From the perspective of empowerment, why is the de-financialization of social tokens imperative?

Author: Kairon

Original Title: 《My 2022 Predictions: The Year of web3》

Translation: Captain Hiro, DeFi Dao

This article was co-written by me and Eliot Couvat, where we explore social tokens and further elaborate on how community contributors can receive more rewards beyond monetary compensation. If you want to know Eliot's views on the social token revolution, be sure to follow him on Substack‌.

Gaby Goldberg writes in her brilliant article 《The Social Token Paradox》‌ that if you plan to measure a community's value by the price of its tokens, you will reduce your exposure to valuable contributors who are likely to bring unique perspectives to your community.

Most DAO (Decentralized Autonomous Organization) builders today hope for their token prices to rise continuously, without realizing that this could also be the reason for the destruction of their communities.

That’s why we should not view social tokens as financial assets, or at least not use their prices as a measure of community success, because that is really not where their value lies.

In the world of cryptocurrency, anything can be financialized, and anyone can turn anything into an asset. The emergence of social tokens is meant to unleash the power of non-financial goods and bring tangible value to social connections.

But it is crucial that we first separate the monetary burden of social tokens from the actual use cases they are building, and show everyone that reputation and networks are more important than money.

Decoupling Social Tokens from Cash

So, specifically, how can we demonstrate to individuals that reputation and networks are more important than the rise in token prices?

Today, people still primarily view social tokens as financial assets, while their true promise lies in the ability to build trust through reputation, helping individuals around the world align their talents and work towards causes they care about.

In fact, as their name suggests, social tokens are primarily the tokenization of human interaction and the opportunities it provides. Social tokens represent the value you add to the Web3 ecosystem. With social tokens, contributors to tokenized communities finally have something tangible and tradable that represents their work, connections, and history.

As Vitalik Buterin, E. Glen Weyl, and Puja Ohlhaver describe in their latest paper 《Decentralized Society: Finding Web3's Soul》‌:

Web3 aims to broadly transform society, not just the financial system. However, today’s social structures—families, churches, teams, companies, civil society, celebrities, democracy—are meaningless in a virtual world that does not represent the human soul and its supporting broader relational primitives (often referred to as the 'metaverse').
If Web3 discards enduring patterns of identity, trust, and cooperation, as well as composable rights and permissions, we will see false attacks, collusion, and a limited economic domain of fully transferable private property, all of which trend towards hyper-financialization.

Because social tokens are earned by community members through contributions, building new connections, and providing value to the community, the tokens represent status, reputation, and a voice among like-minded individuals.

These concepts are perfectly illustrated and encapsulated in the $CLUB token.

Illustration of $CLUB provided by Seed Club

When the social token $CLUB from the Web3 accelerator Seed Club launched a few months ago, it was only available to active members of the Web3 ecosystem—those holding multiple significant tokens ($FWB, $FF, $BANK) or those who built projects through the accelerator.

The tokens could not be purchased; they were only rewarded to individuals who actively contributed to the project's development. Because of this, $CLUB became a highly coveted token that people would hold onto regardless of market conditions.

Rather than providing any economic benefits to community members, $CLUB gave people the opportunity to vote on which projects the Seed Club accelerator would accept. For $CLUB holders, having a voice in the industry and the ability to choose the teams they empower means more than another get-rich-quick scheme.

$CLUB is not about speculation; it is more about reputation, friendship, and collaboration. Through $CLUB, the Seed Club team may be one of the earliest teams to truly understand where the power of social tokens lies.

This is why social tokens will truly unlock the potential of cryptocurrency.

Now is a Builder's Market

Tokenized communities are emerging as a new structural model that can leverage new coordination mechanisms, providing individuals around the world with a digital-native way to collaborate through tokens.

As Packy McCormick emphasizes in one of his excellent pieces‌:

Web3 seems to be a toolbox for creating a genius of the scene (Scenius). Rather than financial speculation, Web3 provides a set of tools (such as social tokens) that can adjust incentive mechanisms in a way that allows groups to tap into their community genius.

It may be the ERC-20 standard or the term "token" that has led to confusion about where the value of social tokens lies. However, we can be clear that tokenized communities and DAOs must build useful applications on top of the data provided by social interactions to realize this scene genius—creating utility that goes beyond finance.

Tokenized communities must embrace and share non-monetary benefits of measuring contributions, curiosity, friendship, and a whole suite of human qualities through their culture, making this space more worthy of people's efforts.

We believe that a "contributor-centric" approach can help solve the social paradox posed by Gaby Goldberg, creating a positive feedback loop of pride, coordination, and sustained collaboration within communities, allowing members to see their victories through tangible assets rather than just a chart or harmonious shout-outs.

We know that social tokens are not just what the price charts show; as pioneers of this new certification pathway, our role is to build real-world use cases and create better experiments for the broader public to understand their possibilities.

This brings us back to the question we started with—how can we show individuals that reputation and networks are more important than money?

Creating a DAO Native Contribution Dashboard

Today, people may still be reluctant to let go of the idea of social tokens as cash because there is no Web3 platform that beautifully showcases which communities you have participated in, nor is there a platform that displays the extent of your involvement in them.

Social tokens can reflect the quality and impact of a member's work in the community well, but we lack the design components and the narrative surrounding it. Simply put, we have the technology, but we do not yet have a way for people to see and showcase the amazing things they have done to drive community development, as well as what they can do with the newly earned tokens.

Now, let’s imagine a separate application to track your opportunities to express opinions in the community, keeping you updated on whether you belong to the top 10% of the most active contributors in your most active workflows. There could even be a way to organize the countless social tokens you earn through valuable contributions to the community.

Mockup of the application

In our view, this "application" should be a dashboard, not a wallet. While the idea of a Web3 wallet may sound appealing at first, perhaps putting your social tokens and DAO tokens in one wallet makes it easier for people to develop the mindset that "social tokens are money."

That’s why we believe a better solution might just be an interface that shows everything you do with social tokens, similar to what Backdrop is doing.

Backdrop is a dashboard launched a few months ago that helps everyone engage in Web3 tokenized communities by displaying what is happening in these communities on a well-designed interface. By accessing someone's profile, anyone can see if they voted on a proposal, participated in an event, and so on.

Eliot's profile on Backdrop -- here we can see all his "Web3 actions"

We believe an application/dashboard similar to Backdrop will focus entirely on improving the social token experience from the contributor's perspective, allowing people to understand the true value of social tokens.

The dashboard should focus on a single question: "How do we create an interface that makes the experience of community members contributing value and earning social tokens no longer a constant chase?"

When people have the right interface—one that easily showcases their friendships, their work, and their impact in this space—perhaps we will start to see fewer people considering whether a token is successful based on price and more based on the story it tells.

Conclusion

Tokens quantify the depth of relationships between individuals, making social graphs fairer and more measurable, and most importantly, they enable better coordination mechanisms—creating gamified incentives/rewards and establishing a programmable digital economy.

When the hype around a social token builds up, who is more likely to sell? Does holding 10 or 20 specific tokens really make a difference? Once you build experiences and purposes around your economy, all of this and more becomes irrelevant.

We need social tokens because they allow us to create a programmable digital economy that will help us tap into our collective wisdom. While our activities have increasingly moved into the digital realm, we have made little progress in creating tools for coordination in a digitally native way.

With social tokens, a whole new world of possibilities has finally opened up, provided we view them as representations of social capital rather than financial assets.