This year, social tokens may be the next big thing in crypto, but regulatory constraints and specific use cases are still unknown.
The COVID-19 epidemic, as well as other recent occurrences, have highlighted the necessity for a fully digital economy, resulting in the development of Metaverse ecosystems, Web3 platforms, and the acceptance of digital currencies.
For example, the Ukrainian government recently asked the crypto community for donations in Bitcoin (BTC), Ether (ETH), and Tether (USDT) via Twitter (USDT). NFTs, or non-fungible tokens, have also acquired public acceptance as artists and creators throughout the world have explored new ways to monetize their work using these models. These use cases are inventive, but they also show that blockchain-based notions that appeared early on can take years to catch on with the general public.
In 2022, social tokens will be available.
This appears to be the case with social tokens, which are issued by individuals and communities to encourage participation. While social tokens were anticipated to be the next big thing in the crypto world in 2020, they appear to be gaining traction this year due to rising interest from non-crypto users.
Social tokens, according to Jan Baeriswyl, a token design specialist at Outlier Ventures, a venture capital business that supports the development of innovative technologies, are fungible ERC-20 tokens that can be used for purposes other than financial ones. “Social tokens, for example, can be used to obtain access to certain communities, such as those found on Discord. “Because social tokens are less focused on money, they are more accessible to the general public, which is why we are seeing more interest,” Baeriswyl explained. He went on to say that social tokens can come in a variety of shapes and sizes, and that they can be used by creators to communicate with fans or by communities to raise awareness for specific causes.
Furthermore, social tokens are being used to assist creators and communities in gaining access to Web3 platforms, which provide decentralized models and incentives for community participation. Socialstack, a social token issuance platform built on Ethereum, Polygon, and Celo, caters to non-crypto native communities to help issue social tokens that enable for the formation of a Web3 ecosystem, according to Andrew Berkowitz, chief executive officer. “At Socialstack, we recognize that crypto-natives make up only 1% of the world’s population. “We feel that individuals require a platform that allows them to access Web3 capabilities with just an email login,” he said.
Berkowitz noted that Socialstack recently assisted Project Zero, a non-profit focused on safeguarding the ocean from climate change, in launching a social token to establish a “environment of value that benefits both the earth and individuals.” PZero, Project Zero’s social token, allows community members to receive prizes by performing certain acts, according to Michele Clarke, the company’s creator and CEO.
For example, Clarke stated that Project Zero already has a user base of around 1 million people. Users can now earn PZero for assisting in the awareness of specific situations. “An ambassador with a large following, a brand partner or collectible artist, or a news story can trigger a jump in the millions or even hundreds of millions, and we’ve had a few activations reach over a billion,” she said. Clarke also stated that one of Project Zero’s main goals with its social token is to convert members’ short attention spans (which are common during significant crises) into long-term involvement with the organization.
Jake Beaumont-Nesbitt, Initiative Zero’s founder and chief community experience officer, went on to say that the project was founded eight years ago and was intentionally decentralized since it is made up of a global science-based community. Given this, Beaumont-Nesbitt noted that Project Zero was a perfect fit for the Web3 ethos because the organization has never had centralized platforms or third-party intermediaries. Project Zero can now better engage with its community by adopting a Web3 paradigm and including social tokens, according to Beaumont-Nesbitt. He stated, “
“By establishing value for contributors, Web3 engagement allows an organization to scale up tremendously.” Giving to particular causes today is more than just putting money in a jar and praying for the best. Web3 provides transparency, allowing individuals to see where their money is going while also allowing them to participate more fully.”
Project Zero community members will be able to use their social tokens to redeem a variety of digital and real-world offerings, according to Clarke. “For instance, members might purchase an NFT on our platform and then be rewarded even more with social tokens that can be redeemed for other incentives,” she explained.
Other projects are aimed toward individuals, especially as the “creative economy” continues to gain hold, whereas Project Zero symbolizes what Baeriswyl would describe as a “community” social tokens. Calaxy, for example, is a token-based tool for creators established by NBA star Spencer Dinwiddie and former financial executive Solo Ceesay. While Calaxy is still in development, Ceesay says the mobile app will effectively allow artists to create their own social fan-tokens within a Web3 ecosystem: “The Calaxy app allows influencers to create social tokens with an intuitive interface, while also having a marketplace in the app to engage with followers.”
