Social tokens are a kind of cryptocurrency that a brand, creator, influencer, or community can use to either monetize themselves or fund a cause. They are coins (crypto tokens) issued by creators or communities that confer certain privileges, relating to their creator or community, on the holders of the token. Fans of creators can either buy the token or be rewarded tokens for doing certain community activities like managing a discord, being a moderator, or promoting a creator on social media. Social Tokens represent a fundamental change in crypto and a massive step forward bringing the crypto and creator economies together.
Any creator can create a social token using one of the popular platforms. By creating their own social token, a creator is in essence issuing their own crypto coin with a price that fluctuates in dollars (fiat). Fans can buy into the social tokens because 1) they believe that the token may appreciate in price as the creator grows and/or 2) because they want access to the rewards conferred by the ownership of the token.
Unlike many cryptocurrencies (or the so-called meme coins), social tokens do have intrinsic value. The exciting thing about them is that the creators themselves set this intrinsic value. For example, a creator might say that only their social token can be used to buy certain special services from them. A YouTuber could say only their token could be used to buy a shout-out on their channel. Because of this, the social token of a creator who has a large following with loyal fans should be in demand because of the access to the creator the token confers. That said, social token prices can be volatile as they’re also subject to the volatility of the cryptocurrency market as a whole.
Creators who release social tokens do it because they believe it will help them raise funds or monetize their brand in a novel way not tied to sponsorship from influencer marketing. Additionally, social tokens can help build community and act as a reward for community-building activities.
Since monetization is a problem that lots of creators and influencers face, social tokens have become a viable alternative way of monetizing. In theory, it’s a win-win for creators and for fans, as the tokens help creators monetize and create rewards for the fans as well as the potential for the tokens to appreciate in value.
In today’s social influencing market, influencers and creators generally have two limited monetization streams. The first, and perhaps most important, is through advertising.
Whether it’s through programs like YouTube’s Partner Program or TikTok’s Creator Fund, most creators and influencers rely on advertising as their primary source of revenue/income.
This can create a difficult dynamic as only two million of the estimated 50 million creators make enough money to rely solely on their content creation as their source of income. Additionally, all platforms are not created equal in terms of revenue. YouTube is widely known to have the highest CPM for videos. However, gamers, in particular, can monetize extremely effectively on Twitch through “subscriptions,” where users pay a monthly fee to subscribe to the channel, and the revenue is split 50/50 between Twitch and the creator.
Hank Green (one of the original YouTubers with his and his brother’s channel, the Vlog Brothers) recently broke down (in a YouTube video) the economics of the TikTok Creator Fund where creators actually only get paid a fraction of a cent per view and whereas TikTok grows the payouts to individuals creators actually go down. Instagram had not until recently paid creators for content or had a revenue-sharing program. They’ve recently added pay-outs to creators based on views of Reels (their new TikTok competitor).
Social tokens provide an alternative revenue stream for creators and shift the monetization from being reliant on large platforms like YouTube, TikTok, and Instagram or to being reliant on fickle brand campaigns through influencer marketing. By providing an alternative method of monetization for creators, they reduce the dependence of creators on these platforms. And by extension, reduce their dependence on advertising dollars spent by these huge corporations.
Social tokens also allow the creators to focus more on their content rather than complying to brand guidelines for advertising or influencer marketing. By focusing on their content, creators can engage with and grow their content and communities and shift away from a dependence on brand advertising.
By focusing more on their content and community, it opens possibilities to creators building new social platforms or the ability to share content. Not being dependent on brands, frees the creators to create content without restrictions.
This is still an emergent area of the creator economy. Like NFTs and cryptocurrency, social tokens are still in their infancy. Despite being made specifically for influencers and creators, many are not aware of the capabilities of social tokens, and how it can empower them. Additionally, because of the volatile nature of cryptocurrency, many creators and influencers are waiting to see how the space unfolds before jumping in and getting involved. There’s still much that can be done with social tokens and as more and more creators get involved with them, it will show more use cases of social tokens and prove their value to their fans.
