We’re (in) the money
Collectives have always failed historically. Will social tokens let them thrive?
Social Tokens of 1933
A wink, the anthropologist Clifford Geertz noted, is not necessarily a wink. A machine-learning algorithm might have some difficulty differentiating between one person’s involuntary spasm of the eyelid and another’s come-hither coquetry, just as it might struggle to identify someone’s mocking of the former or rehearsal of the latter. Each of these is, technically speaking, a wink, but to understand what they mean requires that one be culturally fluent. Or to put that another way, context is the decoding ring of culture. But one still must know the cultural codes.
The above accounts, in some way, for the suspicion I tried to articulate a few weeks ago in “The Currency of Community”: NFTs are better than social tokens at building a community, a culture. An NFT may not be worth much as a jpeg, but it is worth quite a bit more as social capital, as a demarcation of tribal identity, a wink that rewards the viewer for decoding its meaning—not even for anything it says, necessarily, but for signaling that the viewer is “in the know,” operating in the same cultural code. In that sense, NFTs are a kind of financial innuendo, discreetly signaling status without being so gauche as to state it outright the way a bank statement might. To translate that social capital into financial capital in the limited quantitative terms of a social token, a money number, is to reduce a flirtatious wink into an eye-spasm. Decoding aura as a number doesn’t just kill the joy of speaking in innuendo—it kills the rich signification of the aura itself by making it unimaginatively, boringly legible.
And so on and so on. Do you sense the self-satisfaction in the language?
The thing is, something bothered me about the piece I’d written: the presumption that we need to choose between NFTs and social tokens, as if each can’t serve complementary functions in building communities. A couple days after writing, I joined Leaving Records’ DAO and claimed my free $GENRE tokens that offer early access to music and events. A few days later, PartyDAO enabled collective bidding on NFTs that would distribute the asset among the holders in the form of fractionalized tokens: NFTs, in other words, were tokens. Over the following weeks, I found myself using $FWB tokens to read their weekly newsletter, playing games in Forefront’s Discord to win their native $FF token, receiving .99 of a spare $MIRROR token to grant a publication, and crowdfunding BLVKHVND’s esports leagues by buying NFTs that gave me a proportionate number of tokens.
Which is to say: social tokens aren’t just crucial to building online communities. They’re even crucial to building online communities around NFTs.
One of my laziest and most fruitful writing habits is to try to poke holes in articles I like to see if there’s a better argument waiting to emerge from someone else’s framework. (To be a critic is, in a sense, to be a parasite.) But this week, I’d like to write against myself, against my own argument a few weeks ago for NFTs over social tokens. I’d like to make three cases for why social tokens offer a whole new possibility for collectives to succeed in ways they never have historically.
Money out of thin air
Projects that raise money by selling NFTs effectively trade an asset for money that they put into their treasury. Projects that raise money by releasing social tokens, on the other hand, just mint money out of thin air. That means they earn money twice-over, both from the small portion of tokens they sell and from the larger portion of ones that they don’t, which sit in a treasury accruing value from the rising price of tokens on the market. Projects that release social tokens, in other words, earn both cash and spending power at once.
Of course, there’s a thin line between these models, and NFT projects like Nouns will often keep their own NFTs in a treasury or multisig wallet for future use. But their value is indeterminate, their allotment is generally small, and they may require semi-lengthy sales to convert into a currency that the project can use as money. By contrast, social tokens are money. They are money written on the wind, usually backed by nothing more than a community’s commitment to drawing more people to buy the token.
That may sound like a case for the NFT model—you know, the one that allows communities to monetize from actual assets (in crypto-land, jpegs are the closest things to things). In any case, isn’t that better than the social token model, where communities just monetize from Ponzi Scheme promises that higher prices will draw more members, which will draw higher prices in turn?
In fact, it’s a case for social tokens. Let’s step back.
One way to understand the impact of social tokens is to see them as part of a far larger financial trend, far beyond crypto, to give everyone upfront access to recurring revenue.
Startups have always had the ability to raise vast sums of money with promises of future profit: a decent diagramm on a napkin might solicit $2M from VCs in actual capital as well as an additional $10M of phantom capital known as “equity” for a $12M valuation. Social tokens allow anyone to raise this way without needing VCs to dictate terms. And in that sense, they’re similar to ISA programs like Lambda School, which trains coders for free in exchange for a portion of their future pay, or to debt-marketplaces like Pipe, which allows non-venture companies to trade on future revenue for immediate loans.
Social tokens, Lambda School, Pipe: all of these capitalize potential money-makers upfront based on expected future earnings, and in doing so, actually increase the probability of financial success by giving them money to invest.
Minting money out of thin air has traditionally been the right of the rich, something states could do through printing machines, money-lenders could do through interest, and VCs could do through valuations—always in the hope and expectation that the future would produce real value to back up the fictional value of the present. Social tokens mean that anyone can mint money out of thin air, money that’s exactly as valuable as their vision of the future is persuasive to the people around them. Social tokens don’t just allow creators to take the place of startups in traditional economic models. They also allow supportive communities to take the place of VCs and even states (micro-states, but states nonetheless).
