The eve of the explosion of community tokens: this is the incremental market where encrypted finance has the most potential to connect with the real world

Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom), Written by LeftOfCenter, published with permission.

Editor's Note: This article comes from

Chain News ChainNews (ID: chainnewscom)

Chain News ChainNews (ID: chainnewscom)

, Written by LeftOfCenter, published with permission.

It's time to use tokens to revolutionize the Internet charging model. The road to revolution should start with creative people and creators.

With the rise of the creator economy, intellectual content products are being rapidly produced and disseminated on the Internet with an unprecedented attitude. Many creators have gained many fans and even cashed in. The era of "creation by all" has quietly arrived. But nowadays, most creators still can’t rely on this to make a living. The fundamental reason is that there are structural problems in the Internet revenue model: that is, the use of a free product model subsidized by advertising is not real market pricing, resulting in The income of most long-tail creators is diluted and diluted.

With the continuous development of the encryption economy, the Internet has begun to transform from Web 2.0 to Web 3.0. Whether it is content creation, music distribution, platform infrastructure, or various Web 3.0 tool products with different functions, the ecology of creators and community economies It is being gradually improved, which makes it possible to implement the ownership economy:

Creators can use their future earning capacity as a value to support the issuance of tokens, and fans can purchase tokens to "invest" in creators and share in their future economic success; this also opens up additional sources of funding for creators, and Interaction with fans opened up a new way.

Unlike ICO, which has been widely criticized for issuing tokens out of thin air, community tokens are issued based on certain value support. They may be the profitability, popularity/popularity or reputation of the creators. The open and permissionless encryption economic primitives can promote Form a fan-oriented value discovery market. Compared with the physical chain, this value native to the Internet community is easier to capture.

Before the real asset on-chain solution is perfected, community tokens may become one of the incremental markets with the most potential to connect to the real world.

The Rise of the Creator Economy

The creator economy is on the rise.

The creator economy is not a trendy label, but a tectonic shift that is quietly taking place, and it has already happened in the era of Web 2.0.

An important evidence is that for a long time, there have been a large number of platforms connecting creators and consumers on the Internet, covering almost all categories from music, education, knowledge sharing, blogs, pictures to videos, etc.

In this type of online platform, people make a living by selling their skills, knowledge and ideas on a platform in a way independent of traditional organizational forms. The products or services sold include but are not limited to writing, videos, games, movies Photography, education, music and other categories, former Kleiner Perkins partner Eric Feng (Eric Feng) refers to this group of people as Digitally Native Vertical Creators (DNVC) for direct-to-consumer brands .

a16z investor Lin Ji called this the creator economy, and made an essential distinction between it and the gig economy that has become popular in recent years. She believes that the gig economy is a commoditization model of labor caused by homogeneity and scale effects in a division of labor society, while the creator economy focuses on making a living with heterogeneous skills, which is a sustainable accumulation of personal brand effects and the audience, a passion economy with independent creativity, realization of individual creativity (Monetizing Individuality), and sustainable development attributes.

As human civilization matures, human needs have also evolved. As a "worker", work is not just to make money, but to combine career development with a sense of accomplishment and freedom. That is, in addition to making a living, work Still makes sense. With the rise of the Internet and the emergence of various platforms that directly connect creators and consumers, it has catalyzed the transformation of new employment models. In the past, the market that was only a job matching market can no longer meet people's needs, which brings opportunities for a new type of creator platform.

According to a 2017 study by the McKinsey Global Institute, 20% to 30% of the working-age population in the United States is engaged in "independent work", which is what we often call "freelance work." In addition, the percentage of jobs carried by digital platforms such as Uber and Etsy is growing rapidly, and this trend has spread across the industry, from YouTubers, podcasters and gamers who are digital natives monetizing their personal interests to those who are not traditional. Creators, such as teachers, salespeople, farmers, chefs, and buyers, are all transitioning to digital self-employment.

Most people can't make a living from it

On the surface, this seems like a good business.

The abundance of household names on YouTube, Instagram, and TikTok, combined with the often exaggerated coverage in the media for one reason or another, can give the false impression that these platforms are full of money-making opportunities.

According to Forbes, the highest-paid YouTuber in 2019 was 8-year-old Ryan Kaji, who made $26 million from his unboxing videos and $2,000 from the Dude Perfect team, which went viral with sports trick videos. $10,000, beauty blogger Jeffree Star earned $17 million, and that's only limited to ad revenue or sponsorship. And some smarter people began to realize their traffic dividends. For example, Huda Kattan, a Middle Eastern beauty influencer, started her own business and developed Huda Beauty, a beauty brand with the same name, with a market value of 1.2 billion US dollars.

