- Social tokens are a way for crypto-based communities to incentivize working together on projects.
- More than the tokens themselves, it’s the growing ecosystem around them that is valuable.
- Social tokens are already being successfully utilized in rapidly growing communities.
- Eliot Couvat is a French writer and head of community at Coinvise.
- This is an opinion column. The thoughts expressed are those of the author.
Since last year, the NFT space has boomed. Short for non-fungible tokens, NFT sales have burst into the media limelight, and so far this year, NFT sales have totaled more than $13 billion.
Despite the surge in interest, many people still don’t get the point of NFTs. They’re treated as a flight of fancy with little practical use. But while NFTs still draw skeptics, a new trend has emerged that could provide more utility than NFTs and has the potential to completely reinvent the future of work and the way we collaborate: social tokens.
What are social tokens?
Put simply, social tokens are a way to incentivize anyone to work toward joint projects in a DAO, a crypto-based decentralized community, in exchange for a digital currency. This digital currency can then be redeemed in exchange for other cryptocurrencies or special perks within the community the token is associated with, such as access to token-gated content, the right to vote on future strategic decisions, or early access to community NFTs.
DAOs are firstly virtual places where people passionate about the same things decide to join forces to hang out and achieve high-ambition goals. It’s not about work. It’s first and foremost about culture, about vibing together and creating what you’ve always wanted to create. In DAOs, culture comes first, products and projects come second. There are many types of DAOs, some focused on building products for the crypto world and some focused on social networking. All DAOs, even socially-focused ones, are building different products with different ways to organize their work, and social tokens are how they can accomplish these goals.
Social tokens are cryptocurrencies like any other regular cryptocurrency. But the benefit of creating a social token is to give community leaders the power over the distribution of the token.
The goal of creating a social token is to build a virtual economy where early believers and contributors can share the upsides. Contributors who help the community grow by contributing to the different projects the DAO is building are given shares, or social tokens, with the aim of creating such an ambitious and robust community and projects that people are keen to buy the token to gain access to membership-only content, perks, and voting power in the community. Instead of simply getting paid with an existing cryptocurrency (similar to a salary), contributors are incentivized to help the organization succeed, as the value of their tokens — directly correlated to the success of the project — can gain an almost infinite value. Think of it like receiving equity as an early employee of a startup.
Social tokens also allow community leaders to reward contributors fairly. Unlike a startup, you don’t need to be one of the first contributors to have a decent amount of your community’s token. Even if you join at a later stage, you’ll be rewarded for your work. It’s a much fairer distribution of power than traditional startup models.
On top of the advantages that social tokens provide within a decentralized community, they are also more easy to trade than NFTs. Token holders don’t have to wait until someone wants to buy their tokens to sell them; they can simply exchange them for another cryptocurrency at any time, which makes their value less hypothetical than an NFT’s.
Finally, unlike NFTs, there’s no need to get capital to jump into the social token revolution. There is no barrier to entry. Anyone can put in some work and invest their time in an online community and be rewarded with social tokens. After all, those who invest their time are the ones creating the real value for an organization.
Social tokens as a way to create trust
The point of creating a social token is to incentivize collaboration by making it easy to collaborate with individuals that you don’t know and that you don’t specifically trust. Instead of setting up contracts and legal status to cover each contributor at the beginning, social tokens enable transactions on a blockchain, meaning there is an irrefutable record of the exchange.
Social tokens won’t completely replace what we use now to create trust at work, such as legal contracts or regular, fiat payments, but they are a way to start small-scale projects more quickly.
One way tokens can do this is via a “multi-signature wallet.” This wallet is a crypto wallet that allows you to manage your community crypto assets with the option to require a pre-defined number of signatures to confirm transactions. That way, no one can abandon a project with all the money that has been contributed since it would require the authorization of all the other members.
Crypto mechanisms also allow members to equitably vote on future decisions, with voting power proportional to the number of tokens a member has.
What kind of organizations should use social tokens?
More than the tokens themselves, it’s the ecosystem around them that is valuable — the community or organization. While NFTs are mostly speculative today and serve primarily as a way to show status and belong to a community, social tokens allow people to participate in these communities, build great things together and share the upsides. Getting an NFT is like being an investor in a company, whereas getting social tokens in exchange for your work feels more like being an early employee. You’ll be more involved, learn more, and have power over the community’s future. It’s much more fun than being an investor hoping for a return down the road.
Some projects have successfully leveraged the power of social tokens in recent months. For example, The Modern Billboard Collective is a project between three startups that aims to create a tokenized equivalent of the Million Dollar Homepage, a web page consisting of a million pixels arranged in a 1000×1000 pixel grid where anyone could buy a pixel for $1 and put an ad there, making the entire page worth $1 million. The collective aims to take this idea and, using tokens, allow brands to advertise without using a middleman on their respective websites by selling part of their homepage’s pixels.
In the pursuit of leveraging crypto-mechanisms for the whole project, they also succeeded in creating trust between each of the three founding startups. Indeed, by letting anyone buy a digital “lot” on one of the three websites “on-chain,” it is easy for each company involved in this collective to trust each other, as the royalties will be shared automatically and fairly between all of them. These experiments are made easy thanks to platforms like Coinvise that allow anyone to create a social token in minutes.
Some decentralized communities bet on social tokens years ago to incentivize cooperation, and many of these communities — such as Friends With Benefits, a group chat of thinkers and creators similar to a social network, or JUMP, a community for advertising professionals, Fortune 1000 brands, and Web3 startups — are currently thriving.
Social tokens could be the next revolution in crypto by facilitating collaboration and providing an easy way to work on multiple ambitious projects at once, giving flexibility and autonomy to token holders.
There are already several communities using social tokens that are growing steadily and have the potential to become billion-dollar communities. The space is developing fast, but everything still needs to be built and there are a multitude of opportunities ahead for ambitious and motivated individuals.
It might be a once-in-a-lifetime opportunity to grow with these new Web3 communities and be rewarded for being part of this revolution. Don’t miss it.