A Step by Step Guide to Social Tokens for Creators
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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.
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).
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).
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.
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.