Aside from the inspirational stories of success and the beautiful vision the media portrays to the public, the data tells us the other side of things.

The data shows that in 2017, 17 million creators in the United States earned about $7 billion on a total of nine platforms. However, the real situation is that only the top players can really make money, and most creators cannot make a living on this. In fact, only 3% of YouTube channels earn above the poverty line, which means that 97% of people are living below the poverty line, which is not enough to make a living.

Also, most ad-supported platforms, such as Instagram and TikTok, do not share revenue with users, and in this case, the only way to monetize is to gain a large number of followers and then sell their own products.

Like the internet itself, the fact that creators on these platforms are distributed is a power-law distribution with a very long tail. The power law distribution is the Matthew effect. In this case, it means that a few people have the majority of income, while the majority of people have very little income, because of the winner-take-all principle.

There are structural problems in the Internet revenue model, and the free model cannot maximize platform revenue

The fundamental reason for this problem is that there is a structural problem in the Internet revenue model: that is, adopting a free product model subsidized by advertising is not a real market price, which will dilute the income of most long-tail creators and diluted.

In fact, most traditional businesses set their prices by iteratively testing customers' willingness to pay and competing processes. This is not the case, however, with two-sided markets based on digital information products. The reason is that the scale effect of the network is the key to success for products that generally start out as Internet business models. In other words, for an industry without technical barriers, the key to its success or failure is the size of the network.

To scale this network effect, these platforms typically employ demand-side economies of scale. Specifically, the platform side will subsidize most consumer users with a free model to quickly seize the user market. On the other hand, there will be some realizable revenue sources for subsidies.

Most of the current mainstream Internet platforms adopt this model, including YouTube, TikTok, Pinterest, Reddit, Tumblr, Google Search, Facebook and other platforms. On the one hand, they will subsidize the creators on the platform with a certain indicator based on the income paid by advertisers.

This will lead to revenue eventually flowing to top creators, while most long-tail creators will not be able to get a share.

An effective improvement plan is to adopt a differentiated pricing model, that is, use a tiered pricing model to attract some consumers to purchase (or generate more consumption), so as to minimize consumer surplus.

Consumer surplus refers to the difference between the price consumers want to pay and the price they actually pay, on the supply and demand curve, the area between the equilibrium price and the demand curve. In a market with a downward-sloping demand curve, some consumers are willing to pay more than the market price.

Take coffee as an example. If the market price for a latte is $5, but you are willing to pay $10, then your consumer surplus is $5. And there may be other pricing demands from consumers in the market, ranging from $20, $15, $12, and $9. In this case, if people can buy goods according to their wishes, more consumer surplus will be generated, that is, the total income paid minus the total income set by the market. All else being equal, the lower the market price, the greater the consumer surplus; the more elastic the consumer demand, the greater the consumer surplus.

The perfect differentiated pricing is that the price charged by the merchant to each type of consumer is just in line with the consumer's willingness to pay, so that the consumer's surplus is minimized and the merchant maximizes the profit.

How willing are people to pay for digital content?

Under the free model of advertising subsidies, a unified free pricing model is adopted, which obviously cannot achieve effective differentiated pricing. For highly flexible cultural and creative products and services, there is still a lot of room for consumer surplus to be tapped, which is an industry that is extremely suitable for a differentiated pricing model.

In fact, the differentiated pricing model is one of the important features of fan economics, which is to provide services by meeting the needs of different loyal fans. The inherent attributes of the cultural and creative industry are naturally compatible with fan economics, because cultural and creative products have different values ​​for different people, especially for die-hard fans, who may be willing to pay a higher premium to buy idol products.

As Kevin Kelly, founding executive editor of Wired magazine, puts it, “A die-hard fan is someone who will buy all of your work. For example, they will drive 200 miles to hear you sing; If you have read your book, they will also pay for your hardcover, paperback and audiobook full set; they will pay for the DVD version of the "best" video of your YouTube channel; they will come to your organization once a month. reunion."

"If you have like 1,000 of these die-hard fans, even if you don't necessarily get rich, at least you don't have to worry about making a living anymore."

According to Kevin Kelly's concept of "One Thousand Die-hard Fans", anyone engaged in creative or artistic work, artists, musicians, photographers, craftsmen, actors, animators, designers, or authors, etc., as long as they can get one thousand One loyal fan can make a living.

Li Jin, a partner of a16z, believes that in fact, only 100 real fans are enough, and creators can segment the audience, and then provide tailor-made products and services at different prices. According to her, human beings are currently in a trend of unbundling from the employment system, and many people are shifting from corporate employment relationships to independent individual businesses. This is also the creator economy that she has been paying attention to.

