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Dear subscribers,
I make no money from this essay. If I wanted to, I would need to put it behind a paywall where only a fraction of readers will see my hard work.
But what if there's another way?
In January, John Palmer crowdfunded an essay by issuing $ESSAY social tokens.
Sixty-three people bought these tokens, and John raised $13K total. As co-owners of the essay, token holders get 10% of future sales.
John then wrote the essay and sold it as an NFT for $6,000.
Token holders got 10% of the sale and access to John's private Discord community.
If none of this makes sense to you, don't worry. In this post, I'll explain what social tokens are and why creators should care.
Thanks to Bradley Miles (co-founder of Roll) for taking the time to answer my questions. Thanks also to Brian Flynn, Patrick Rivera, and Rex Woodbury for their input.
What is a social token?
Let's explain what a social token is by comparing it to an NFT.
An NFT (non-fungible token) is a record of ownership of a unique digital asset. Like a record stating that you own a painting or a puppy, each NFT is "non-fungible" (unique) in that you cannot easily swap one for another or divide it into fractional pieces.
In contrast, social tokens are fungible (mutually interchangeable). Like the US dollar and bitcoin, social tokens can be swapped with each other and divided into fractional shares (e.g., you can own 0.01 $ESSAY tokens).
To summarize:
NFTs let a single fan own a digital asset.
Social tokens let many fans co-own a community.
What does it even mean to co-own a community?
To make this concrete, suppose you're a YouTuber named Jimmy with 10,000 fans.
Instead of asking fans to pay to subscribe to your YouTube channel (letting YouTube take 30% of your revenue in the process), you ask them to buy and hold $BEAST tokens. In exchange, they:
1. Get community benefits
Token holders get access to your private Discord community and exclusive content drops. They can also use their tokens to vote on community actions (e.g., who you should hire as a community manager).
2. Co-own NFTs
You ask fans to buy $BEAST tokens to crowdfund your next video, which you’ll list for sale as an NFT. In exchange, token holders get a 10% of all future sales of the NFT. Since token holders make money when your NFT sells, they will help find a buyer.
3. Co-own your future income
To grow faster, you need to get better video equipment and hire an editor. You ask fans to buy $BEAST tokens to fund these purchases. In exchange, token holders get a cut of all future income that you make up to a certain amount (e.g., $100,000).
To summarize:
Social tokens let fans co-own your community. Token holders might:
1. Get community benefits
2. Co-own NFTs
3. Co-own a creator’s future income
This ownership has several benefits:
Fans have an economic incentive to help whatever they co-own succeed.
Fans can buy, sell, and trade their tokens without an intermediary taking a 30%+ cut of each transaction.
How are creators using social tokens?
To make this more concrete, let’s look at three creators who are using social tokens to let fans co-own their community.
$CHERRY (get community benefits)
Cherry is an adult creator who has her own $CHERRY token. The more tokens a fan holds, the more access they get:
Sfw Discord server
Nsfw Discord server and content
Special interactions with Cherry and unique NFT collectibles
$WHALE (co-own NFTs)
Whale is a well-known NFT collector. His social token, $WHALE, is the most popular token today because whale tokens are backed by an extensive NFT vault valued at $22M. Essentially, token holders are co-owners of these NFTs and $WHALE has increased in price from $3.59 in January 2020 to $33 in March.
Token holders also can:
Rent NFTs from the vault
Access a Discord community with crypto art experts
Receive Whale content drops, swag, and more
$ALEX (co-own future income)
Alex is an entrepreneur who raised $20,000 via $ALEX tokens to support his move to San Francisco. Token holders get:
15% of Alex's income (capped at $100,000), paid out every quarter.
Additional perks like 1:1 meetings, access to Alex's network, etc.
Alex used his earnings to co-found Showtime, a social network for NFTs.
What are the risks with social tokens?
As you can probably tell by now, social tokens are complicated (that's probably why they haven't taken off like NFTs…yet).
As a creator, there are several factors to consider:
Creating a token for your community is a long-term commitment. When you create an NFT, there's no pressure to do additional work after you sell it. In contrast, when you create a social token, there’s an implicit obligation to make the token more valuable - whether that's creating more content, offering more perks, or doing something else for your community.
Price fluctuations can have an impact on your mental health. Your token price will fluctuate daily as fans buy, sell, and trade your tokens. A large decline in your token price can have an impact on your mental health if you pay too much attention to it.
Regulations can impact social tokens. If creators start pitching their social tokens as "crowdfund me and I'll make all of us rich," this medium can easily attract regulatory attention.
The last point is worth a history lesson. From 2017-2018, ICOs (initial coin offerings) took over the crypto world. Startups would mint their own tokens that they then sold to investors to raise money. The problem was - after people bought the tokens, many companies would just take the money and run. Scams were rampant.
