"There Will be Billion-Dollar Communities on the Internet:” Jess Sloss
In this week’s episode we speak with Jess Sloss, the instigator of Seed Club, a DAO that builds and invests in community tokens. We talk about the emergence of the social token economy, and how that’s different from the creator economy or the gig economy; the difference is that social tokens and DAOs allow individuals to create wealth rather than create revenue. They’re tools for creators, and importantly, also for creator’ fans, to build something that’s similar to equity in a company, instead of having a salary. Another concept that describes this, Jess says, is the ownership economy. This is the idea that creators and fans can have actual ownership of their communities and platforms. Jess says we’re about to see billion-dollar communities on the internet.
We talk about the difference between personal, creator, brand, and community tokens, and how value accrues to these instruments. Still, we are in the very early days of this new economy, and there aren’t any tried and true recipes; everyone is still figuring it out together.
More broadly though, DAOs and tokens enable the ability to direct resources, Jess says. They allow people all over the world to come together, pool their resources, and leverage those resources in pursuit of something greater than they could achieve separately. Those communities become valuable in their own right and tokens unlock the potential for every member to benefit from that value. The exact, best way to unlock this value, is still an open question, and the opportunity to discover that, is what’s so exciting to Jess and a growing number of creators.
The podcast was led by Camila Russo, and edited by Alp Gasimov. Transcript was edited by Owen Fernau.
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Jess Sloss: Sure. I've been an entrepreneur since I left high school. I started a gardening company to pay through university, was really early into social media, worked in the music business for a number of years and in the FinTech space. And then just really fell in love with tokens and crypto networks in 2017. As all of a sudden, I saw this opportunity to own some of the networks and algorithms and tools that were going to be cornerstones of our digital economy.
“I saw this opportunity to own some of the networks and algorithms and tools that were going to be cornerstones of our digital economy.”
And so I worked on early security token issuance in 2017 and then on a number of projects until about the summer of last year when I saw a few templating tools that have led to some of the early tokens emerge, and it really captured my attention. I've always been a believer in the value that small groups of people can create online, and have always thought that most of the value has been captured by platforms rather than people. And I think what tokens bring to communities and especially social tokens is this ability to capture more of that value that we're creating on the internet. And so I started Seed Club with a group of people back then, and it's been a wild ride ever since.
Starting Seed Club
CR: Nice. So what was the initial idea behind Seed Club? What did you want to achieve with it?
JS: So Seed Club, I think like any good DAO started as a Telegram group. I had a number of friends, like Alex Masmej, and Brian Flynn, in June, who had issued their own personal or social tokens. And we were kind of shocked, I think, by the interest and action that was happening around them. And so many folks had questions. And so we really just started a group that brought a bunch of people who were exploring this topic together, and very quickly realized that there was something here, something that a lot of people were interested in, and really just built from there. We had our Telegram group a little bit, still keeping it very curated. We went from maybe 15 members to around 62 members who exist in it today. So still fairly small compared to the opportunity out there in the world.
“I had a number of friends, like Alex Masmej, and Brian Flynn, in June, who had issued their own personal or social tokens. And we were kind of shocked, I think, by the interest and action that was happening around them.”
We ran a hackathon that really showed that there's a lot of people trying to build for the space, and there's some really exciting projects that came up from that. And ultimately, our core product is an accelerator program where we bring 10-15 community leaders, creators, founders, together and run them through a six-week program where we expose them to the latest and greatest thinking on the edges of DAOs, community tokens, social tokens. And our goal is just to launch many more experiments so that we can learn fast together, share those learnings. and hopefully accelerate this movement to empower communities to capitalize and reward and build a lot of value out in the world.
CR: Can you talk about the first batch of projects that you're seeing in the accelerator?
JS: Yes, so our first one, which seems like a decade ago, last fall, we worked with a mixture of established tokens and new ones. RAC, Connie Digital and his HUE token, and Alex Masmej along with a few new ones like ForeFront, we were working with some of the early folks in the Gitcoin Kernel community.