In fact, free is not the best model, and there is growing evidence that people are willing to pay for digital content. Most traditional news publications have successfully built paid platforms, the Washington Post, the Financial Times, Business Insider, the Wall Street Journal, and the often cited New York Times ( Its subscription revenue is currently twice that of advertising revenue) and so on, which proves the feasibility of the subscription model; Spotify's monthly active subscribers account for half of the total number of users.

Internet products begin to explore multiple monetization models

Since the advertising model is unreliable, it is better to make money directly from consumers.

In fact, some Web 2.0 platform and tool providers have realized this change, creating more diversified monetization models for the core users of the platform—creators—beyond advertising.

For example, YouTube, the world's largest UGC video platform, has only had advertising revenue at the beginning, and has now provided creators with a variety of monetization channels including brand cooperation, live broadcast rewards, stores, and paid subscriptions. TikTok, the overseas version of Douyin, released a creator fund in July this year, planning to invest 200 million US dollars to support the creator plan, and will release a tipping mechanism similar to Bits.

In addition, creator platforms like Substack are often more attractive to creators than the Medium model, because it provides a solution for content creators to set pricing rights independently, allowing creators to set prices independently, usually content creators can Set up your own monthly subscription model (at least $5 per month), and Substack will take 10% of the fee.

Patreon is another fan-paid subscription platform worth mentioning. Positioning creator sponsorship, Patreon allows creators to open their own membership programs, with a wide range of creative forms, including but not limited to photography, porn game developers, independent musicians, YouTube talk show hosts, video directors, paintings, writers, etc. , the sponsorship mechanism is mainly set by the creators themselves. It is very flexible and can be paid on a monthly basis, per item basis, and advanced functions that provide fans with more permissions. Generally speaking, the higher the fee, the more permissions and feedback they can enjoy. Of course , creators can also simply share free content to readers, or publish creations to obtain sponsorship profits, and even obtain stable income to make a living.

For example, Saifedean Ammous, the author of The Bitcoin Standard and an economist, has set up his own membership plan on Patreon, which is divided into 3 gears. The first two gears are 25 US dollars per month and $50, enjoy the same permissions, including allowing sponsors to directly access the manuscript in progress, participate in live online courses, join online forums and Telegram groups, etc.; the highest tier is $300 per month, except for the first two tiers covered In addition to the privileges, a 1-hour Austrian economics course and a private lesson on the latest research on Bitcoin can also be provided in January.

Of course, it’s also possible that fans don’t ask for specific rewards at all, they just want to support creators to complete something they want to accomplish. Therefore, Patreon is somewhat less like a business relationship, and more like a party willing to pay for sponsorship , the other party expresses gratitude through feedback, without the compulsion of a buyer-seller relationship.

A series of emerging platforms such as Substack, which directly connect consumers with creators, give creators a pricing power, based on which a market can be formed, and consumers in the market can vote whether the product is valuable by paying bills. If they are willing to pay for it, a value market based on the work will be formed.

In other words, as more and more such platforms emerge and are gradually adopted by creators, individuals whose value is difficult to quantify in large organizations can use these markets to form free pricing for their works.

Crypto Finance and Bond Tokenization

A more radical improvement is to issue bonds based on the creator's future income as a value support. Fans can buy bonds and allow them to trade. This can be traced back to the "Bowie Bond" issued by Internet musician pioneer David Bowie.

In 1997, glam rock musician David Bowie launched "Bowie Bonds" (Bowie Bonds), using the royalties of all his albums released before 1980 as guarantees to issue bonds, which were later issued by Prudential Insurance Company (Prudential Insurance Company) ) for $55 million. The 10-year bond pays 7.9 percent, about 1.5 percentage points above the market benchmark rate on U.S. Treasuries.

At the time, the deal worked out well for Bowie, as it allowed him to advance royalties and licensing fees for ten years without giving up ownership of his songs.

This is a bold financial experiment. Before this, the practice of packaging illiquid assets into bonds was only common in home and car mortgages, but David Bowie first used this method for music copyrights, pioneering the packaging of intellectual property rights into financial products . This move has been praised by many financial experts, because he truly understands the value of intellectual property rights.

The rise of encrypted finance and its series of encrypted economic primitives can maximize the "value discovery" of intellectual property. Take basketball player Spencer Dinwiddie as an example. He once launched a crowdfunding campaign called Gofundme, with a target amount of 2,625.8 BTC equivalent in US dollars (equivalent to 24.6 million US dollars).

