Social Token: The Next Big Hype?
If you have the feeling that you always join a hype too late, the social token ecosystem could be your chance. After DeFi and NFT, the next stage of Web 3.0 is now brewing with the new “social money.” What social tokens are all about and why they are picking up steam now.
The momentum in the crypto sector is brutal. In just a few months, the focus changes from one topic to the next. If 2020 was all about decentralized finance applications (DeFi), it is now the non-fungible token (NFT) sector that dominates 2021. However, the next hype is already announcing itself: Social Tokens.
The term social token is rather vague and covers all tokens that can be assigned to individual persons or community networks. For example, anyone can tokenize themselves and monetize their person or the services they offer via a smart contract. This may sound a bit obscene at first, but it is basically not. A graphic designer, for example, can issue his own tokens that embody a claim in return, such as the completion of work hours.
Detached from a single person, however, social networks can also be built on the “social money”. An example of this would be a celebrity or artist issuing social tokens that entitle the purchaser to access to a specific community, such as an exclusive Telegram group. There are no limits to the imagination of the design. These can range from tokenizing the simplest social media accounts to trying to build a new Facebook.
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Why the hype right now?
Trying to use blockchain technology to enable a fairer and better social media ecosystem is far from new. For example, re-decentralizing our data is part of the basic narrative of blockchain protocols to help us regain control of our data. Currently, it is primarily inter-platforms like Facebook’s that collect, verify, and monetize our data.
To change this, the crypto alternative Steemit (Steem) had already formed in 2016. However, after a brief initial hype, the enthusiasm for the crypto-Facebook alternative quickly died down. Just like for Non-fungible Token (NFT) or DeFi applications, it was still too early at that time. Above all, the protocol solutions were still far too immature, impractical and far removed from any substantial ecosystem. Just as happened with DeFi and NFT, there are now many indications that a second and fierce run-up is also imminent for Social Token.
Social Token: The logical consequence after NFT
The fact that Social Token prices are rising, both at the protocol level and at the individual level, as well as that many new projects are emerging in this ecosystem, is mainly related to the hype around NFT. To understand this better, we need to take a look at the value creation in the NFT sector. NFT producers such as artists have an interest in not only selling digital objects or usage rights. Rather, they may be interested in monetizing interactions with their followers as well. A sought-after artist or influencer can thus use social tokens to quantify his or her public reputation or reach and turn it into money.
A practical example can be found with the artist Connie Digital with the website or collection danky.art for NFT art and music. Connie Digital has issued the social token HUE using the social money blockchain infrastructure Roll, which can provide the holder with access to certain services. Those who want to not only purchase their NFT products and trade them if necessary, but also participate in their community can purchase HUE.
As of press time, the social token information service Forefront reports a market capitalization of $230 million for personalized tokens. The market size shows that this is still purely a “gimmick”. The tokens of social blockchain protocols are of course not included. The three largest social blockchain cryptocurrencies alone – Status, Steem and Hive – have a combined market capitalization of over one billion US dollars.
However, the speculative character is likely to be in the foreground for the majority of holders. As with other crypto projects, this means nothing more than the hope that the price of a token will rise due to increased popularity. Thus, it can be assumed that the buyers of HUE are more interested in quick money than in the creative products of the artist Connie Digital.
BitClout: it does not work without Elon Musk.
The momentum that this particular crypto sector is attracting can be seen in the BitClout project. The “social crypto exchange” with the look of Twitter has already been able to attract notable backers. Silicon Valley heavyweights Sequoia Capital and Andreessen Horowitz have joined as investors, as have crypto exchanges Coinbase and Gemini. For a short time, BitClout tokens can be purchased there to acquire Creators Coins that belong to a certain social media account. Even without the consent of Elon Musk or Kim Kardashion, BitClout uses their Twitter account as an “investment base.” So if you hope that Elon Musk’s Twitter account will gain popularity on BitClout, you can invest in their social coins.
- The aggressive approach, i.e. unsolicited mirroring of over 15,000 Twitter accounts, is of course not without public criticism.
- On the other hand, some buyers of BitClout tokens hope that they could be traded on exchanges in the future.
- Currently, there is no possibility to exchange them for other cryptocurrencies.
- Nevertheless, Bitcoin with an equivalent value of around 200 million US dollars have found their way onto BitClout. This is evident from the associated Bitcoin address.
Interdependence as opportunity and risk
As is true for the DeFi and NFT sectors, social tokens are maximally dependent on the crypto market environment. Whether their prices rise is driven more by market sentiment than by hard-to-define fundamental value indicators.
If the crypto market undergoes a severe correction in the near future, no matter what the trigger, the prices of social token protocols as well as tokens are likely to plummet southward.
That said, the momentum in the sector suggests that social tokens are the next big hype. They build almost consecutively on NFT and expand its value creation. So if you want to be at the very beginning of a big hype, you might want to keep an eye on social money projects. Looking at the innovation cycle, we are probably still at the very beginning here. Consequently, a bubble, with all the opportunities and risks, is probably still ahead of us.