And it was really a good opportunity for us to learn what it’s like to launch a token and what are the challenges people have. Our most recent cohort ran for the end of winter, early spring. We worked with 12 projects, everything ranged from an NFT that was trying to build a collector DAO around it, to a B2B-focused community of brand marketers that's just about to launch, to a couple of media companies, one like Global Coin Research who's, I think, in a similar space to you, doing interesting things around how do you pay and reward writers for their content. And there's a whole bunch that are about to come out.
But yeah, I think we've seen a steady increase in the creativity and opportunity and excitement in using tokens to represent social capital in other communities or in media companies, or in DAOs being the trend right now. And our goal is just to get really really good at helping to accelerate those.
“I think we've seen a steady increase in the creativity and opportunity and excitement in using tokens to represent social capital in other communities or in media companies, or in DAOs being the trend right now.”
CR: And in accelerators in traditional Web 2.0 they usually take an equity stake in companies and sometimes invest small seed amounts of money. Do you do something similar?
JS: So our model is that we partner with these projects and want to be the early diamond hand holders of their tokens. So in exchange for membership within Seed Club, and the accelerator program and our broad network, and all the value that we can help bring to the table, we earn a small percentage of tokens for that work. We also run a studio program in a very similar way. We earn a small percentage of tokens for the work that we're doing in maybe a bit more of a hands-on way with some of the larger projects we work with.
I think it points to the big difference that tokenized communities have where we're able to invest through our effort and time and social capital into these projects, and hopefully, share in the upside. So we're making asymmetrical bets, we believe. We think there will be billion-dollar communities on the internet. You could argue there already are they just aren’t being realized in terms that value can be captured.
“I think it points to the big difference that tokenized communities have where we're able to invest through our effort and time and social capital into these projects, and hopefully, share in the upside. So we're making asymmetrical bets, we believe. We think there will be billion-dollar communities on the internet.”
And so we're very eager to go and take bets on smart people and great communities, and align ourselves over the long term through a token stake that gives us an opportunity to be active in building in the community, to being core members of the governance process, and to helping to grow these things over the long term. We do not make capital investments into these projects directly, though a few of our projects have purchased NFTs that kind of act as an unlock for the community that you could argue is a new way of investing in these on-chain communities.
The Ownership Economy
CR: Got it, perfect. Okay, so now taking a step back, and going a bit high level, what are social tokens on what is the creator economy? And I would love for you to compare this new creator social token enabled economy with past trending topics of the gig economy, the subscription economy. We see these different economies jumping into headlines and stories, every few months or so. So what's a distinguishing factor or why do you think this economy is better, if you think it is?
JS: So we're trying to come up with a new economy term. I think that's how you legitimize anything. Maybe the social token economy, the community capital economy, we're still working on it, we’ll workshop it. So your first question, what is a social token? I like to define it as a token that represents social capital. So that could be a brand, that could be the value of belonging and participation in a community, it could be fame, fortune, social capital can be pretty general.
But most often, these things start off as a pooling of social capital, people coming together to create something, and then issuing the token as a way of representing that early value. And so some examples of social token projects that have really done this, I think, Friends with Benefits really stands out there, where the idea of holding a certain number of tokens gives you access to this club, which is a Discord, but increasingly is in real life as well. I accessed a club in Miami because I am a member of the Friends with Benefits Discord.
“Friends with Benefits really stands out there, where the idea of holding a certain number of tokens gives you access to this club, which is a Discord, but increasingly is in real life as well. I accessed a club in Miami because I am a member of the Friends with Benefits Discord.”
So that’s a very clear example, I think, of social capital, the desire to be a part of a community being the core product and having that value represented as a token. I think where it goes is pretty open. There's a lot of exciting different mechanisms and business models that can be layered on top of it that we can get to a little later on.
