Building internet products around tokenized communities
Perhaps the defining flaw of the modern internet, at least of web 2.0, has been that while we as users create its value (we post, we share, we create), the economic value we create (and control over our data) are co-opted by entities unrelated to us (namely, corporations).
Web3, blockchain technology, and decentralized autonomous organizations (DAOs) present an off-ramp from this flawed paradigm to a more distributed, egalitarian and transparent internet in which community members, creators and contributors will co-own the virtual spaces they play a vital role in creating.
One of the key technologies propelling this new paradigm is what’s referred to as social tokens.
What are social tokens?
Technically defined, social tokens are developed under the Ethereum ERC-20 standard, and are fungible tokens used to convey ownership or membership in an organization.
Think of social tokens like shares of stock in a corporation, but rather being issued on an exchange like NYSE or NASDAQ, social tokens are issued digitally on a crypto blockchain. Social tokens enable many of the same ownership mechanics of stock shares, such as fractional ownership of an entity, voting rights and collaborative governance and tradability on an open market.
In a nutshell, any website or organization can issue social tokens that give its members co-ownership in itself.
What are examples of social tokens?
Some early projects that utilize social tokens include next-generation decentralized social networks, music artists and commercial websites.
- $FWB. Friends With Benefits is an early example of a Web3 decentralized social network. To gain membership, you must apply and be accepted, and you must be a holder of the $FWB social token. FWB members collaboratively vote on product direction, budgeting, partnerships and other governance issues.
- $RAC. Pop musician RAC is among the first musicians to create a social token for his fanbase. Owning $RAC tokens grants access to content, merchandise and events available only to token holders. $RAC also trades on various crypto exchanges with a current price (as of writing) of $1.64 or a fully diluted market capitalization of roughly $16 million.
- $RARE. The popular art NFT marketplace SuperRare has issued a social token $RARE which carries tradable value and offers participative control over art curation and governance.
Why online companies should start to incorporate social tokens into their web strategies
As we move from Web2 to Web3, power centers are shifting from companies that operate websites and apps to the community members that drive them. To succeed in this environment internet companies must not only embrace the decentralization theme they must drive it by adopting decentralized concepts like social tokens, DAOs and shared ownership.
Companies stand to benefit by embracing social tokens in the following ways:
- Distribute ownership and financial upside to your community. In a decade, we, as internet users, will find it strange how we once invested our time and creativity into platforms in which we had no shared ownership. The people who create social spaces should have ownership over those spaces, including a financial stake and control over governance issues.
- Align incentives. The most successful communities are those in which members have aligned incentives. In local communities, we work together for the common safety, beauty and functionality of our neighborhoods. By distributing social tokens among members, digital communities can likewise create shared motivations where the collective energy moves towards aligned goals.
- Deeper engagement with your users, increased collaboration. Gamification elements such as points, levels, badges and achievements can add significant engagement to digital products. Weaving social tokens into the fabric of any gamification system will serve to deepen engagement and create stronger connections between virtual goals and real world outcomes.
- Better product decisions. The best product teams already partner closely with their user communities to solicit feedback on and generate ideas for new features. Decentralizing product roadmapping decisions through a DAO and collaborative voting process using social tokens can inform robust, community-driven product decisions.
- Reward employees and extended team. Social tokens can be used like stock equity and granted to employees and team members as a bonus structure and to align incentives.
- Alternative means to take in investment capital. Rather than distributing equity or creating convertible debt, companies can issue tokens as a means of partnering with investors.
At Demand.io, we see decentralization and social tokens as key enablers of our mission
Since 2009, our mission has been to build sustainable social commerce experiences that create utility for users and drive e-commerce. Every product we build starts with the question: what community are we serving and how can we create value for this community? How can we involve our community as core constituents in our platform to help our members reach their goals?
Our guiding principle is that of alignment: how do we align incentives across the constituents we serve? As examples, each product we build utilizes gamification, user reputation systems, and reward programs to enable user contribution, measure and track performance, and provide incentives and monetary rewards to our members.
How our products will adapt in 2022
Over time, we’ll decentralize our community platforms to include the following elements:
- Social tokens. We will support shared ownership by launching social tokens for the various products we operate. Most likely we will reward early and existing community members with token grants and giveaways.
- DAOs and community governance. We will decentralize certain aspects of governance, decision making, and product roadmapping decision to our communities.
- NFTs. When appropriate, we will mint NFTs for digital items or as certificates of ownership of IRL items. We may also provide infrastructure and tools for e-commerce brands to manage NFTs.
- Moderation and community management. We’ll partner with our community members for moderation needs and utilize peer-to-peer community platforms like Discord to collaborate more closely with our users.
The team we’re building, the future we’re building at Demand.io
- At Demand.io, we operate at the intersection of e-commerce, decentralization, creator economics, and content (social media, conversational SEO).
- Our business goal is to enable and accelerate e-commerce by helping merchants sell, helping creators collaborate, and helping consumers find and acquire what they’ll love. We aim to create alignment in interests within the e-commerce value chain in which we play: our merchant partners’ interests, our shopper community’s interests, our creator community’s interests, and the interests of our company and our employees.
- We’re hiring engineers, designers, and marketers who share our vision for a more collaborative, decentralized future. We believe we will create hundreds of billions of dollars in economic value for our users in the next decade by making e-commerce work better for everyone.
- Interested in joining us in our mission? Send a note to firstname.lastname@example.org, we’d love to hear from you.