% of yield farmers that enter a farm on the day it launches exit within 24 hours. Around 16% leave within 48 hours, and by the third day, 70% of these users would have withdrawn from the contract."

Curve’s voting escrow (“ve”) contracts use lockup periods to increase token rewards; Gro also introduced a vesting mechanism to encourage long-term engagement.

A new generation of token incentives seems to be placing greater emphasis on contributor growth compared to solely deepening liquidity—an imperative transition to grow the ownership economy’s user base.

3. User ownership can foster richer ecosystems of projects and contributors

Shared ownership reinforces network effects and creates a disincentive to switching to other blockchains

As a result of their permissionless nature, users, creators, and developers have been attracted to these projects and have begun building around and on top of them.

CC0 NFT projects create the potential for their IP to be used in novel and generative ways—increasing the reach, relevance, and, ultimately, the value, of that IP.

By enabling free use of their assets, CC0 NFT projects extend the definition and possibilities of ownership. This approach has the capacity to stimulate building, creation, and collaboration

4. The ownership economy allows users to become owners earlier and participate in value creation

we found that on average, web3 companies that launched a token did so 2.7 years after founding; in 2020, VC-backed companies went public approximately 5.3 years after securing their first VC investment.

ownership is becoming a keystone of new experiences across all categories of software products.

Chris Dixon predicted with his adage—“what the smartest people do on weekends is what everyone else will do during the week in ten years”—ownership is now extending to all kinds of products and networks.