Trading and Investing

What Are Social & Community Tokens?

Published
March 22, 2021
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The crypto market has experienced tremendous growth over the past decade. While Bitcoin has captured most of the attention, it’s just one of many innovations occurring with blockchain technology across industries. The widespread adoption of cryptocurrencies and their maturing ecosystems have paved the way for Web 3.0 technologies.

Social tokens are a prime example of these breakthroughs. While initial coin offerings (ICOs) have faded, social tokens have leveraged a lot of the same underlying technology to power online communities. The combination of social tokens and non-fungible tokens, or NFTs, could be transformative for the creator economy over the coming years.

Let’s take a closer look at social and community tokens, examples in the wild, and how to create them for your own groups.

What Are Social Tokens?

Social tokens derive their value from the growth of shared communities. While most current projects are at a proof-of-concept stage, the long-term goal is to create an entirely new way to power the creator economy. Tokenization can create unique ecosystems that are far more user-friendly and rewarding than current advertising and subscription models.

There are several different types of social tokens:

  • Personal Tokens are created by individuals to exchange forms of labor. For example, $ALEX is a bet on the potential of crypto entrepreneur Alex Masmej through an experiment that’s often called a “human IPO”.
  • Participation Tokens are created to participate in the potential upside of a group. For example, $SWAGG is a social token backing SWAGG Network creations, including Forefront and upcoming community-initiated products.
  • Community Tokens are created for memberships or communities. For example, $JAMM is a social token that’s required to gain access to the organization's discord, newsletter and other platforms in the Jamm Session ecosystem.

Modern tools have made it easier than ever to tokenize communities. While Collab.Land is a popular platform, MintGate and Coinvise have both built streamlined platforms to create tokens and monetize content on a wide range of platforms. As social tokens go mainstream, more and more content creators could embrace these platforms to build their communities.

These tokens are already starting to play an important role in the creator ecosystem with widespread adoption among crypto artists and musicians. As the technology evolves, social tokens could start to attract more mainstream artists before moving onto larger communities, such as large publishers or online communities built around products or brands. 

The Vision for a Web 3.0

The Web 3.0 movement envisions a decentralized internet powered by blockchain technologies. While Web 2.0 transferred control from browsers to platforms, the modern internet has made it painfully clear that large platforms are more interested in maximizing revenue than rewarding content creators and protecting users’ privacy.

Download our Checklist of the Top Social Tokens to discover the most popular projects in the market today.

Web 3.0
From browsers to tokens. Source: Blockchainhub

Web 3.0 leverages cryptography to eliminate the need for trusted intermediaries. While Bitcoin has famously avoided financial intermediaries, the same principles apply to the centralized web where peer-to-peer networks could eliminate data centers. Artificial intelligence and machine learning could further improve the performance of decentralized networks over time.

Web 3.0 could also provide benefits to content creators and consumers. For example, users could sell their data or barter with advertisers without giving up ownership or privacy while content creators could receive compensation without the enormous cuts taken by platforms and other intermediaries throughout current distribution systems.

The Role of Regulators In Web 3.0

Social tokens and Web 3.0 technologies could prove transformative to the modern internet over time, but the government will still play a critical role in regulation.

Don’t forget to download our Checklist of the Top Social Tokens to discover the most popular projects in the market today.

The Internal Revenue Service (IRS) treats cryptocurrency as property rather than a currency, which means that taxpayers are responsible for paying taxes on any gain in value. While the legal landscape is quickly evolving, the current regulations require taxpayers to calculate the cost basis and capital gain or loss of each transaction and report them on their tax return.

ZenLedger
ZenLedger makes it easy to prepare crypto taxes. Source: ZenLedger

Fortunately, crypto tax software, such as ZenLedger, can help automate the process by connecting with wallets and exchanges, aggregating transactions, computing the gain or loss and pre-filling popular IRS forms. Taxpayers can even integrate with TurboTax to automatically fill out the proper paperwork with an audit-proof record of transactions.

Aside from the IRS, the FCC and other regulatory bodies will likely want a way to control decentralized content to some extent in order to prevent crime. These controls will likely include insights into financial transactions that take place through these networks—as crypto oversight has demonstrated—and the ownership of content shared online.

The Bottom Line

Cryptocurrencies and blockchain technologies are being applied to an ever-growing number of industries and use cases, ranging from finance to logistics to media. By decentralizing data and placing it on an immutable ledger, these technologies could fundamentally transform the way that these industries operate, align incentives, improve security and increase efficiency.

Social tokens enable creators to build communities and monetize their content. As a key enabler for Web 3.0, a number of platforms have popped up to make it easier to tokenize communities. Participants should keep in mind, however, that all types of crypto tokens could have regulatory implications, including taxation.

If you use, trade or invest in crypto, ZenLedger can help you ensure that your taxes are accurate and help you save money over the long run. Try it today for free!

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