The crypto industry has been going through various hype cycles during the past year, creating new innovative concepts that utilize different kinds of tokens. From “simple” currencies to utility and governance tokens, the unfolding of new opportunities in the space seems endless at times. While more and more developments emerge, digital assets and blockchain technology progressively find their use case with traditional companies and individuals. The most recent trend, non-fungible tokens (NFTs), has gathered massive support from within the crypto community as well as outside. Companies and artists have embraced NFTs ranging from digital art to sports collectibles, in-game items, and even tweets. With a number of new projects joining this trend, it doesn’t seem to cool off quickly. However, new developments are already on the horizon - social tokens. While this concept had already been around for some time now, it hasn’t really kicked off yet mainstream.

What are social tokens?

Social tokens can be understood as a category of digital assets that are based around a community or a single individual. These tokens are backed by the reputation of the brand, followers, or individual providing various incentives to the holders of the tokens. Two types of social tokens exist:

  1. Personal tokens

Personal or individual tokens are created by individuals and often used to exchange forms of labor. For example, a graphic designer will do one hour of work if paid a certain amount of their social tokens. In this example, the individual drives the token’s value by performing a service. Or an individual could launch a social token that allows holders to receive a cut of their future paycheck, vote on life decisions, meet 1-on-1, or any other perk that holders might want to incentivize them investing into the token/individual. Here, a community is built and revolves around a single individual.

  1. Community tokens

Community tokens are typically used for membership or being part of a certain community. For example, creators will launch a community token that users must acquire in order to gain access to private social media groups, newsletters, etc. They might also be given as rewards and thereby incentivizing behavior within a community.

Using social tokens, companies, creators, and entrepreneurs may unlock new monetization opportunities early in their road to success. The idea is that writers, streamers, bloggers, musicians, artists, photographers, influencers, and basically any kind of entrepreneur who is part of the creator universe can launch a personal digital asset (= their own social token) to improve their personal earnings as well as social capital. For both, personal and community tokens, the larger the community investing in the social token, the more valuable the underlying asset becomes due to increased demand. Built around this ownership economy, it creates a clear win-win situation for the founder(s) and the members of the community. It provides (financial) incentives for all stakeholders to grow and develop as the community or individual will be more valuable in the future. A creator sacrifices revenue since they effectively dilute their future value in exchange for capital today. However, this value is distributed to the earliest adopters who are financially incentivized to grow the creator audience. A social token acts as a combination of capital to kickstart and early adopters, essential elements to the development of any network.

A growing market

The most famous example of a social token, and the one that more or less started the space, was $ALEX. This social token was launched by an individual, Alex, with the idea to create a vehicle for supporters to feel exposed to his future and let them discover new frontiers. Initially, he offered a 15% income sharing per year for three years after he moved to San Francisco (which is now delayed since COVID travel restrictions). Alex offered holders of $ALEX the ability to govern the token, 1-on-1 meetings with him, and even the ability to decide on some of his life decisions. Since then he has tried other experiments, like a monthly newsletter, a private Telegram group, a voting system to let people choose his daily habits, a liquidity mining experiment, and a partnership with another social token, all involving $ALEX in some ways.

$ALEX price evolution

Source: Coingecko, April, 2021

This is just one example of the evolving social token market. Even though social tokens are in their beginning, some tokenized communities have already increased significantly in value. Several tokens have slowly developed into large communities with market capitalizations of several million dollars.

Social tokens by market capitalization

Source: Messari, March 26, 2021

Research by Messari from the end of March showed Whale and Rally tokens, the two largest social tokens at the moment, with market caps of $136 million and $104 million, respectively. In early April, these have already increased to $170 million and $130 million, a 25% growth on both tokens.

Future outlook

What started off as an experiment of an individual aiming to use the crypto community for his personal development, is turning into a real opportunity for entrepreneurs and companies alike. Creators and influencers have a new way to monetize their efforts and reward their early and loyal followers. The principle of social tokens may become increasingly adopted by brands and individuals because they will see that they can earn a little more profit with social tokens and align benefits between users and businesses much better. You could view social tokens as a sort of stock investment in a community, individual, or brand, as token holders gain access to governance decisions and the value of the social token increases as the community grows in popularity.

With use cases such as NFTs spilling over from the crypto world to the wider economy, social tokens just need some more (bigger) actors to buy into the concept. With the rise of social token platforms that handle the issuance process, distribution, and transactions of personal and community tokens, social tokens already take a major step towards mass adoption. A great example can already be observed in the field of football. Socios.com, a platform run by the blockchain company Chiliz, aids football clubs to emit their own fan tokens. This allows fans to invest in their favorite teams, while in parallel be part of the club’s governance, access rewards, and other perks. Several large football clubs, such as Barcelona, Juventus Turin, and Paris Saint-Germain, are already participating. Similar to NFTs, the younger generation might be more inclined to try it out. Also, video games serve as a great way to warm people up to the idea of social tokens in other aspects of life. In the end, social tokens and platforms already started to grow significantly. While some of these are potentially overvalued in the short term, in the future social tokens can create immense value for and by individuals, companies, and communities.


Sources:

Exploring The Social Token Revolution - Andrew Steinwold ; October, 2020 [1]

Are 'social tokens' the next big thing? - Cointelegraph ; October 2, 2020 [2]

Alexmasmej.com - April 4, 2021 [3]

The Social Token Bible - Messari ; April 5, 2021 [4]

Whale and Rally dominate social token scene with $240M market cap - Cointelegraph [5]