How Social Tokens Work
Social tokens are a very broad term currently and encompass both many uses and many definitions. The standard social token is currently a crypto token issued by a creator. The creator selects the name of the token and its price. So creatorX, might pick the token name $creatorX and issue 10,000 tokens at $1 through a social token platform. S/he would then promote the social token issuance to their fans and community and encourage them to buy the token. The token price would fluctuate based on a lot of factors in crypto-economics like demand, the size of the creators’ community, uses of the token, and broader macro-economic factors tied to the overall crypto market.
One of the very first communities to build a viable social token was the DAO Friends with Benefits. The DAO was formed back in 2020 when Trevor McFedries, a digital entrepreneur, got the idea to build an online club where special cryptocurrency tokens will be used to unlock special privileges for members of the club. The coin was specifically targeted at his friends in the art and music world and was a way to integrate them into the world of tech and finance.
But McFedries didn’t have a lot of precedents to go off, so he decided to test the basic mechanics of his idea by creating a token called $FWB and sending it to his Twitter followers. The big idea behind the club was thus; attaching a cryptocurrency to an online social club created an entry point for members committed to learning and contributing to “Friends with Benefits.” Ideally, as the community grew, so would the value of the token; but the token is also subject to crypto market fluctuations. The principal of the token is that it could be purchased or it could also be granted out by the community to members for making contributions to the community (e.g. managing the DAO, or social channels, etc.). This contributing to the growing framework of social tokens.
According to McFedries, the DAO was really about creating a community of like-minded people interested in the developments in the crypto and web3.0 community. As a DAO, the tokens also gave community members voting rights into new initiatives and how the FWB would use or spend treasury funds in new initiatives.
Investors in the group, like Andreessen Horowitz (a16x) said the group was not really a start-up, but instead something like a corporation of like-minded crypto enthusiasts — something like the Homebrew Computer Club, which was a Silicon Valley hobbyist group where Steve Jobs debuted the Apple computer.
This means that the real value of the token lies in the perks the owners have access to. Right now, there is so much value being created in the DAO. People are doing exciting things, like launching NFTs together and even starting companies together. Friends of with Benefits is one of the more successful examples of community building in Web3, using aspects of Web3 like DAO’s and social tokens.
Another clear example of what NFT communities are doing with social currencies is the $Mork social currency. The currency is essentially the social token for the Hackatao NFT community. With the $Mork token, members of the Hackatao community can vote on community actions, have ranked access to community perks (such as their discord server), and generally have a say in what the community does.
Friends with Benefits is one example of a well executed Web3 community that utilizes it’s own social token. The big other category of Web3 communities that have built up around tokens are NFT communities. With NFT’s (non-fungible tokens), the token has some sort of art, drawing or collectible image associated with it (the Cryptopunks and Bored Apes the most notable and famous of NFTs). Additionally, unlike social tokens where more tokens can continually be issued, NFTs are issued in a single mint/drop where a fixed number of tokens with slightly differing art features (or “rarities) are issued. The Cryptopunks were the first version these “pfp” (“profile picture”) images NFTs.
NFTs are developing many other uses, but the most common are as pfp NFT’s, where the image is designed to be used a online profile pic and many people are now adopting their online identify with different NFT collections or communities.
Social tokens aren’t just useful for the creators and communities releasing them. Fans and community members also have something to gain. Creators can release a special kind of token called a Social Reward Token (an “SRT”) where the creator’s most loyal fans have the opportunity to buy in and receive their own the Social Reward Token..
With Social Reward Tokens, creators can attach tangible perks to ownership of their social reward token. There are different levels of rewards and fans of creators won’t know what level they receive until after they’ve minted their social reward token. These rewards can vary from rare, unique rewards and experiences with the creator like a mentorship, 1:1 gaming, a group dinner, etc. to small group live streaming and/or limited exclusive merchandise.
Through this, social tokens solve both the monetization problem of creators and communities and also solves the remuneration problem for loyal fans and community members.
Social tokens are essentially a way to free creators from the clutches of ads, and content interference by third parties. Since a huge part of Web3 is freedom and decentralization, social tokens are a way for content creators to earn their freedom and reward their most loyal followers.
In terms of the technical aspect of these tokens, there’s no exact definition or framework for token technicalities.
