- The vast majority of internet users own exactly 0% of the services they contribute to.
- This is starting to change via the ownership economy-often referred to as web3-with products and services that turn users into owners
A new internet owned by users
- The next generation of software will be user-owned, with digital ownership leveraged as a building block to enable novel user experiences.
- 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.
What is the ownership economy?
- Products and services that will define web3 are those that transform users into owners
- The ownership economy encompasses both passive and active participation
- Ownership manifests across a spectrum of experiences that range in user effort, responsibility, and degree of collectivity
- For this report, we focus on crypto tokens rather than equity because they have a richer and more frictionless design space
The ownership economy is big and growing
- Market capitalization of over 19,000 tokens tracked by CoinMarketCap is $1.76 trillion
- The largest cryptonetworks by market capitalization are established layer 1 blockchains: Bitcoin ($725 billion) and Ethereum ($337 billion)
- Metamask, a wallet that is used to connect to decentralized applications, had 32 million monthly active users as of February 2022
- In the fourth quarter of 2021, Ethereum had monthly average transactional users of about 6 million and daily active transactions of about 400,000
- DAOs, decentralized autonomous organizations, are online communities owned and governed by their members
State of the ownership economy in 2022
- User ownership is transforming how people transact, invest, create, build, play, learn, communicate, and socialize
- Walden’s original essay “The Ownership Economy” posited that user ownership could result in “platforms that can be larger, more resilient, and more innovative”
- Many of these aspirations have yet to be realized due to nascent playbooks on how to best effectuate user ownership
- Realizing that potential requires additional research on best practices regarding ownership distribution and education geared towards developers and users
User ownership can jumpstart growth, but sustaining it is more challenging
- Giving users ownership in the form of tokens can be a powerful alternative to paid marketing, helping to bootstrap networks and overcome the cold-start problem.
- For crypto projects, giving users ownership can function as marketing, drawing in new users through the promise of ownership and increasing engagement as a result of having skin in the game.
New token distributions designs are boosting user loyalty
- Ownership of in-game assets can engender more player loyalty.
- Axie Infinity, a blockchain-based game in which users collect, breed, and battle digital creatures called Axies, has achieved significant scale, with over $1 billion in cumulative revenue and nearly 3 million daily active users
- Player retention has remained strong and consistent over time, suggesting that engagement is not simply a function of the game’s novelty
- But there are counterexamples of token incentives’ mixed impact on user engagement.
User ownership can foster richer ecosystems of projects and contributors
- CC0 (or “no copyright reserved”) projects-those that relinquish all copyright and turn over their work to the public domain
- These projects allow their intellectual property (IP) to be freely used, remixed, and commercialized
- Shared ownership reinforces network effects and creates a disincentive to switching to other blockchains
The ownership economy allows users to become owners earlier and participate in value creation
- Users become owners faster than in their centralized counterparts, allowing them to contribute to and benefit from value creation.
- On average, web3 companies that launched a token did so 2.7 years after founding
- VC-backed companies went public approximately 5.3 years after securing their first VC investment
The future of the ownership economy
- Ownership is becoming a keystone of new experiences across all categories of software products
- Web3 started as a developer phenomenon with layer 1 blockchains, but ownership is now extending to all kinds of products and networks
- Independent self-managed artists need to know that the Intellectual Property they own is for them to manage and the web3 will make it possible on the Internet