Unlocking the World of Social Tokens: Definition, Uses, and Examples
Understanding Social Tokens: The New Frontier in Crypto photo
By: Natali

Understanding Social Tokens: The New Frontier in Crypto

Table of Contents

Social media revolutionizes how creators connect with their audience, enabling them to build an international fanbase and establish powerful brand identities. However, influencers still struggle to monetize fan engagement. Streaming services often take a significant portion of creators' earnings.

However, there is a new way to launch direct support for the favorite artist. It’s called a social token. Once users buy this token, they get access to exclusive content or achieve a governing right in the community.

On the other hand, creators can earn money directly from fans and share with them some unique incentives, motivating them to become even more engaged in this community. That way, creators can bypass the gatekeepers of traditional social media platforms and retain a greater share of their earnings.

Social tokens will benefit even investors. It’s a potentially lucrative investment opportunity. If you ask yourself, “What are social tokens?” and how do they benefit all related parties? Continue reading this article.

Defining Social Tokens: What Is A Social Token?

They are digital assets issued by individuals, communities, or organizations to foster engagement, incentivize participation, and monetize their brand or community. They are distinct from classic tokens like Bitcoin or Ethereum in several ways:

  1. They offer a utility. Social tokens need to serve some chosen function. They can give holders access to exclusive content, services, or governance rights.
  2. They are community-centric. These tokens are crucial for social interactions in the chosen group. The more social tokens users have, the more they are valuable to the public. Popular users can share their assets with other highly active users.
  3. These tokens are fungible. Unlike NFT, social tokens are fungible. Users can trade those assets or exchange them for something directly. For instance, a singer can launch their social token, and each fan who gets 1000 tokens can exchange it for a physical vinyl album.

Social tokens are a relatively new concept in the crypto world, so their usage cases and applications are still evolving. However, they have significant potential for transforming how creators, communities, and brands interact and monetize their value.

The Emergence of Social Tokens in the Crypto Space

As of early 2024, social crypto assets are still in their infancy. However, I think they will disrupt an influencer market, expanding the blogger’s impact on their audiences.

TikTok NPC trend facilitates the understanding of tokenomics for a general user. I see social token usage as the next step of the modern blogger journey. Users finally saw that they have a direct impact on blogger’s actions. In all meanings 😅

Social tokens provide a mechanism for new media to directly monetize their influence and engage with their fans more meaningfully. Bloggers can sell exclusive online and offline content, provide exclusionary services, and unlock new experiences for community members.

Smart contracts can make this partnership even more fair. The system will track user’s actions and produce tones for them only when they meet all requirements.

Social tokens align with the core principles of Web3, emphasizing decentralization, community ownership, and the creation of new value within digital ecosystems. They represent a step towards a more democratized and user-centric online landscape.

As crypto social tokens develop, they may blur the lines between traditional crypto, socials, and governance. They will revolutionize how we interact with online communities, support creators, and participate in the digital economy.

How Social Tokens Work

The whole social token infrastructure is led by intelligent contracts. If the influencer doesn’t specify the token's requirements, the recipients just don’t get it. So, without pre-specified rules clear to everyone in the community, this process gets ruined even before the implementation.

Once you decide to launch the creator token, think about the tokenomics and smart contract requirements behind the project. Smart contracts are self-executing programs that reside on a blockchain network and automate the terms and conditions governing the social token. Here is what you should do to launch your own creator tokens:

  1. Launch a token issuance. The issuing entity should determine the total token supply, the distribution mechanism, and the token's utility within the community.
  2. Initiate a smart contract development. A smart contract is developed to manage token issuance, transfer, and redemption. This contract defines the token's properties, including its name, symbol, and total supply.
  3. Deploy this contract on the blockchain. You should deploy the contract as a layer-2 solution on a chosen network, such as Ethereum or Solana. That way, you can make this token accessible and verifiable.:
  4. Launch the Initial Token Sale (ITO). That way, your company will raise funds for the community or creator's project and distribute the tokens to early supporters.
  5. Provide community rewards. You can distribute them as rewards for community contributions, such as participating in discussions, creating content, or moderating forums.
  6. Launch access to exclusive perks for the most active community members. In this step, you can also launch a community governance, where users can participate in decision-making processes related to the community's direction and development.

Tokenized social assets can be a powerful medium of exchange within the community, enabling peer-to-peer transactions for goods or services. These tokens can grow in value as the community grows, providing the holders with unforeseen yet great investment opportunities.

The Connection Between Social Tokens and NFTs

Social tokens and social NFTs can revolutionize how we interact with online communities, support creators, and participate in the digital economy. They both can foster engagement and monetize the community. However, they have distinct usage cases.

Social tokens are fungible. Users can trade or exchange them. These tokens primarily serve a utility function, giving holders access to exclusive services or governance rights. Brands can use them to boost participation and create a sense of belonging within a community.

Social NFTs represent ownership of the item, like traditional NFTs. No one can directly exchange them for other NFTs. Users must trade the NFT for money to buy another NFT for these earned funds.