But your question around how does it compare to different economies? How do you define the creator economy? These are all really big, maybe even existential questions. But I think Li Jin, who really led some of the definitions of the passion economy, which I think is also referred to as a creator economy, described this so well in a conversation I had with her recently where she was talking about the creator economy is about helping people generate income online. So how do I earn subscription revenue? We can capture all of that there. Whereas the token economy or the crypto economy or the social token economy it's more about helping individuals earn wealth online.
I think the big difference is the creator economy is about generating revenue and the social token economy is about more of an ownership stake in the platforms that you're using and in the communities that you're active in. So the idea being that the way we generate wealth is through equity ownership, not through a salary, I think that can carry through, as you look at the definitions between these two worlds.
“I think the big difference is the creator economy is about generating revenue and the social token economy is about more of an ownership stake in the platforms that you're using and in the communities that you're active in. So the idea being that the way we generate wealth is through equity ownership, not through a salary.”
CR: Okay, that's interesting. So the idea would be that within the creator economy, you're creating something similar to, in the Web 2.0 world, a company, that in the Web 3.0 world is a DAO. And so with that DAO comes something that's more similar to equity through social tokens. And that's how you create wealth, which is different from like having a Substack that creates income through subscriptions. You're not necessarily creating a company. It's more like you're providing a service through a third party platform?
JS: Yeah, I think you're providing a service to a platform and the platform is rewarding you in cash flow. So I'm earning from YouTube. I'm earning from my Substack. I'm earning from Google ads. I think the difference in Web 3.0, so Web 2.0 to Web 3.0, is that you're able to have ownership across the stack. So not only is there ownership maybe in the organization that's providing this work to YouTube, or to a Substack, but you also have a chance to earn equity in, or tokens in, a Substack or a YouTube. So this ownership economy idea of us being able to own the platforms and tools that we're using on one level, and then also I think the level that we're playing in is also having ownership in the communities that are collectively using these tools to hopefully create more value than they'd be able to do by themselves.
“So this ownership economy idea of us being able to own the platforms and tools that we're using on one level, and then also I think the level that we're playing in is also having ownership in the communities that are collectively using these tools to hopefully create more value than they'd be able to do by themselves.”
Tokens Capturing Value
CR: And how important is it for these communities that are providing ownership to their funds through a token? So how important is it for them to be built on platforms that they own? So I think there's this, maybe disconnect between all of these Web 3.0 communities building something that's very decentralized and organic, people-based, but they're still building on more of the legacy Web 2.0 to infrastructure?
JS: I love that question. I mean, I think I might differ with some of my peers and this belief. But I think it's going to be very hard for a Web 3.0 version of YouTube or of Twitter, or insert your really dominant platform in the Web 2.0 world to be built on a Web 3.0. I love guys like Audius trying, I really hope that works out. I think it's potentially a big challenge. And it’s because they just do a really good job at owning an audience, having an audience, and introducing content to an audience. So I think it's going to be a longer term process before we have fully decentralized platforms there.
“I think it's going to be very hard for a Web 3.0 version of YouTube or of Twitter, or insert your really dominant platform in the Web 2.0 world to be built on a Web 3.0.”
And in reality, I think the right way to move is how do we as a community leverage all the existing tools that exist out there to create value for our community? And that means using every tool that we have access to. I think the way to think about it is… What is a token? I think a token represents a shared belief in some way. And so there's this way of using all sorts of tools to really solidify and entrench and empower this token as the center of your community. It’s like the place where shared belief is recognized, and where value accrues to in some way.
“What is a token? I think a token represents a shared belief in some way. And so there's this way of using all sorts of tools to really solidify and entrench and empower this token as the center of your community.”
And I think that's a very, maybe fuzzy or hazy idea, even in my mind. But I think where in Web 2.0, it's all about owning the social graph, I think in Web 3.0, it's about the ownership graph or the transaction graph. And all of that ultimately gets aggregated around a token rather than around a profile on a specific platform which means that, through that lens, if we're trying to drive as much social capital to this one token, we're going to use any tool possible to do that in a way that's actually effective.