This crowdfunding is supported by his NBA contract income, and tokenized bonds are issued based on Ethereum, which are provided to fans for purchase and investment. After months of gaming with the NBA official organization, Spencer Dinwiddie received $13.5 million of the $34 million contract revenue in advance through this event. In return, investors can get 4.95% monthly interest and have the opportunity to join his team. All-Star weekend event.

In essence, this is a way to tokenize debt. Compared with borrowing money from institutions, fans can become investors, which can open up additional sources of funding for stars and have more diverse interactions with fans. For fans, the program allows fans to "bet" on a player's success and earn money on the player's future performance.

Fan-oriented value discovery platform

With the continuous development of the encrypted economy, the Internet has also begun to transform from Web 2.0 to Web 3.0. Whether it is content creation, music distribution, platform infrastructure, or various tool products with different functions, the ecology around creators and community economy is developing. Gradually improve.

Zora: Helping limited issuers capture high premiums in the secondary market

Zora x RAC

Zora is a platform for creators and designers to release limited products in the form of encrypted tokens. It allows creators to issue limited edition artwork and merchandise in the form of encrypted tokens. A token issued on the platform promises to exchange A real product in the real world.

If you want to issue 100 pairs of limited edition sneakers, you will generate 100 specific tokens, which can be sold and traded through the Internet, so that the physical product can be priced dynamically with the supply and demand of the open market.

The price of these tokens will fluctuate up and down as buy and sell operations and transactions take place. This means that before the token is converted into an actual product, the holder can still sell it for an upside profit, and of course may lose money, and the resulting transaction fee will go to the creator. When a token is finally redeemed for a physical item, the token is destroyed and removed from the market forever, at which point the creator will receive revenue from the item at the current token price.

What Zora wants to do is to help creators/brands capture the high premiums generated in the secondary market by reshaping the buying and selling model of limited products. For example, the Yeezys, a joint series of Kanye x Adidas, is priced at only $220, but due to short supply , leading to 10 times the original price in the secondary market like StockX, but these high premiums all fall into the pockets of scalpers. With a platform like Zora, creators can create their own marketplaces to enable true price discovery and capture value from subsequent secondary market transactions.

Of course, the most noteworthy classic case is the limited edition personal token TAPE issued by Grammy Award winner Andre Anjos under the pseudonym DJ RAC on Zora. Tape versions of three studio albums BOY. TAPE tokens are priced based on the bonding curve, with an initial price of $20 each, and eventually a hot sale, with the price quickly rising to hundreds of dollars.

At present, compared with the issue price, TAPE tokens have risen 83 times, and the selling price is 1698 US dollars.

This case proves to us that it is feasible to issue personal tokens based on encrypted economic primitives and build a fan community to make a living and even make money. The allocation of personal tokens RAC allows us to see that the fan token economy is not only theoretically self-consistent, but also has the possibility of landing.

community ownership economy

The Internet has flattened the world. People all over the world, no matter where they are, can talk online based on topics of common interest. The rise of the encryption economy and Web 3.0 allows people to share the same information no matter where they are. All kinds of tokens become a community of interests, and get incentives from the system according to their own contributions.

Imagine such a scenario, you have a keen sense of smell, optimistic about the future development potential of a certain creator, then you can own a part of this project by purchasing the community token issued by it, similar to buying a company’s stock to bet on the company Once the project succeeds in the future, it will be directly reflected in the token price. As a fan, you can not only share in the idol's success, but even have a say in its income and career direction.

This is the ownership economy.

With the rise of cryptoeconomic primitives, creator infrastructure platforms, and some of the Web 3.0 tools that come with it, it is possible to implement the ownership economy into reality.

Most community tokens are based on the ERC-20 format on Ethereum, which means they can be traded without permission, creating a natural market for these tokens. For community members, just holding the tokens issued by the community means participating in the community, and any related achievements of the community will be reflected in the currency price. For loyal fans in the community, they can invest a lot of time and energy to earn tokens and get the rewards they deserve. Of course, you can also directly participate in the market without participating in the community, and buy tokens by investing money. That is to say, even if you are not a loyal fan, you can also bet on someone to earn income in the future, bet on a certain creator’s In the future, it is no different from buying stocks and investing in a company.

In the case of RAC, RAC adopted the same retroactive token distribution mechanism as Uniswap to give back to loyal fans, and airdropped a large number of RAC tokens to platform supporters including Bandcamp, Patreon, Twitch, etc. These fans either paid Members (meaning willingness to pay), or surrounding buyers (meaning loyal fans), or people who have exchanged TAPE tokens for physical tapes (meaning not speculative investors), this is Kevin· The type of die-hard fan that Kelly describes is willing to pay for your hardcover, paperback, and audiobook collections and for DVDs of your YouTube channel's "best" videos. Obviously this is a very worthwhile airdrop, because it incorporates the most valuable users into its own community value system.