This means that social tokens could be fungible tokens launched on the blockchain (in fact, many of them are on the Ethereum blockchain as an ERC-20 token), or non-fungible tokens also on the blockchain — or even tokens that could be bought directly through fiat. Ethereum is the leading blockchain for these types of applications, despite there being massive issues with using the Ethereum blockchain. Currently, Ethereum uses a Proof of Work model for recording transactions, this causes significant and unpredictable transaction fees/costs by using Ethereum. As such, social token platforms are starting to use other blockchains like Solana or Layer 2 Blockchains (secondary blockchains built on Ethereum to make Ethereum more efficient) like Polygon.
All tokens must fulfill certain conditions. First, they must be connected to a creator or community. And, there must be special privileges accorded to ownership.
Since most creators do not have the technical skills of creating their tokens, social tokens of the future will most likely be created by third-party platforms. These platforms would also serve as advisory boards for these creators, as they will assist them with marketing and creating privileges that the token holders will have access to. Of course, since it’s a free market these platforms will deploy different modalities for issuing these tokens. While many will put them on a blockchain like a coin, others may go the route of creating NFTs with capped values instead. Again, the possibilities are potentially endless and creators looking to get into the industry right now are as early as they can be.
Compliance Issues
Increasingly, cryptocurrencies are coming under scrutiny by the Securities and Exchange Commission (SEC). Because the cryptocurrency space has developed and evolved so quickly, the SEC has not been able to stay current with policy, and their policy and rules are evolving as cryptocurrencies evolve.
There are already signs that these assets’ leeway is temporary. If the social tokens are bought in exchange for fiat, as they ordinarily should be if they will help creators reach the goal of monetization, then they may be classified as securities. If they are classified as securities, the SEC could have some regulatory oversight. A good example of one such case is the lawsuit that has been brought against XRP, the sixth biggest cryptocurrency in the world, by the SEC. The lawsuit is essentially predicated on the assumption that the ripple token is a security of the company Ripple, not a digital currency. And that, the SEC alleges, constitutes selling securities through a backdoor.
Today, the SEC and many world governments are still trying to navigate the new and exciting world of cryptocurrency and related assets. While cryptocurrency enthusiasts dream of a post regulatory world built on the cornerstone of cryptocurrency, that future is looking very unlikely, especially if there is anything governments can say about it. Today, the role regulators could play in overseeing social tokens is quite ambiguous, but one expects that will not be the case a decade from now. By then, there would have been enough exploration of the limits, uses and usefulness of crypto assets for governments to attempt to regulate them usefully. Could social tokens fall into that bracket in the future? Could they come to be regulated by the SEC or even a sister government agency? It’s certainly a possibility.
Why Should Creators Care
Social media platforms were built into the giants they are now by creators. Their content was the reason audiences kept coming back. In 2007, as YouTube was growing exponentially, creators were not paid a revenue share by YouTube until competing online video platforms started offering to pay YouTube creators to move to their platforms. YouTube quickly developed the Partner Program to pay their top creators so they would stay on YouTube. The biggest social media platforms are built on advertising so it doesn’t create a barrier to audiences joining the platform.
While influencer marketing has become a huge factor in the industry in supporting creators, it covers up the fact that some platforms (Instagram for example) haven’t had a model that pays their creators or platforms like TikTok that pay their creators just a tiny amount, while making a huge amount of money from advertisers.
Asides from that, the avenues for monetization for creators are so limited that services like Patreon, which essentially serves as a gofundme for creators, have now gained popularity.
Even creators with large followings have to develop multiple revenue streams outside of what these social media platforms pay in order to make a living and support their staff needed for content creation. The revenue streams include: donations, merchandise sales and influencer marketing.
Social tokens now offer another potential monetization stream and one that provides benefits for the community. If they partner with a secure social tokens platform and take their expert advice, they should be able to drop tokens that would generate enough hype and value for them to continue creating what they want the way they want it. Social tokens offer creators greater freedom than monetization channels like influencer marketing where the brand could dictate the type of content, etc.
However, creators should be very careful when setting the benefits of their social tokens. They need to ensure that whatever perks are listed with owning the coin are easily deliverable. If not, they may find it very difficult to keep up with requests from their fans. They also need to find a transparent way to award social reward tokens to their fans. This would give the rest of the community faith in the entire process, as you would be demonstrating that they too can earn through their loyalty.
Creators should research the different options for platforms when it comes to social tokens as each platform has its own strengths and benefits.