Shares vs Tokens - Which vehicle will Data Access likely ride on?

Packaging Data Access as Shares

In principle, Data Access can be packaged into conventional tradeable instruments such as shares. The existing financial infrastructure - Centralized Exchanges, derivatives, regulators  - can then be brought to bear on Data Access shares. In this picture, shares might represent something like fractional ownership of the underlying Data Asset. Transferring shares transfers ownership. If the market valuation of the underlying asset increases, the shares become more valuable and get traded more heavily.

There is a certain comfortable familiarity with the idea of shares representing fractional ownership of Data Access. Let's stress test the idea though, shall we?

1. Data Access rights are comprised of rights to ownership, usage and monetization. In case of corporations, shareholders have ownership of the assets (minus liabilities), their potential growth, and distributed profits. In case of Data Access, would shareholders have true ownership of the underlying data? Or would the ownership reside with the owner of the underlying Data Asset with the rights to usage and monetization distributed among shareholders? Or is it some combination of both?
2. If one has shares representing usage rights, does one not indirectly have ownership over the underlying data? Alternately, can the shareholder not simply use the data and sell the shares at the same time?
3. What would shares representing monetization rights mean in the context of Data Access? Do they represent the right to sell Data Access at the current valuation of the data on the open market? Or do they, like dividends, represent the rights to profits made by the owner of the underlying Data Asset?

I could go on. But without belaboring the point, let me state simply that the mental model of shares doesn't do a great job with Data Access rights. Fitting these requirements awkwardly on to the existing financial infrastructure calls for changes to the existing ways in which shares work. This might need changes in financial pipelines, creation of new financial infrastructure and accopanying regulations. In contrast, Web3 already has an alternative that is infinitely more flexible - Tokens.

Packaging Data Access as Web3 Tokens

Web3 Tokens have a distinct advantage versus shares in representing Data Access Rights - composability. I've written about composability in the past in my article on Idea Legos. Tokens can be designed flexibly to represent the demands of the underlying asset class.

To take two specific examples, we can have Non-Fungible Tokens (NFTs) representing ownership of unique Data Assets and Fungible Tokens representing rights to Data Asset usage, trading and staking.

These primary forms of Data Access can be combined and composed in a variety of unique ways to address the demands of the situation at hand. For instance, if we wanted to design an instrument that rented out Data Access for a particular time period, could we design this using tokens?

Of course we could! In principle, we could design "Data-rentals" represented by special NFTs where periodic "rents" are streamed to owners in exchange for temporary transfer of ownership. This is of course just one example of a financial instrument designed per the needs of the situation. The possibilities are quite extraordinary!

Besides elegantly solving some of the problems that might plague the shares-as-Data-Access-rights model described above, Web3 tokens have a significant first mover advantage. Ocean Protocol's Open Data Marketplace, for instance, already has a thriving, open, public data Marketplace that allows for buying, selling, trading and staking on Data Assets using Datatokens.  As of this writing, the Total Value Locked (TVL) in Ocean Market Data Token Pools is ~2.5M USD.

Given the above, my money is on Web3 tokens winning out as the best-suited instruments for Data Access.

Web3 tokens can trade both on order-book based Centralized Exchanges (CEx) and AMM-based Decentralized exchanges (DEx). If I were to hazard a guess, I'd say DExes win this contest for two main reasons. First, the liquidity requirements for tokens on DExes are significantly lower than those for CExes. DExes allow Datatoken-Crypto pair markets to exist even in the absence of significant liquidity.

Other than the most sought-after data assets, I expect the liquidity for most other Data Asset tokens to be poor (I'll have more to say about this in the next article). Secondly, similar to the case for Web3 tokens, DExes have a significant first-mover advantage.

Alright. If you've stayed with me so far, you know that Data Access (and not Data) is the true financial asset, and that I expect Web3 Tokens to become the trading instrument that will likely represent Data Access as a financial asset.

Having set the stage, I'd like to move on to the main article in this series.