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From Social To Community Tokens
How Social tokens are shifting from helping content creators better monetize to allowing building a future where decision making & flow of funds are fully transparent, uncensorable, and immutable.
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When I first became interested in Social Tokens in early 2021, they weren't really a thing. The "Creator Economy" was the trending space to be in, and despite the promise social tokens would help creators make a living out of their passion without having to work a 9-5 to achieve wealth, few of them had actually created their tokens.
But many things have changed since then.
In 2021, the Social Token market (which had existed for a couple of years) grew by over 500% from January to June. The number of addresses holding social tokens grew by ~200%, and there were 10 million tokens in circulation with a fully diluted valuation of $330 million.
That's what we call an incredible turnaround.
In early 2022, the craze doesn't seem to slow down, and it's honest to say that the Social Token revolution is slowly happening and seems here to stay.
So the question you probably ask yourself now is - “Wait, why this turnaround? Did everyone suddenly realize the social tokens' power? Or is there a more profound reason?”
As you've already surely guessed from this article's title, yes, there HAS been a significant shift in how social tokens are seen: creators realized that the true power of tokens resides in their power to gather communities, not in their ability to help creators better monetize.
But to understand how all of this happened, we have to jump back to the past, in a time where social tokens were seen solely as "Fans Tokens."
1 - The original use-cases of Social tokens
The creation of value in our ever-more digital world has drastically changed, for the better or the worst. Teens dancing on TikToks can earn more money in one video than top execs in traditional companies because we're now living in an attention economy (sorry, I don't make the rules), and the ones knowing how to capture it are the great winners.
But behind this new paradigm exists a sadder reality: this new economy only benefits a handful of creators, with less than 4% of the estimated 50 million creators earning a living from their creations.
Inequalities suck, and social tokens originally saw an urge of interest from creators seeing in this technology a better way to interact with their fans and monetize their audience better, the tokens serving as a pass to access premium content and exclusive experiences.
By letting only their biggest fans, those holding a sufficient amount of tokens, access their community, creators would more easily foster a sustainable community (less spam), ensures members have skin in the game (not only passive members or commenters), and incentivizes community members to make the overall community desirable to join over the long-term (the more desirable the community, the more valuable the token will be). By purchasing the creator's token, fans would further commit to their favorite creators and build a positive feedback loop that nurtures healthy fan communities built around a shared passion.
Originally, social tokens were seen as a way to provide a way for super fans to show their loyalty, and for creators to get initial liquidity and better capture the value, they are creating.
It sounds like a good deal, isn't it? Well, it was, but creators never widely adopted social tokens for multiple reasons.
2 - The problems encountered
For social tokens to be widely adopted by creators worldwide, we needed seamless ways for creators to implement them in their communities. Creators are not all tech-savvy, and the slightest blocker in the workflow would have discouraged many of them from leveraging this new tool.
And as you can imagine, they encountered more than one blocker…
They were difficult to implement for solo creators - They afforded a lot of advantages that creators could only unleash with a big enough community while being fairly complicated to implement for non-tech-savvy creators. Compared to the little short-term advantages for creators & fans, the time and trouble of implementing the token were simply not worth it.
To give a financial value to the tokens, creators had to put money upfront - Big creators who could afford to create a Liquidity Pool (the mechanism giving financial value to a token) and put money upfront already had plenty of ways to monetize their audience and didn't really need the token to monetize better. On the other hand, small creators, the ones who needed the most a token to engage and monetize their community better, couldn't afford to put ~$100K upfront in the hope of potential future revenue. Therefore, their tokens weren't tradable on an open market, limiting the opportunities that could have come with it.
NFTs became mainstream - Creators realized NFTs would actually be much easier to implement. Given the hype around NFTs, fans were keener to buy NFTs than social tokens, and it was easier for creators to make NFTs because, once created and implemented, the job was (almost) done. NFTs could serve as virtual passes, didn't need liquidity, and fans hoping for financial returns simply had to invest and wait until the creator did the work and created a hype around their project to sell.
