Social Capital: A New Asset Class
0rigin are advisors to the Clout.art project and creators of the economic model. Below is a high-level description of the token and its general principles. Readers should refer to Clout.art documentation for more technical and in-depth functionality.
Clout.art is an innovative dApp where social media posts can be translated into NFTs and sold or monetised. Before the NFT is created, the original post must be deleted which establishes a true value transfer from the old world to the new.
Clout.art is built for Web 3 and its economic model reflects those principles. In Web 3, the application layer shares its wealth with enabling protocols and likewise Clout.art attributes value to system economic contributions.
In our traditional Web 2 social media platforms, the number of ‘Followers’ per content creator is directly correlated to their earnings power and creates a feedback loop compounding the value.
This clear economic benefit, or asset pool, is not recognised in tangible form. More and more, social media users and communities are conscious of this misalignment and consequently growth will be constrained.
Clout.art deals with this disparity by allowing followers to share directly in revenue generation by content creators in addition to enjoying the non-tangible benefits of providing social support.
This ‘Shareconomy’ model resets the economic principles of social media and removes the friction point that is threatening its growth.
The SWAY Token
The native token of Clout.art is the SWAY token which is staked to replicate following:
- Content creators establish individual pools for their NFTs.
- Users stake SWAY tokens to the pools (content creators) they wish to support.
- Staked SWAY tokens share in the revenue generated from their specific pools.
The Emergence of Social Capital as an Asset Class
We can draw on parallels to credit markets where the existence of third-party guarantors or credit underwriters reduce the overall cost of capital and enhance the earnings power for primary debt issuers.
By analogy, the SWAY token holders are providing a Social Underwriting facility for content creators.
A Single Fee-Rate
We assume for now that revenue generation is the simple sales of NFTs by content creators although other monetisation strategies are easy to envisage.
The system fee-rate applied to content creators’ revenue is determined from the total proportion of SWAY staked at that time and identical across all content creators.
As total staking increases, the fee applied to content creators’ revenue decreases following the curve below:
Since fee-rates and volume have a mutual dependency in a mature system, as markets become efficient, aggregate SWAY staked will maximise absolute revenue, i.e., the product of volume and fee rate.
The Staking Queue
Content creators’ revenue is paid to their staking pool based on stake weightings but adjusted for the relative time that tokens have been staked for. We use an exponential decay curve and simple integration to solve for token reward weightings in the pool.
Simply put, longer staked SWAY earn more than recent ones on a per token basis.
The initial issuance of SWAY tokens is 100 million with a further 100 million to be distributed as incentives for platform adoption.
The issuance of new SWAY, up until the 200 million cap, relies solely on content creators joining the platform and creating pools i.e., expansion of the economic system.
Adoption tokens are allocated to both existing content creators and SWAY staked. The split between the two cohorts depends on the total proportion of SWAY staked (as used to determine the system fee rate above).
Lower staking skews the rewards to content creators whilst higher staking skews the rewards to SWAY staked (by pool weight and queue position). This originates from the assumption that staking is positively correlated to the economic health of content creation.
Our Social Capital model enables a commercial relationship to exist between content creators and their underwriters. The value creation for content creators and stakers is interdependent since staking drives value and value drives staking. We envisage the most successful content creators will forge symbiotic relationships with their staking pools to marry the two parties’ fair returns on assets.
The staking of SWAY as the primary economic indicator allows the system to dynamically calibrate to maximise capital returns. This creates a unit of account that fairly reflects the economic health of the platform in its fundamental value through cost of capital arbitrage.
In other words, the SWAY token, represented as a simple monetisation of ‘Following’ or ‘Likes’ from the traditional social media experience, can now act as a global currency for social media evolution in Web 3, through the creation and recognition of Social Capital as an asset class.
Update 7/28/2021: Clout.art has transitioned from $SWAY token ticker to $SWAY. Read more
0rigin designs and builds blockchain and decentralised models that will have a profound impact on the global economy, by fusing traditional disciplines from finance and technology with cutting edge techniques and product innovation.