In other words, as Eliot Couvat suggested recently, social tokens enable crowdfunding-as-an-investment. Imagine kickstarter if you got to invest in the projects you supported: this is the power of social tokens.
To be blunt, a community of writers might not be able to raise money from NFTs of their work (NFT-essays are, alas, not really a thing...yet). But that community could raise money from social tokens with a promise of some share of future income, the opportunity to meet the writers, the chance to be in a book club, etc. And in return, writers could have the backing to write full-time for a writer-owned publication that they might never have had otherwise. A jpeg promises a jpeg, sitting in the static 1s and 0s of the present. But a social token promises whatever opportunity people want it to signify. As Tina He intimates above, a social token is literally the right to a dream.
Social tokens are often positioned as the next breakthrough for creators who have shifted to building their careers independently online, outside of the studios or journals or record labels—here, at last, is a way for them to reward fans who have taken on the work of distributing and promoting their work. As the workforce is increasingly atomized into a freelancer economy of solopreneurs, social tokens seem to offer a way for any individual to become a creator by printing themselves a kind of upfront loan, as discussed above. But they do something even more powerful than that too. They incentivize that creator’s fanbase to play the role of the promoter that conglomerates can no longer perform effectively in a landscape of collapsing institutional power.
I actually think this is a bit misguided.
A community based around the promotion of a single beloved figure has a simpler name: a cult. QAnon is a cult, Scientology is a cult, and Ethereum looks like kind of like a fun cult in a gangly adolescent phase, one based not only on admittedly anti-cult principles of decentralization but the worship of a wonderfully thoughtful founder who looks like he’d rather be anywhere other than his own church. Most religions, we might say, are cults, though somewhat logical ones: if you do feel the need to worship and promote a single entity, God seems like a fairly good choice. For that matter, so do Rihanna, Cardi B, and Lil Nas X. Each could surely create a thriving fan community incentivized by their tokens, or as the Catholic Church would put it, their indulgences.
But for most creators, it will likely be a challenge to build an individual community around their singular presence. Leaving aside the ethical implications of joining a cult (damningly, they’re centralized), most fans would probably prefer to join a community around multiple artists, rather than to have separate Discord channels and low-liquidity tokens for each of the 500 creators they love. Bundling makes sense for creators as well, who can collectivize to support each other’s work and drive fans to one another.
So what creators need, then, is the opposite of a cult: they need a decentralized collective, a DAO. With proper coordination, DAOs actually offer a far more compelling model for distribution than centralized models of either corporate conglomerates or, yes, cults. In fully decentralized creator communities, fans can actively become creators themselves, remixing each other’s work and developing a reputation for their own work as fans. In a DAO, it’s not just the fans who work for the creators, but the fans who all work for each other as well—tendencies we’ve already seen with Twitter and TokTok. That’s an incredible unlock of talent from a pool of previously passive consumers.
What’s notable about Twitter and TikTok is not just that they’re technologies to enable decentralized creation, but that they could have only emerged in the cultural landscape in the past decade. For that matter, it’s contemporary technology that allows DAOs to tackle the central challenge of “proper coordination” that has historically capsized collectives from the Paris Commune to Occupy Wall Street. Whether technology can better coordinate human working groups to reward participation and engagement remains to be seen, though the success of esports and communal video gaming over the past ten years suggests it can. But it’s clear that the technology of social tokens offers incentive mechanisms for workers to contribute and collaborate within decentralized communities that have never existed in the past: tipping and paying contributors, for example, in just a keystroke. In that sense, the magic formula is “DAOs = collectives + incentivization.” DAOs are gamified communes.
Crucially, it’s social tokens that do that gamification. I’d previously written that NFTs are better for building communities while social tokens are better for building economies, but that seems predicated on a false binary. Communities are able to incentivize their users fully when they operate as self-sovereign economies that can reward users and let them reward each other as well, especially when that work also builds up the value of the token itself that they’re earning. So bundling creators together in single DAOs and Discords actually enables a more powerful economy, as the social token can now serve many uses as members collaborate with each other.
But the bigger point is that social tokens turn fleeting fun-and-play communities into long-lasting fun-and-work communities because social tokens turn communities into economies. We are not necessarily far from social communities building their own decentralized exchanges, as Brian Flynn suggested recently.
Web3’s ability to turn work into an investment and community-building into a game may sound like dystopian, a hyperfinancialized vision of social relations as a means rather than an end. But for the moment, it is our best shot at fighting the tragedy of the commons to keep members actively involved as participators in a movement, rather than faceless members of a crowd whose marginal contribution is 0. We might even go further and say that social tokens effectively let us turn our decentralized collectives not only into economies, but into states—gamified collectives, or if you prefer, gamified governments. Creative economies, then, are just the beginning.