In the ownership economy, a token is not just a financial investment tool, but more importantly, it is an equity token. For example, the issuer can set up a hierarchical community membership model, requiring a certain amount of tokens in the wallet to access a Discord channel, read certain community-exclusive content, receive limited gifts, and experience exclusive rights such as early releases. Since ownership is verifiable on-chain, verifying access is straightforward. Nowadays, there are Web 3.0 community chat applications like Syndicate, which can verify asset ownership in a trustless way. For example, Syndicate can be used to create a Chainlink whale community, and the parameters of the chat group can be set to at least hold 1000 LINK tokens are required to join the group.

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Syndicate user interface

The ownership economy allows individuals to become part of the community, not only in terms of economic rights and exclusive access to content, but also as an individual unit in the community to allow their opinions to be better heard, which is mainly achieved through governance voting. All these elements will motivate the smallest member unit of the community-individuals to become active participants and evangelists of a community.

Community Token Issuance Platforms Foundation, Roll, Fyooz

Foundation, another token offering platform targeting artists and designers, was founded by former Dharma product designer Matthew Vernon. Similar to Zora, Foundation allows artists to issue ERC-20 tokens representing physical objects, which can then be sold on the secondary market or exchanged for physical objects. Unlike Zora's sale of tokens on the Uniswap platform, Foundation chose to develop its own protocol to make the pricing model more suitable for art sales. For example, every transaction fee generated by secondary market transactions for works published on the Foundation platform will Property of the artist. Like Uniswap, Foundation also uses bonding curves to define the relationship between supply and price, but allows designers to customize the low and maximum prices of token sales, which can solve the problem that the last few items on the Uniswap platform cannot be used due to their high prices. The sale problem.

Roll is the first platform product to set foot in this field. As a creator-oriented community token issuance platform, Roll aims to help content creators establish a monetization relationship with fans, and is committed to providing content to residents living in the Internet community. Introducing the community token technology stack, allowing creators and their fans to easily earn, spend and trade community tokens.

By providing a set of tools for the community platform, Roll makes it easy to issue and distribute your own community currency. At the same time, the issuer can also customize the value of the currency, that is, the way the currency is acquired and consumed is up to the issuer Decide for yourself, allowing community subjects to capture value.

Roll was founded by Bradley Miles and Sid Kalla, formerly of CoinDesk. At present, two rounds of financing have been obtained, with a total financing of US$2.7 million. The first round of investors includes BitMEX CEO Arthur Hayes, VaynerX founded by Internet celebrity Gary Vaynerchuk, venture capital funds Techstars Ventures, Hustle Fund, Techstars NYC, and the second iFabric Ventures, IOSG Ventures and William Mougayar in the round.

Unlike most crypto projects, Roll does not issue its own tokens, but it has been advancing in an orderly manner in terms of product growth and introduction of creators. Roll has currently introduced 300 creators, and introduced star raps such as Akon The singer issued personal tokens on Roll. In September this year, the total market value of community tokens issued on the platform was close to 250 million US dollars. Roll will continue to cooperate with a series of musicians, creators and organizations next year, allowing these organizations and individuals to create community tokens based on Roll infrastructure and APIs.

So far, Fyooz has attracted attention by collaborating with two rappers, Lil Pump and Lil Yachty. Among them, rapper Lil Yachty released his personal token YACHTY, which sold out within 22 minutes at a price of $15. The deal generated a total of $276,006, according to the Fyooz app. YACHTY token holders have a variety of exclusive rights related to Lil Yachty, including access to a blind box prepared by Lil Yachty's mother, Venita McCollum (Venita McCollum has published the book "Raising a Rapper"), and access to Lil Yachty's career personal belongings and attend online parties with him. Another rapper, Lil Pump, plans to issue a personal token, PumpCoin, on Fyooz in early 2021. PumpCoin will allow fans to interact directly with the rapper himself, and with Lil Pump in other unspecified ways. Due to SEC regulations, PumpCoins are only available outside of the United States.

Why do you say that?

When we talk about the ownership economy, it is not limited to creators, but actually can be applied to creators in a broader sense, that is, those who contribute whether it is time, energy or money to become part of a community and stake it by holding community tokens. Focus on its future, such as decentralized autonomous organizations Duckdao and DXdao and Karma DAO.

Are community tokens a bubble?