The Beginner’s Guide to Social Tokens and NFTs
If you’ve heard of social tokens and NFTs but aren’t quite sure what they are, allow us to introduce you to one of the world’s most coveted art collections.
Over the last few months, the Bored Ape Yacht Club (BAYC) – a collection of 10,000 avatars of cartoon apes, each with its own unique combination of 170+ traits and attributes – has become one of the most talked-about topics in tech. Since launching in April of 2021 at a modest price of around $190 a piece, these one-of-a-kind non-fungible tokens (NFTs) have sold for as much as $3.4 million. While BAYC prices have cooled considerably in recent weeks (in line with the greater crypto market), their meteoric rise proves that demand for NFTs and their fungible cousins, social tokens, is very real.
If all this talk of tokens, apes and NFTs has you confused, don’t worry. All will become clear soon. For now, just know that in addition to taking the world by storm, social tokens and NFTs are offering creators access to a new world of Web3-powered opportunities, opening up more ways for them to monetize content and revolutionizing how they manage their fans.
To make it easier to understand what these digital assets are and how they’re changing how creators view compensation and engagement, we decided to put together this handy guide. We have a lot to cover, so let’s get right into it.
What are social tokens?
Social tokens are fungible digital assets that brands and individuals can issue to members of their community to grant them access to exclusive perks and experiences.
Something that is fungible is interchangeable, meaning it can be passed from one individual to the next like currency. Dollar bills are fungible because they can be easily exchanged for another dollar or a combination of coins, whereas things like properties and paintings aren’t because they cannot be divided and their value is determined by their unique characteristics.
In a sense, social tokens are like personalized cryptocurrencies that offer members of a community value in the form of rights and benefits. Those benefits can include everything from facetime with the creator to access to exclusive content and groups. Because social tokens are fungible, they can be freely sold and exchanged, and their limited supply can make them more valuable over time as the creator grows.
What are NFTs?
Whereas fungible assets have units that can be interchanged, non-fungible assets are unique and cannot be divided or easily swapped for something else.
Up until now, digital items uploaded to the internet could be endlessly reproduced, ultimately making their origins unclear. Non-fungible tokens (NFTs) address this issue by giving assets a unique digital signature that makes them one of a kind. Since NFTs hit the scene, we’ve seen companies and individuals purchase everything from artworks to tweets and even classic memes.
In practical terms, the key difference between social tokens and NFTs boils down to the nature of the assets they represent. Creator economy expert Peter Yang summed it up perfectly when he said that NFTs allow a single fan to own a digital asset, while social tokens allow fans to own a piece of a community (through exclusive rights, experiences and so on).
How is ownership tracked?
Proof of ownership of both NFTs and social tokens is stored on a publicly accessible digital database known as a blockchain – the same technology that supports the exchange of cryptocurrencies like Bitcoin and Ethereum. Because blockchain networks may be managed by thousands (or even millions) of computers, records of token ownership cannot be forged.
How does one buy social tokens and NFTs?
Most digital assets are built on the Ethereum blockchain and require payment in Ethereum or whichever currency corresponds to the blockchain they’ve been built on.
In most cases, to get started, you’ll need to purchase some ether (ETH) through a cryptocurrency exchange or a digital payment app like PayPal. Next, you’ll need to set up an Ethereum-compatible crypto wallet like MetaMask and connect it to an NFT marketplace like OpenSea or SuperRare. Once you’ve done that, you’re ready to buy your first social token or NFT.
Of course, there are other ways to obtain digital assets. In fact, there are times when a brand, creator or group will choose to simply give them away. There are some compelling reasons for brands and creators to do that, which we’ll get into in just a moment.
How do social tokens benefit creators?
Now we’re getting to the fun part.
We’ve written before about how forming deeper connections with fans is key to enjoying long-lasting success as a content creator. There are many ways to do this. Integrating social tokens into your content strategy can be one of the most effective because it incentivizes fans to engage with your content and each other.
Recently, we’ve seen popular brands and even bands use digital rewards to strengthen their relationships with their customers and fans. In most cases, creators will sell tokens to their fans. However, they may also use them to reward their most loyal followers for engaging with the community, or give them away through promotions.
As time goes by, a creator’s social token can become the backbone of their own personal economy – an economy that brings the creator’s relationship with their fans full circle. For example, as their social token’s value increases, creators may choose to use it not just to reward fans for their contributions, but to compensate them for any content or services they provide. Fans holding tokens may eventually be able to use them to tip the creator, redeem them for discounts or other perks, or choose to sell them later at a higher price.
When used wisely, social tokens not only help creators increase fan engagement, they also enable them to convert more customers, driving revenue.
How do NFTs benefit creators?
NFTs not only offer creators a way to increase engagement, but also allow fans to own a “part” of the creator – whether it be their content or their community.
Some creators may choose to use NFTs to build a community exclusively for NFT holders. If successful, such projects can take on a life of their own and give rise to a whole new group of loyal fans.
Of course, for creators, the key benefit of NFTs is the fact that they add a whole new dimension to monetizing content. This is because NFTs’ smart contracts enable creators to stipulate a percentage of all future sales. (OpenSea allows creators to set a percentage fee of up to 10%.) This means that now, in addition to earning revenue from the initial sale, creators can earn royalties each time a piece of content is resold.
What does all this mean for the creator economy?
In a world where creators must navigate platforms’ changing algorithms and high revenue shares, social tokens and NFTs offer something that many creators have been sorely lacking: control over their content and community. This is the true promise of the Web3 era, and the reason why creators are choosing to develop their own personal platforms with solutions like b.stage.
A diverse monetization strategy is essential to the long-term health of any creator’s business. By offering more control over how their content is monetized, social tokens and NFTs can add stability to a creator’s revenue model while reducing their dependence on traditional platforms. For many, that could mean less reliance on algorithms and ads, less burnout, and more peace of mind and financial security.
At the end of the day, because these technologies are still quite new, they’re subject to change and should not be viewed as a creator’s ticket to success. Rather, they should be viewed as tools that, when combined with fandom-amplifying platform builders like b.stage, offer creators more ways than ever to strengthen their connections with their followers and turn them into superfans. Ultimately, creators who prioritize taking control of their platform, audience and monetization will be better positioned to succeed in Web3 and beyond.
*Images in cover photo courtesy of Bored Ape Yacht Club, VeeFriends and Cool Cats