To join a cult is to belong to that cult exclusively. To join a DAO is to forge relationships that lead to joining a dozen other DAOs as well. It’s arguable that nobody belongs to just one creator community, to just one DAO.
Online, in other words, we are multitribal. We fractionalize our identity and our time across multiple communities and protocols, and we’re unlikely to identify ourselves for one affiliation: rather, it’s the combination of affiliations that defines us uniquely. This seems, in many ways, a result of an internet culture that flattens time, fosters subcultures, and enables remix collaborations. Likewise, part of what makes DAOs really special is that despite their name as “Decentralized Autonomous Organizations,” they’re not autonomous—they can overlap, drawing on the same people and work across communities, so that one person’s effort no longer goes to a single company but to ten separate projects at once. Again, when properly coordinated, DAOs can accelerate technological development far beyond what a company might achieve.
We’ve focused so far on the economic power of social tokens to develop capital for creators and incentivize community efforts. But as their name suggests, social tokens represent social capital as well as financial capital, and in that sense, they are also credentials of one’s community affiliation, as well as rough proxies of the status accrued by working for a protocol. If they are indeed weaker than NFTs at conferring status, they are stronger at conferring simple data about one’s involvement and earnings: we can imagine a future protocol that could validate that one’s tokens were earned x years ago, within such-and-such a community, directly from its official treasury account.
How could that data be used?
Chase Chapman and Brian Flynn have spoken about a web3 Tinder: one that could cross-check social tokens across different communities to match two people based on their shared interests. Because content in web3 is platform-agnostic, transferable from one marketplace or publication to another, we can share our heterogeneous taste preferences from multiple communities to improve curation and matching. In other words, YouTube can only recommend us videos based on what it knows about our habits on YouTube, just as Spotify can only recommend us music based on what it knows about our habits on Spotify. But with web3 protocols, we could choose to reveal more abstract data about our taste to match with content we might like. That could point us to people who share the taste, whether they be curators or simply community members we want to meet. Searching online will become targeted and personalized whereas now it’s free-form and abstract. We can imagine how intensely that could change media habits for everything from NFTs to adult entertainment to artist collaboration—or even recruitment.
There are two final points to make here. The first is that cross-community connections are more important than ever, not only because the whole draw of the internet has always been to find the other weirdos in the world who share your sliver of taste (here’s Bill Gates advocating for the internet as a coalition of cigar communities in 1995). More importantly, collectivizing online is increasingly the way that people build power online, boosting each other’s statements, building on each other’s work, and yes, manipulating markets of scarce digital goods. The better the data to make matches between people, the stronger their community will be.
But second, the multitribe nature of DAOs means we are shifting away from any notion of a steady, stable community at all, towards what Jarrod Dicker has referred to as the “individual as DAO.”
In other words, each person has their own community, at the unique intersection of others who share various of their mutual interests, as well as sharing varying degrees of time, labor, and social capital within their mutual communities. In fact, a web3 Discord would probably be designed to map out shared acquaintances and create conversations that could be fluidly widened and narrowed to one’s closest and farthest acquaintances based on shared spaces and prior discussions.
If this sounds at all revolutionary, it’s in fact the opposite—a return to how we’ve always lived within our own communities-of-one, a mishmash of slightly clashing personalities that we call a “friend group,” even though it’s unique to us alone. It is a group like a birthday party, a tribe that is only our tribe and nobody else’s, one formed from the intersection of all the tribes we belong to throughout our day, a kind of social thumbprint. Social tokens allow, for the moment, an imaging of that thumbprint as a way to incentivize us to collaborate with strangers.
Basically, 30 years of technological development was required for us to approximate and accelerate our pre-online social habits. If web1 and web2 seemed exciting because of the breadth of social options they presented from so many strangers on earth with whom we might, might, share something in common, then web3 will be exciting because it narrows our search to the best options for us as individuals, because it makes the internet seem small again. The risk is that we may be placed within tribes that are too small and homogeneous, but the fundamental multitribalism of internet life will hopefully do the reverse: break down the gates of self-preaching choirs to let us move fluidly from one community to the next.
Social tokens play a small role as demarcations of our identity within those communities that in turn let us create our own community-of-one. And ultimately, more powerful than dope NFTs or get-rich-quick-speeds is this incentive simply for connection and conversation—the incentive that keeps us reloading social media and transmitting cute content blindly into the void in the hope that it will be reciprocated or rewarded. Social tokens are an entrance fee of a kind into those connections and conversations, but more importantly, they’re records of the ones that we’ve had. That data about how we relate will, one hopes, let us get better at relating as well as we not only create micro-communities in the place of institutionalized religions, but ones that can encompass members of widely different backgrounds from around the earth.
Whether that actually happens in a world where community-building is still largely a luxury for the armchair class—that remains to be seen.