Despite differences, they can play complementary roles in community building. Tokens can foster engagement and give holders a voice in decision-making processes. NFTs can represent ownership and build scarcity.

Examples of Social Tokens in Action

There are already multiple tokens. The most known examples made on the Rally platform are $WHALE, $BASIC, and $PLAY. $WHALE is a token for the Whale Watching NFT community, $BASIC is a token for the Livepeer decentralized video streaming network, and $PLAY is a token for rapper Playboi Carti.

Another common platform for tokens is the Chiliz. It is a blockchain service that issues social assets linked to pro football. Customers can use CHZ tokens to access exclusive online content about their favorite athletes.

The Value Proposition of Social Tokens

A social crypto token concept can offer unique values for creators, as they can become a solid alternative monetization channel. These tokens provide creators a direct way to monetize their brand and fanbase. Instead of relying solely on traditional revenue streams, creators can offer holders access to exclusive content, experiences, or perks, creating a more engaged and loyal following.

Social crypto can also nurture group governance, empowering creators to involve their supporters in decision-making. It will lead to a more invested and engaged fanbase. Creators better understand their fans' preferences so they can tailor their content and offerings accordingly.

This concept can provide value even to the investors. As a relatively new asset class, social tokens hold the potential for significant value appreciation as the concept gains adoption. Investors can capitalize on this growth potential by acquiring and holding social crypto tokens of promising projects or communities.

Social token holders often gain early access to new features or products. That way, tech-savvy investors may get a competitive advantage.

The Impact of Social Tokens on Online Communities

They transform the communities, introducing innovative engagement approaches. Social tokens provide a powerful mechanism to incentivize participation by offering holders new rights. It will create a more vibrant, dynamic, and supportive community environment.

Social tokens promote loyalty by aligning the community's interests with the creator's desires. Holders are vested in the community's success, as the token value is tied to the community's growth.

As I said, these tokens open new monetization opportunities, as creators don’t need to rely on traditional advertising or subscription models. This direct monetization approach allows creators to build a more sustainable business model, reducing reliance on external funding.

Creators also can implement decentralized governance structures within their communities, empowering members to participate in community decision-making processes. This democratization of power shifts control from centralized authorities to the community itself, fostering a sense of ownership and accountability among members.

Challenges and Considerations

Social tokens can revolutionize how we interact with online communities. However, to achieve it, we should overcome major challenges like:

  • Volatility and Speculation. Social tokens are a new asset class. Thus, they are subject to significant price volatility. You could lose money if the price of the token goes down.
  • Community Reliance and Dependence. They are used to incentivize participation in online communities. However, if people are only involved in the community because of the financial rewards, this community will fail in the long run.
  • Sustainability and Long-Term Value. The long-term value of a social token is closely tied to the success of the project it represents. If a massive name from the community gets canceled, it directly affects the token’s price.
  • Classification and Legal Frameworks. As of today, there are no legal frameworks governing social token issuance, trading, and utilization. Thus, it challenges creators to create this new community lawfully.
  • Securities Laws and Compliance. Some jurisdictions claim all tokens (including social) as securities. It may impose significant administrative burdens and costs on creators and issuers.

So, you, as a token issuer, should make your tokenomics transparent, disclosing relevant information to potential holders. It must include details about token distribution, utility, and potential risks. Ensuring fair representation, transparency in voting processes, and accountability of community leaders.

If you are unsure of someone from your team, telling them a final goodbye before you launch a token would be safer.

Social token projects should protect vulnerable users, such as minors or those with limited financial knowledge, from potential risks associated with speculation or manipulative trading practices.

The Future of Social Tokens and Tokenized Communities

I think that social tokens have a bright future. We already see how token systems are changing social media, thus eventually, they will begin to implement blockchain solutions.

Social tokens can become sophisticated tools for fostering deeper engagement, as members will actively contribute to the community's growth, not just as passive consumers but co-creators and stakeholders. They will evolve into versatile tools for community governance, reputation management, and even decentralized social media platforms.

We need 5-10 years to see crypto integration with the existing social media platforms. We already see how people purchase TikTok coins with their credit card to get some gift/token to pay their favorite blogger. It’s the infant form of social tokenomics. So, we just need to wait a few more years until we see a prospering Web3 ecosystem.

As the popularity of these tokens rises, we will see an increased amount of regulations. Some may say that regulations will come first, but I don’t think like that. Governors won’t spend that time on something that isn’t popular. They have a lot of stuff to do, so they concentrate on already popular options. Thus, if you want to adopt a social token workflow before it gets too regulated, today is the perfect time.

Wrapping up

Social tokens are a transformative innovation poised to redefine online communities by fostering deeper engagement and empowering communities with ownership rights. This approach introduces new monetization models for modern creators and businesses.

These digital assets will shift community-building from passive consumption to active participation and co-creation. Social tokens will serve as a bridge between traditional social media platforms and the emerging Web3 ecosystem.

As social tokens continue to evolve and integrate into the social fabric of the internet, they have the potential to democratize online communities and create new avenues for value creation. Do you want to constantly get info about new opportunities to earn with crypto fairly? Subscribe to the Defiway socials so you won’t miss the info!