How to Leverage Social Tokens for Long-Term Growth

This is a guest post featuring Chris Collins, consultant at Foundation and Moneymail in a FF exclusive.

2020 experienced a marked acceleration in the issuance of social tokens, with a wide range of groups and individuals issuing their own tokens to supercharge their communities. For those new to the term, social tokens are used by individuals or groups of people to help coordinate and reward work that contributes toward a community's goals. Given its potential to distribute value more efficiently and better align interests, it's become crystal clear to me that these types of tokens will have a huge impact on community building going forward. While it's an incredibly exciting time for community builders, the playbook for properly implementing a social token is still a work in progress. Among all the social token experimentation taking place, it's also become clear that community builders need to be aware of speculators and the role they will play in your community once a token is introduced.

Ingredients for a Strong Community

To understand why, let's first take a look at the main ingredients for a healthy, thriving community. Since the dawn of mankind, humans have always been a social species and sought collaboration with others. While the motivation was once a necessity due to survival, today it has evolved into a need for making deep, real connections with others whom you share a strong bond with. Whether it be based on shared values, goals, or identity, we have an ingrained desire to connect with others. But I believe the most important characteristic of a thriving community is genuineness. People can tell when others are being genuine about a shared affinity and it is the key to unlocking stronger trust between community members, which enables greater collaboration and establishes an all-around stronger community.

With the rise of social tokens, we have a new tool that did not exist before: a way to share value and success with a group of people who contribute toward a community's goals. On its face, this sounds incredible and gets me hyped about how anyone from any corner of the world can share in the value creation of a community they care deeply about and contribute to. Creators can now activate and empower their fan base by allowing them to participate in their rise to success. A mission-driven community can now attract and further incentivize passionate members to help build it into the best version of itself. We are at the dawn of a new era where any community can allow members to share in its success and I expect social tokens to become a critical piece of infrastructure going forward.

The Role of Speculation

How do speculators fit into all of this? It's no secret that the crypto ecosystem is filled with many users looking to bet big on the next token in order to make large sums of money -- and speculation can indeed be very healthy by bringing attention to nascent promising projects. However, too much speculation and you'll find yourself dealing with users who are ready to bounce as soon as they can flip your token for a profit. The consequences for a healthy community are very serious.

f a significant amount of your community is composed of members who are just in it to make a quick buck, you will be sorely disappointed with how your community evolves. - Chris Collins

Speculators are best known for being genuine about primarily one thing -- making money as quickly as possible. Don't let the genuineness of your community suffer due to members who don't care that much about your mission.

Promoting Long-Term Commitment Through Vesting Schedules

To mitigate the possibility of your community turning into one big speculative frenzy, it's important to look at the feature of tokens that enables it to happen in the first place: liquidity. To illustrate why liquidity plays a big role, let's take a look at how a startup is typically formed. A long held best practice in company building has been to put the equity of all founders and employees on a 4-year vesting schedule, which serves to align the team's incentives to build for the long term. Anyone who leaves before the 4-year period loses ownership of unvested shares. This minimizes the probability that a founder or employee will leave their team high and dry in the early stages of building, a time when they're needed the most. Likewise, I believe a vesting mechanism (with a time frame that makes sense for the issuer) would promote a more sustainable approach to building a community with a social token. The longer-term liquidity horizon weeds out those who want to "ape" into a token, and optimizes for members who will likely be more active and valuable contributors. These members will still have a financial incentive down the road if they are able to put in a sustained effort toward creating a thriving community. In the new community building paradigm, passionate community members are the new "early stage employees" and an incentive system executed via a social token should borrow relevant tried-and-true best practices from traditional company building.

It's also important to consider additional tools that communities can use to promote a committed member base. Transitioning decision-making to a community goes a long way toward empowering members to stick around for the long term, and the JAMM community is an important example of how one can do so. What started out as a weekly Substack newsletter by founder Brian Flynn, has transformed into a community with a social token ($JAMM) that rewards members for contributing toward its mission of exploring the intersection of creators and crypto. Since all unissued tokens are held in a Gnosis Safe (a wallet that requires multiple signatures to execute a transaction), the community votes to allocate how tokens are distributed every month in service of its mission. Also, tools such as Superfluid and Sablier allow for continuous programmable cash flows that can reward members for specific actions in real-time (such as for help with running a live Discord event, or time spent moderating a community-sponsored virtual panel), making the act of rewarding members who add value to a community as tangible as possible. The design space for building a sustainable community is constantly evolving and there will be many ways to ensure long-term buy-in, in addition to vesting schedules.

Sustainable Communities = Stronger Communities

If you apply long-term thinking to community building, you will have a higher chance of attracting people with a genuine interest in furthering the goals of the community, rather than serving speculators who might be counting the minutes to move on to the next shiny object. I'm excited to see communities everywhere leverage social tokens in a sustainable way to achieve their goals.