Calaxy, according to Ceesay, is powered by Hedera Hashgraph’s distributed ledger technology, which allows users to engage in many ways using social tokens in a decentralized manner. Calaxy, like Project Zero, focuses on non-crypto natives, according to Ceesay. “We provide services to YouTubers, gamers, social media influencers, athletes, and others.” “Our roster of creators is huge,” he said.
Given this, Ceesay noted that Calaxy provides a user experience similar to that of Instagram or Twitter, in which users have a discover page that also allows them to follow various influencers. Users may then purchase social tokens from an influencer’s webpage, where they’ll also see a list of experiences available, such as one-on-one video conversations or access to exclusive events. While creator social tokens may appear to be comparable to nonfungible tokens, Ceesay explained that nonfungible tokens are primarily about usefulness and artistic expression, whereas social tokens provide more flexibility:
“Imagine a future in which a sports player, for example, has a social token that represents their image. They can then keep that token in their possession for future decentralised finance possibilities. This is a whole new economy in which creators have complete control over their tokens.”
Concerns about “social money” regulation
While social tokens are gaining popularity, it’s also vital to note that regulatory problems exist. The most important factor to consider is a social token in the form of a security.
Ceesay said that tokens issued on Calaxy are stable coins that are collateralized one-to-one with USDC, ensuring that social tokens are not perceived as securities. “These coins are stable because of the regulatory grey area,” he explained, “but this also helps with onboarding.” For example, a Calaxy user could be an eight-year-old boy who is a fan of a specific sports player, according to Ceesay. “We don’t want these users to have a risky asset,” Ceesay added.
Berkowitz went on to say that Socialstack is a completely closed ecosystem in order to maintain regulatory compliance. While there are no specific regulations governing social tokens yet, Berkowitz says that some actions can be done to assure compliance:
“The greatest strategy to reduce a security’s risk is to have an NFT and then have a Know Your Customer layer that identifies each user as an accredited investor.” This is the ideal method to reduce risk, but for now, we’re ensuring that communities on our platform don’t get themselves into dangerous circumstances.”
To Berkowitz’s point, Clarke stated that Project Zero is a social movement, not a get-rich-quick scheme. “We’re establishing a community.” “Not only through currency and smart contract projects, but also through social tokens, Web3 is offering incredible prospects for trading value,” she noted. Project Zero’s PZero social tokens, according to Clarke, have no monetary value:
“It was done on purpose.” As a result, determining the initial values for earning and redeeming PZero social tokens proved difficult. Our tokenomics must be simple, but they must also be developed without reference to any particular fiat currency in order to achieve scale.”
Will DAOs be supported by social tokens in the future?
Despite the fact that social tokens are becoming more widely accepted, applications for these digital assets are still being created. As a result, the future of social tokens is unknown. “People can utilise these assets in a variety of ways. “What’s most interesting is that we don’t know what the best use cases are yet,” Ceesay said.
As a result, some in the industry believe social tokens will play an important part in decentralized autonomous organizations (DAOs), which typically use a token that can be used to receive incentives. Although social tokens are in their infancy, Stani Kulechov, the founder and chief operating officer of Aave (AAVE), an open-source DeFi system, stated that in the future, the crypto sector may see creator social tokens powered by DAOs.
Baeriswyl also anticipates the emergence of hybrids of NFTs and social tokens. While this is still a theory, he explained that the GameFi and play-to-earn spaces are already using a mix of NFTs and fungible tokens:
“You normally have NFT things and then a currency to trade value with in play-to-earn.” As a result, rewarding users with social tokens that are actually NFTs may make sense.”
Regardless of predictions, it’s reasonable to conclude that social tokens are here to stay, as they make it easier for creators and communities to launch these tokens. “Complexities and a lack of easy-to-use onboarding ramps may have prevented social tokens from gaining popularity in the past.” “There are now apps and platforms that can assist with this,” Ceesay explained.
Berkowitz went on to say that Socialstack is collaborating with a variety of groups, resulting in 20 various use cases spanning podcasting, musicians, festivals, conferences, and more. “Non-crypto native groups interested in integrating their community into Web3 through a social token are our target audience.” As Web3 evolves, this will become more advanced.”
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.