Is it time to tokenize everything? That is what some developers and communities are doing with social tokens. Some consider social tokens to be the next big thing in the crypto space, while others suggest they are an attempt by influencers to gain some quick cash. Regardless of your stance, social tokens are an interesting concept worth exploring.
What is a social token?
Social tokens are a type of cryptocurrency issued by influencers, communities, or brands to monetize themselves or activities.
Before the onset of Web 3.0, the monetization of content by creators was largely managed by platform owners and social media giants. For instance, if an influencer released a video on social media, platforms such as Facebook, YouTube, Instagram, or Twitter shared the revenue with them. Additionally, social media platforms have the power to censor or control content produced by influencers.
Web 3.0 fixes this in multiple ways, including the concept of social tokens. Content creators can eliminate middlemen (platforms) by charting their path with social tokens.
Similar to most cryptocurrencies, these tokens are built with blockchain technology and secured by cryptography. Most social tokens are built on top of existing blockchains like Ethereum as ERC20 tokens, Binance SmartChain as BEP20 tokens, or Solana as SPL tokens.
There are two general classifications for social tokens: creator or personal tokens and community tokens.
- Personal tokens are created by individuals such as celebrities or artists. These tokens can be exchanged for exclusive content or services.
- Community tokens are issued by brands or groups as means to gain membership or access to a community.
Another type of social token is tokens issued by platforms that allow people to create social tokens easily. E.g., Bitclout (CLOUT) and Rally (RLY).
The increase in social token adoption has led to the advent of several social token creation platforms. For instance, Rally has created a hub that allows people to design loyalty programs around social tokens, and other platforms like Fyooz and Seed Club have joined the fray.
Another dynamic social tokens project is BitClout, a place where users can trade tokens based on the reputation of celebrities.
Chiliz is probably the most popular social token project at the moment. The platform has partnered with several sports teams to release fan tokens that provide unique experiences for supporters. At the time of writing, Chilliz has worked with major sports brands such Manchester City, Paris Saint-Germain, Juventus, Inter Milan, and the Davis Cup.
If you believe in the adage “follow where the money goes,” social tokens may be of interest to you. VCs have begun pouring money into this sector of cryptocurrencies. Here is a list of some investments in social token platforms:
- Chiliz, the leading sports social tokens issuer, received an undisclosed sum in investment from Binance in 2018 after securing $27 million through early private placement.
- Rally, a social token hub for loyalty programs, raised $22 million in April 2021.
- Showtime, a platform that allows users to make NFTs and creator tokens raised $7.5 million in May 2021.
- Coinvise, a social platform, raised $2.5 million in June 2021.
- Calaxy, a celebrity fundraising application, raised $7.5 million in July 2021.
What is the utility of social tokens?
For social tokens to gain value and mass adoption, creators will need to have use cases for them. As the sector evolves, more advanced use cases are being introduced by developers. Here are some of the most popular ways fan tokens provide value to holders:
- Monetize fan engagements: Like the “play to earn” concept in the gaming industry, social tokens allow fans to “engage to earn.” Famous artists or brands can reward loyal fans with social tokens.
- Payment method: Some brands and celebrities accept their social tokens as methods of payment for event tickets or merchandise. In other instances, using the social token gives you a discount on your purchase.
- Exclusive content: Fans can unlock special content by holding social tokens. For example, Nigerian music icon Davido has announced $ECHOKE, a social token that is set to open access to festivals and exclusive merchandise.
- Governance: Even though this may not be at the highest level of the brand or management of the artist, social token holders can sometimes vote and influence decision-making.
Beyond the value it provides for holders, social tokens also create new opportunities for creators. This includes:
- Fundraising: Instead of waiting till products are sold to raise money, creators can sell fan tokens to fund new projects.
- Better rewards: The existence of middlemen like social media platforms reduces the income of creators through the payment of fees. With fan tokens and a personal medium, creators can earn a better income and lower prices by eliminating third-party charges.
Finally, social tokens can promote the network effect of the entire crypto space. An increase in the adoption of a social token built on the Ethereum blockchain will promote the popularity of the network. What’s more, it presents a unique opportunity for onboarding new users into the cryptocurrency world.
Social tokens fit the Web 3.0 narrative of connecting creators and consumers directly. This could make the sector an essential part of the creator economy and crypto industry in the years to come.