l;dr: Cryptoeconomic networks change the economic model from shareholder to stakeholder capitalism.

A few days ago, anyone who had contributed liquidity to the Uniswap decentralized exchange, woke up to find that they had been “airdropped” some UNI tokens.

What does this mean? Why did this happen? And why is it important?

Users as Owners

For a while, we’ve been talking about the idea of cryptoeconomic networks as the “third way,” providing an alternative to shareholder capitalism that enriches the few and socialism (which also enriches a few).

The UNI airdrop-which resulted in a predictable explosion in price- is the latest example of a trend which is about to become mainstream:

Community-owned and community-governed networks.

As the tweet from Adams above highlights succinctly, Web 2.0 showed us the power of network effects. In those business models, however, each additional user created value for the network, but that monetary value (aside from the utility value of using Facebook, for example) went to the owners of the network.

While the argument could be made that “Zuckerberg created Facebook and Brin/Page created Google and should receive the rewards,” the fact is that there is no way they could have achieved what they did without people contributing their time, effort, and information.

The same is true of crypto networks, but with a big difference.

In cryptonetworks, the economic value is distributed across the members of the network in proportion to their contribution.

Uniswap, being a decentralized exchange for tokens, is relatively easy to understand. As discussed in The Good Governance Premium, Uniswap had surpassed centralized Coinbase Pro in terms of trading volume because people around the world had contributed the tokens they own in order to create a deep pool of liquidity for trading.

In return, a contribution of tokens, which is kind of a misnomer since ownership rights are still maintained-in a way- would be rewarded by a share of fees generated from trades.

To make it more understandable….you know the commission that brokers charge (or the difference in the spread between the price they give you and the price they get from other exchanges)? Well, Uniswap shares most of that with its Liquidity Providers.

The pool of liquidity that Uniswap provides is owned by the community and, the profits from the activity in that pool are shared with the community in proportion.

There is no way for Fidelity or TD Waterhouse to do this without breaking their business models…which is why they will eventually lose.

The value of digital networks is owned by every member of the network, NOT just the people who built it originally.

Cryptotokens make this possible in a way that was previously impossible.

That’s the innovation.

Finance is First, Not Last

It’s not even fair to say that “finance is first” because every cryptoeconomic network, by design, is built this way. Bitcoin being the primary example.

The UNI token, which represents a governance right (ability to vote) more than a right to a share of profits-an important difference- is just a high profile example. It’s like having a seat on the board of directors of Nasdaq.

There are thousands of others and there will be millions more.

For example, the next market that is in the process of exploding is crypto-art, the Reese’s Peanut Butter of Crypto

One token, $Rari, which I touched on here, is to an art marketplace what UNI is to Uniswap.

If you are a buyer or seller of art in the Rarible marketplace, you are going to earn $Rari tokens. Think crypto-Sotheby’s at scale, but with fees going to everyone who is a $Rari token holder, not just the owners of Sotheby’s.

This story will repeat over and over and over again.

If it’s a network, it can either be owned by a few or by the many. My bet is that people will migrate to the network where they can both get utility value but also economic value and have a sense of ownership and empowerment.

It may take a while, but I believe the end result is inevitable.

Name a market, name a network. It will become community-owned.

In the end, this is good news.

For more, see Understanding the New Crypto Economic Paradigm