With these barriers at entry, you start to understand a bit more why not many creators have decided to launch their social token.
Sure, social tokens had (and still have) plenty of utility for solo creators, but creators needed to put in a lot of work to overcome those problems, and there simply weren't enough of them keen to do it to bring the light to this technology and give it a chance.
Now, don't get me wrong, social tokens for solo creators ARE useful. My take is simply that social tokens, in the sense of "Fans tokens," will mainly be adopted by tech-savvy creators and the ones who have the chance to be accompanied by experts and companies. Implementing a social token is a lot of logistic for a creator, and Fan tokens will simply become a sub-category of the broader social token market.
After this painful failure, and to become mainstream, social tokens needed to find a new narrative and a new audience, one that would be keen to go through the struggle of implementing them and that could leverage their full potential.
And they found takers among the people who wanted to collaborate online.
3 - From Social to Community Tokens
Though most of our activities have moved to the digital world, our tools to coordinate in a digitally-native way haven't much evolved.
In the second part of 2021, tokenized communities (aka DAOs) emerged as a new structural model, one that could leverage new coordination mechanisms and give a digitally-native way for individuals worldwide to collaborate through tokens.
Soon, it became obvious that tokens - in the sense of virtual currencies that live on a blockchain and can be redeemed in exchange for other cryptocurrencies or special perks within the community the token is associated with - would be much more useful for communities than they'd ever been for creators.
Builders realized that tokenized communities could represent entirely new economic and coordination models for organizing groups of people. Through tokens, they saw a paradigm shift in the creation and collective management of communities centered around holding a common asset.
Groups of individuals worldwide could now have millions of dollars in a shared bank account with complete strangers and allow thousands of members to vote in a few hours securely, all thanks to tokens.
The best example of this new paradigm shift is Constitution DAO. This group of internet friends joined forces and nearly purchased the US Constitution after raising millions in only a week. This tour de force has only been possible through this new model of tokenized community and by leveraging the $PEOPLE token to coordinate.
Builders realized that social tokens, far beyond simply helping creators better monetize, could become a powerful tool to unlock innovation at scale and accomplish ambitious projects that were once impossible.
I found Packy McCormick well transcribe this new paradigm - "Web3 seems to be a toolkit for conjuring Scenius. More than financial speculation, web3 offers a set of tools that can align incentives in ways that allow groups to tap into their communal genius."
4 - The future of community tokens
Today, community tokens already serve as the core infrastructure and coordination mechanism of most DAOs. Tokenized communities realized the power of community tokens and have been using them since then to create trust at scale, align incentives, give ownership over future key decisions, foster culture, and retain contributors.
But, to be honest, even though the future of crypto is heading toward community tokens, they are far from being ready for mainstream adoption.
To reach this stage, community tokens will better infrastructure. They will need, for example, liquidity provisioning solutions and treasury diversification mechanisms for tokenized communities, which are two of the biggest blockers today for Web3 builders.
For community tokens to become mainstream, we'll also need to onboard more people to this revolution. While it was already challenging for solo creators to onboard their biggest fans, communities have the power to appeal to a much larger audience through broad and ambitious goals. It will be the responsibility of DAO founders to create better incentives that really encourage non-crypto native people to go through the process of jumping into the space - letting them claim some tokens worth a couple of hundreds of dollars in exchange for creating a Wallet for example.
From a tool to help content creators better monetize to one that allows building a future where decision making and flow of funds are fully transparent, uncensorable, and immutable, social tokens have taken a 180-degree turn in 2021.
Way beyond our present lives, once tokenized communities will have reached their fullest potential, they will allow much fairer and more inclusive systems and governments that could be used to govern our life on Mars for example. (Elon Musk, we see you).
We're only scratching the surface of what's possible with community tokens, but more than 4200 DAOs have already been created, every single one of them contributing to finding new use-cases for tokens.
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