So how are social tokens any different? Unlike ICOs, social tokens are backed by the reputation of a real person or community. If you're a fan, you should only buy tokens for creators and communities that you trust and genuinely want to see succeed.
Ok, so how do I create a social token?
There is currently no self-service platform to create social tokens. This is a good thing given how complex social tokens are to get right.
Instead, you need to work with a platform like Roll and Rally.io to mint your tokens. Below’s a step by step guide from Roll’s creator playbook:
Set up your profile and apply to create a social token
Name your social token. You can name it after yourself or your community.
Make a launch plan. Announce your token launch on social media and get fans to purchase your token.
Keep building buzz by:
Giving out tokens to your most loyal fans.
Creating more community benefits for token holders (private Discord, etc.)
Adding your social token to an exchange so people can trade it with other tokens (e.g., ether).
This blog post took three weeks to write, but I persisted because:
If NFTs are the gateway drug for creators to enter the crypto space, social tokens could very well be the next wave.
I’ll close with one last example of co-owning a community with social tokens.
In January, the WallStreetBets community grew to 9M members by having a shared goal (screw the hedge funds), leader (DeepFuckingValue), identity, and language.
What if this community also had a shared economy through a $WSB token?
Community members could earn tokens by creating great content - from stock investing advice to memes.
They can use these tokens to access emotes, avatar badges, or even vote on how the community should be run.
I think we’re just scratching the surface of what social tokens can do. Instead of another speculative asset, I hope that they become a core tool to help creators and communities succeed.
Great post and explainer! I have a devil’s advocate view to consider more ideas...
There is an interesting branch to this with the idea of the sanctity of content. With content often being escapist and immersive, how often does it make sense to add an economy layer? At the core, people are there for content.
I kind of see a shift with these ideas where rather than the monetization structure being recessed into the background with content being the focus, money is prominently involved for everyone, requiring a more active state of mind. Depending on the context, immersion can either be increased or entirely broken. I am guessing there is a reason most content is monetized with either ads almost seamlessly blended in or simple pay to unlock structures, often as automatic subscriptions. Even Twitch, with donations emphasized, seems to be that way more out of necessity even if there might be some community building that helps with as well. But it is possible that is the upper limit of payment prominence in content. More generally though, I see watching content as just being captivated with the goal of the creator economy to be as invisible as possible.
With that, I am reticent of tokenizing everything. If someone is watching a cool TikTok or reading a fascinating Substack, the experience could faulter if they are also thinking about the revenue potential of content. Maybe music is good because the listener does not have to think of the brand and fluctuating market value and investment potential of an album? A hyper accessible economy layer for content means there is no longer an abstraction between a creator’s content and money. Can the idea of a community even break if it becomes mainly about money and speculation rather than human interaction? I am trying to think how many creators even want or understand tokens. Selling a story of scarcity and fostering a market is a somewhat different skillset from content creation even if related to influence. The general complexity seems to be a barrier for a rapid restructuring of creator monetization.
The examples of existing social tokens seem to have some paradoxes as well. Some are selling an abstract ownership or even a piece of the aura of a brand. Others have a practical revenue aspect. Mixing those makes everything hard to value. In addition, mixing creator support and gambling provides a lot of crossing incentives. And I cannot find as clear of a physical world comparison like there is with art and NFTs, making the new system less proven. It’s important to keep in mind all the variables as well.
Thinking about where adding social tokens can really add a sense of community and co-ownership, those really come more from connections and discussions and engaging content, not money. Can those really be bought in a lot of circumstances? If the goal is simply to support a creator with money, established solutions seem to work fine? Content needs room to be complicated so adding complexity on the monetary support side seems problematic unless it can be directly tied back into the content, improving the experience. That seems difficult and limited in application. It is different for every creator and content type but even if that all works, the use of blockchain tech needs to be justified as well.
In theory the market, though intrinsically inefficient to a degree, would have already provided solutions to real/solvable problems that existed in the creator space. I think the best way to look at this is, what are the tech innovations that are possible because of the blockchain? My main goal is to try very hard not get caught in a hype bubble. I am cautious around whether some blockchain token ideas are just more complicated, less practical Patreon or Twitch or Substack subscriptions being invented without leveraging most advantages blockchain technology provides while embracing what can be drawbacks.
Overall, there is likely a niche for social tokens, especially with new future concepts, but I am not convinced on much broad applicability for the idea.
Thank you very much for this, I am new to social tokens and trying to learn as much as I can as I feel this is what I want / need to do for a charity I am hoping to revive (covid ruined my plans March 2020)
I may be asking many questions :-)