Let’s talk about social tokens. What is the definition of a social token exactly?
In the most basic form, a social token is something which is tied to a community and derives its value from the community itself. Thus, a social token is the tangible value of a groups live expression of freedom. This can be a difficult concept to grasp, but it simply means that social tokens allow communities to benefit in a more direct way from their own creation of value instead of relying on a third party to monitor, direct, or capture that value.
So, is a social token just something a group of people have chosen to recognize as money?
No, in my opinion social tokens are not entirely new monetary systems. I think they are better defined as superior methods of creating and distributing value, whether that be through the tokenization of someone’s career, a brand, or a feeling.
To many people this seems a very strange idea because they don’t yet understand that Ethereum has created a more dynamic and capable monetary system which is the lifeblood of web 3.0.
In order to understand social tokens, recognition that Ethereum provides a new medium for making transactions is vital. Anyone can develop and write smart contracts on Ethereum, which execute commands in a decentralized manner, due to Ethereum running on a network that consists of 1000s of computers around the world which act as its backend. Every action on Ethereum requires ETH which many people are beginning to associate with a new form of money. The difference between ETH and the US dollar is that ETH only facilitates the trade of tokens on Ethereum whereas the US dollar facilitates the trade of the majority of goods and resources around the world. That being said, this does not mean Ethereum can’t take some of the American dollar’s share of trade as it grows and scales over time.
I believe the creation of more social tokens will increase trade on Ethereum. There is a strong likelihood this will prove to be true because social tokens have the ability to disrupt many facets of the modern economy as well as create entirely new pockets of value.
The second step in understanding what social tokens are must be prefaced with a breakdown of what the current decentralized applications (dApps) on Ethereum are like and whether or not their tokenization could be defined as “social.” The dApps and subsequent protocols built on top of Ethereum are similar to companies that operate in the American economy, but instead they operate in the Ethereum economy, which means they are not tied to any jurisdiction.
One could argue that all tokens on Ethereum are “social tokens” because they all revolve around some community or company and act like a stock for that company or a means of accessing that community. While that remains true, I tend to disagree that all tokens are “social tokens” since many tokens on Ethereum are not fairly distributed to the community that uses the product, nor are profits generated by the protocol fairly distributed to the token holders. Without community involvement there is no social aspect to tokens and they devolve into simple corporate tokens or regular stocks, therefore, it is my belief that these two aforementioned functions define what a social token truly is.
I’m not saying that whomever runs the company shouldn’t have the power to do what they want — they should — but if they don’t listen to the community that uses the product, then they are not a community project and their token is not a social token. Their governance isn’t decentralized, they are simply a company building a product on a decentralized medium of exchange. However, this doesn’t necessarily mean the token in question is not a social token. For example, if a percentage of all profits generated by the protocol were given back to holders of the token, then it becomes a social token with regard to value distribution.
So is ETH, the token of Ethereum, a social token? I would argue yes, due to the fact that it is widely distributed and anyone who wants can stake ETH in the network to earn fees over time by validating the chain. In the current monetary system, which is run through web 2.0, the role of validating the network is primarily done by banks and governments who control the supply and demand of the American dollar — a system, by general consensus, that is now the default “data base for resource allocation” to quote Elon Musk.
This leads us to the third step in the process of understanding social tokens. We have to define the medium of exchange, the units of exchange, and methods of value distribution. The medium of exchange is the space in which resources are allocated and stored as units of exchange. There are many mediums of exchange but the two which govern the majority of the world we live in are the physical medium, meaning cash trading hands, and the digital medium that is built on web 2.0 and controlled by corporations, banks, and governments. Currently the American dollar is the main unit of exchange and it exists physically and digitally across all mediums.
The American dollar is a unit of exchange which facilitates the creation of value by individuals, and allows that value to be distributed amongst society generally in the form of stocks and more dollars. The problem with stocks is that they are not very dynamic, creative, or inclusive and the problem with dollars is that a select group of entities have the power to print more as they see fit. They both also exist in web 2.0 which is centralized and controlled entirely by governments and corporations – there is no real freedom of expression or creativity occurring here. Therefore, to succeed in this system, you must be willing to completely bow down and indebt yourself and your company to the US dollar. You must also rely on and comply with the systems gatekeepers who facilitate trade: the bankers and the government. Since the banks and government are in bed together they have the creation of value in a chokehold – meaning the market is no longer free and they alone choose which companies succeed and fail.
In many ways the merging of banks with government is the end of capitalism. In capitalist countries it has been said that anyone can “make it” if they work hard enough. If someone creates a business which adds value to society it will be successful and there will be fair competition amongst people and companies wherein winners and losers are decided based on the value they create. In reality this is no longer true, because the government can choose which companies it wants to succeed by printing more units of exchange without adding value to the system. They then use those units of exchange to buy debt from failing companies which, in turn, dilutes the value created by everyone else. Ultimately this makes every unit of work worth less.
This is not a fair system. It doesn’t allow for equal opportunity in value creation due to corruption nor does it facilitate creative innovation at the base level of value distribution since anyone who redistributes wealth at a large scale could be seen as undermining the government.
Thankfully, things are changing. If you want to create your own system of value creation or monetary distribution it is relatively easy to do so by utilizing Ethereum smart contracts. These new systems cannot be censored or controlled in the way web 2.0 applications are because of the decentralized nature of Ethereum. In fact, on top of it being easier to create new forms of monetary exchange, smart contracts also give us the ability to encode better laws into these new systems of monetization.
The way I see it social tokens must exist in a decentralized medium exchange. They should allow equal accessibility for all who wish to create or trade them. Social tokens do not have to redistribute value created to holders, nevertheless I believe it will be a defining feature of social tokens in the future.
I think social tokens can be defined as a more inclusive and competitive method of value creation. They truly allow anybody to create a system of value based on whatever they desire and any ensuing token can be traded with other tokens on the free market without any interference. For example, imagine a social token called “love” where 10,000 arbitrarily chosen people hold the entire supply which is so large it can’t even be comprehended (something like 10^15 tokens). What if these people then began an online marketplace to showcase their work and could give each other “love” tokens based on whether or not they enjoy the pieces? Similar to Instagram’s “like” system except there is no cap on how much love you can give someone. If people began to use the marketplace, “love” would incur some sort of value over time. Perhaps someone would create a “hate” token as well. After all it is a free world, why shouldn’t you be allowed to dislike something? I don’t know what would happen in a social system monetized in this way, but it is interesting to think about and it really only scratches the surface of what social tokens can do.
Social tokens could also be used by celebrities, artists, or innovators as a way to give back to and grow their fan base by sharing with them a portion of their profits. A Social Token is a token that someone has created and is using to help them actualize their dreams, grow their ideas, and reach their goals. Social Tokens are not just made for the purpose of raising money, they are also made with the purpose of creating and sharing value. Basically, social tokens make it easier for people to create value and allow for more creative ways to distribute money through society, while simultaneously increasing competition and innovation. Social tokens are both socialist and capitalist in nature and I believe they can provide a path for people who want to innovate and unlock value in ways which have never been done before.