This intriguing category of crypto-assets might be the next big thing in the nascent space
The idea behind communities creating currencies customized for their own needs is not new. The LETS and time-banking movements in the 1980s and 90s saw hundreds of communities in North America issue their own local currencies, issued NOT by a central bank, but the collective assent of community members. But the idea has now been reinvigorated with the crypto ascent.
More recently, cities like Calgary (Canada) & Belfast (Ireland) have experimented with local currencies — aimed to achieve growth of the local economy via integration & incentivization. While these tokens serve a larger community, social tokens aim to unlock new monetization opportunities for creators and entrepreneurs.
These social tokens can be broadly categorized into three categories:
❶ Personal Tokens — issued and controlled by a primary individual.
❷ Community Tokens — issued and controlled by a group, often managed by a decentralized autonomous organization (DAO).
❸ Social Platform Tokens — tokens that represent control over a platform that facilitates social token issuance and exchange.
More details are presented in the infographic above.
For content producers like me or anyone who makes a living from transmitting their creative output over the internet, social tokens offer an opportunity to re-align the interests of creators and their communities. However, Creators, artists & brands should be on the lookout against crypto projects offering pump-and-dump mechanisms for short-term gains, that can ultimately ruin the relationship with their followers.
Something similar to this happened in 2017 when several influencers hyped dubious token projects. Traders piled money into initial coin offerings (ICOs) with unclear roadmaps and little intrinsic value. No wonder, the amateurish crypto hike didn’t last. Having said that, the market has come a long way from the last hype. Lots of noteworthy projects with actual use cases have materialized. Influencers should partner with such crypto projects that aim to build richer solutions to community management and monetization.
So what happens when an Individual wants to issue a Social Token? According to Deribit Market Research, tokens act as a catalyst to alleviate the cold start problem all early networks face. When a content creator or influencer starts creating but has no community (Blog subscribers, newsletter readers, etc). It’s only when they have a sizeable following that their token can really take off. In essence, creators are able to sacrifice future personal benefits (e.g. profits) and some utility to their users, in exchange for accelerated adoption and growth.
Although social tokens are still in infancy, some projects have amassed significant valuations. Looking at the market cap data from Messari Research (Figure 1), several personal tokens which have slowly developed into communities possess circulating market capitalizations of several million dollars. Whale leads the pack, however, on a fully diluted valuation, Rally is the highest valued social token with a valuation of over $12 billion (right chart above).
While some of these social token projects may be inflated in the short to medium term, long-term potential can create massive value for individuals and platforms that facilitate the creation of social tokens. Welcome to the future of value creation.
Originally Published on Medium