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What are social tokens?
Social tokens are cryptocurrencies that allow organizations, creators, and entrepreneurs to unlock new monetization opportunities and facilitate community engagement and involvement. Their holders can access a variety of community-related membership perks such as gated chats, voting on community decisions, unique experiences, and rewards. Such tokens can be used by fan clubs, DAOs, and other communities to organize and democratize experiences or even establish community membership.
Social tokens are unlike NFTs, as they are fungible, meaning that social tokens are like fiat currencies and can be exchanged for VIP experiences or even club merchandise. These tokens are not backed by the same utility and underlying value principles of Ethereum or Bitcoin.
Types of social tokens
They are issued and controlled by individuals, or people with public profiles such as artists or entrepreneurs. These tokens are usually known as ‘creator tokens’ and can be created for different reasons:
- Coin Artist wanted to incentivize engagement and ultimately connect with fans.
- Alex Masmejean used personal tokens to finance the start of a career and move to San Francisco.
- RAC created a platform and a direct distribution channel.
These are tokens that are issued and controlled by a group. Such tokens are mostly managed by a DAO (decentralized autonomous organization) to facilitate participation and access within the respective community. The modern implementations of community tokens usually involve a communication platform like Telegram, Slack, or Discord that is regulated by a token.
Karma community is one of the pioneers of the token-gated access idea. The platform limits group chat to 650 members and comes with a community token. These tokens can also be effective tools that incentivize the desired behaviors within a community and enhance community identity and cohesion.
Notable Community Tokens:
Friend With Benefits: Uses $FWB token to incentivize community members to attend calls, host events, and be active in Discord.
Donuts: An Ethereum-related subreddit where community members are rewarded with community tokens depending on how active they are in the community.
Social platform tokens
These are tokens that represent control over platforms that facilitate the issuance and exchange of social tokens.
Social token use cases
Content creators on various platforms can use social tokens in two different ways:
- Build and reward their fan community.
- Compensate themselves for their creative work.
Fans, who are community members will receive benefits such as access to group chats, unique video content or exclusive merchandise. Creators can come up with different membership levels with varying benefits.
This is not the first time that creators are trying to monetize their work as David Bowie issued Bowie Bonds in 1997. This was an asset-based bond that securitized earnings from his earlier selling albums and paid 7.9% as annual interest for 10 years up to 2007. $55 million was paid by Prudential Financial for these celebrity bonds.
Social tokens are a true reflection of Web 3.0 as they directly connect the creators and consumers of content. Spencer Dinwiddie of the NBA and esports’ personality Susie Kim, along with various musicians have created social tokens for their communities.
The following are some of the use cases of social tokens:
Fans can buy tokens to get access to a creator. A perfect example is Portugal. The Man, a musical band that gives fans who buy 10 coins access to benefits like text and video chats and the band’s audio archive. Lil Yachty is another example who gives holders of his coin gift boxes curated by his mom.
We have seen people investing in coins speculatively, hoping that an increase in a creator’s fame will lead to a higher token price. Social tokens are in limited supply and an increase in their demand raises their value. It can be risky to invest in such coins but it is worth a try.
Social tokens can be used as a medium of exchange. Fans can donate a token to the creator instead of using the ‘tip’ buttons that are common on various websites with PayPal or Venmo acting as the intermediaries.
How to buy social tokens
- Social Token Platforms. Fans interested in fan tokens buy CHZ through a crypto exchange. CHZ tokens will then give the fans access to various fan tokens available on the Chiliz network. On the other hand, you may find some fan tokens that are not on Chiliz and its Socios.com website.
- Centralized and Decentralized Exchanges. There are fan tokens available on centralized exchanges. However, these tokens might not be certified or large enough to earn a listing slot. Fans can only access such through swapping or trading on decentralized exchanges such as PancakeSwap.
Risk of social tokens
- It is a long-term commitment for creators. When you create and sell NFTs, there is no additional work or effort needed from you. However, social tokens demand that you keep on working to improve the value. You can do this by creating more content or even offering more perks often.
- Regulations can impact fan tokens. There are a lot of gray areas in the regulation of social tokens. Regulatory attention is likely to be attracted when creators use taglines such as ‘crowdfund’ or ‘make money’.
- Price fluctuations may impact the creator’s well-being. The token price fluctuates daily as fans buy, sell and trade the tokens. If a creator pays too much attention to their token, then a large decline in its price is likely to negatively impact their mental health.