In the era of Web 2.0, giant companies hold all the data of people on social platforms, and use algorithm push to trap users in the information firebox. Moreover, the benefits obtained by giant companies through the use of users’ information and creators’ production materials have not been fairly distributed to creators and users.
In the era of Web3.0, with the development of DeFi, GameFi and NFT, etc., the scale of users and industry influence continue to expand, and social networking has become an inevitable part. However, the existing social products of Web2.0 have the problem of high centralization, which cannot meet the new needs of Web3.0 users for data ownership, income rights, and privacy. Users need a new paradigm of social networks. Social products are also undergoing a paradigm shift from “platform-centric” to “user-centric”.
The blockchain-based decentralized technology in the Web3.0 era enables users to achieve decentralization and composability of creative content, social relationship data, identity reputation, etc., without relying on a centralized platform. These changes will bring new paradigm solutions to users’ data ownership, income rights, privacy and other issues, and build a social network that pays more attention to users.
Why is Web3.0 social networking to be tokenized?
In the cryptocurrency community, the concepts of creator economy, owner economy and fan economy have become popular one after another. Under the open financial atmosphere brought by DeFi, the market and the cryptocurrency community value evaluation system for “social value” It is also constantly updated. An important direction of social tokenization is to bring about the financialization of this “community influence”. With social tokens, both participants and issuers can benefit from “influence” more directly.
As a catalyst, tokens can effectively solve the cold start problem faced by content creators in the early stage. At the beginning of content creators’ creation, they often lack audience communities (fans, subscribers, etc.), until they have a certain scale of community fans and followers, and their “flywheel effect” can really start. Therefore, creators can accelerate the growth of their influence by transferring part of their future personal interests and endowing users with certain rights and interests. Specifically, creators can issue tokens to distribute their future expected income from influence, and distribute these future expected income and users’ contribution value to creators through token economic incentives. The earliest followers and community members, and these early followers will also help creators gain more users and fans. The role of social tokens is to enable creators to receive early investment and early users to be financially incentivized, which is critical to the development of any network.
Types of Social Tokens
Currently mainstream SocialFi projects include Whale, Chilliz, Rally, Friends With Benefits, etc., and new players and projects are constantly entering the social field. Although in the first half of last year, the market share of social tokens was almost negligible, but since this year, the social token market has continued to grow, and various excellent projects have continued to emerge. According to Coingecko data, WHALE, the project with the highest market value of social tokens, had a market value of 2.6 billion U.S. dollars at its peak. At the same time, the SocialFi social track continued to receive new capital and funds. Below, we will divide the types of social tokens by token issuing entities, which are currently divided into three categories: personal tokens, community tokens, and social platform tokens.
1) Personal tokens
Personal tokens are primarily issued and controlled by individuals. For example, a Youtube content creator can promise to provide token holders with a certain percentage of advertising revenue, which will be distributed from the creator’s future profits. Other benefits include making it easier for early fans to join their private communities. While the creators transfer their future profits, they also gain an early audience alliance, which helps to expand the creators’ existing social capital including influence, network scale, etc., and human capital including skills, judgment and creativity. From the perspective of individual token holders, benefits for early token holders include:
- Exclusivity and access rights: including joining the creator’s private community, obtaining first-hand information about the creator, or being able to chat and interact with idols, etc.
- Discounts: Individual token holders can get discounts on any goods, events, NFTs sold by creators and brands;
- Identity and Loyalty: Holding a personal token of an artist or creator usually also represents a symbol of social identity and social capital, although identity and status are not as good as tangible benefits such as “discounts” or “free goods”. The value it brings is often ambiguous. But there is no denying that social capital is growing as an asset, and its social status may also improve over time.
2) Community tokens
Community tokens are primarily issued and controlled by a group, usually managed by a decentralized autonomous organization (DAO). The key role of community tokens lies in the ability to govern the community. Community token holders have the right to control and vote to determine the business development direction and important decisions of a group or organization. These votes also determine how funds are allocated and managed within the organization. In addition, community members can also vote on other members’ proposals. An example of a community token is a fan token (a fan token issued by a sports organization), which currently allows fan token holders to vote and receive derivative benefits such as signed merchandise.
At the same time, community tokens are also an extension of the benefits of individual tokens. Individual tokens can also evolve into community tokens,
One of the most typical cases is WHALE. The WHALE token was originally issued by Whaleshark, a well-known collector in the NFT field, and later evolved into a community token as the community expanded, democratizing the ownership of various NFT assets it owns, and its treasury is also controlled by the community. Based on WHALE DAO, decisions around the governance of these NFTs are in the hands of WHALE token holders. So, over time, many individual tokens may naturally evolve into community tokens and expand their network size.
3) Social platform tokens
Social platform tokens represent control over a platform, which is conducive to the issuance and exchange of social tokens. Due to the complexity of issuing and managing tokens, some platforms have emerged to handle the issuance, distribution and trading process of individual and community tokens, among which the representative social platform token is Rally. The Rally platform can provide the main tools for creating social tokens. For example, Twitch, an overseas game live broadcast website, can create its own social tokens on this platform, which are mainly used to reward creators and members in Twitch. The platform encourages non-cryptocurrency-native media platforms to connect with mainstream audience users by issuing social tokens.
Current social tokens are tokens backed by an individual’s or organization’s reputation, profitability, related services, and brand. Users are often encouraged to contribute to the community by issuing social tokens, or using the token model to motivate users to produce valuable operations. Personal tokens are also dedicated to exploring the value added for individual artists, content creators, and publishers. Since issuers often have their own community and fan base, under the slogan of “creator economy”, social tokens embody many characteristics of Web3.0, and new projects are constantly being launched. On the other hand, the emergence and rise of social tokens has brought new ways of value input in social media. Social tokens adjust the connection between creators and their followers into a symbiotic relationship, which plays a more critical role with the role played by NFT in decentralized social. In the future, social tokens, whether they are personal tokens, community tokens or platform tokens, will likely generate huge value.
*This article does not constitute investment advice