And then, if and when, hopefully, when, a better tool than Facebook or Twitter comes out that is decentralized and owned by the communities, we have the ability to direct our attention or audience and, shared value to that new platform and hopefully be more effective because of the value we built around our token.
CR: Yeah. I think that makes a lot of sense. So I think maybe a token can become a bridge between Web 2.0 and Web 3.0. Because right now the communities are organizing around this one token,, take Friends with Benefits. The token is what's bringing this community together, and everyone who owns Friends with Benefits feels like they are part of this community, and they can share experiences, and access, and all these different perks.
And it just so happens that today the tools that are available to them are things like Discord. But in the future, if there are more Web 3.0 native platforms for that, it'll be easier to migrate the token to those and have another platform to organize, because you can bring the token anywhere. And that's a lot easier than migrating a Facebook profile somewhere else.
JS: Yeah, good luck migrating a Facebook profile somewhere else. Yeah, that’s well said.
Leveraging Social Tokens
CR: Okay. And then, to ground the discussion on a more practical level, how can creators and their fans actually benefit from this? For people listening to the podcast that might not be Web 3.0 native, how can they start to leverage social tokens into their own kind of work?
JS: It's a big question and one that I think if anybody's going to try to say they know the exact answer to that, they're probably lying. I think it's important to know how early we are still in space and how much opportunity there exists to try to figure out new ways of doing this.
I think right now, what tokens represent is a way for fans to back creators in new ways. So whether that's investing and buying a Rally token of your favorite creator before anybody else knows about them, and then being incentivized and rewarded for supporting the growth of that creator through bounties or through retweets or otherwise providing value, I think that's an interesting way to roll.
We're seeing a lot of creators use tokens as a way of more loyalty points. So how do I reward people who are doing useful things for our community? I think tokens represent a way, especially if you look at NFTs, to identify who your biggest fans are in your community. So traditionally, we have the ability to sell ads or to sell merchandise or to sell subscriptions. But NFTs and to a degree social tokens have now given fans that actually want to signal their support at a much higher level, a mechanism to be able to do that, and to stand out in a community. So I think those are the easy ways from a creator standpoint.
“So traditionally, we have the ability to sell ads or to sell merchandise or to sell subscriptions. But NFTs and to a degree social tokens have now given fans that actually want to signal their support at a much higher level, a mechanism to be able to do that, and to stand out in a community.”
But the thing that we're most excited about is how creators can really launch a community that is really about creating community value versus just creating value for a creator, specifically. So what does it look like when two or three big creators come together, pool their fan bases in support of some bigger mission or bigger goal? So maybe it's climate action, or maybe it's coming together to help the next wave of EDM producers to come to the world. And then really at that point, you're talking about trying to build economies that support and incentivize work that creates value for a community. And I think those are like the really big exciting ones in my mind.
“...what does it look like when two or three big creators come together, pool their fan bases in support of some bigger mission or bigger goal? So maybe it's climate action, or maybe it's coming together to help the next wave of EDM producers to come to the world.”
So creators today will use tokens to allow people to invest in them, to support them, to pay them in their own currency for things like shout outs on Twitch or on Twitter or for reviews of their music. But I think where the space is going is really communities emerging with creators in partnership creating much bigger value than what any of these individual actors might be able to create.
Subcategories of Social Tokens
CR: Okay. That’s interesting. So what you're saying is, the potential that there is for social tokens is for creators to band together and use this capital towards something even bigger than they are separately?
JS: Yeah, I think there's a lot of value that can be unlocked on an individual level. So how I think about social tokens, social token is a very broad category. And underneath it, I would put personal tokens and brand tokens and community tokens. And I think personal tokens and brand tokens, there’ll be platforms that are built for them. So maybe a BitClout or Rally is a great example where the rules are pretty well defined, and the tools are really easy. So it's very low risk, low effort, to actually go in and stand something up.
We're most interested in community tokens. And I think within community tokens, there are two main categories. One is creator-centric communities, let's call these fan clubs. And I mean that in the best sense. There's a ton of value in fan clubs. And the others are communities that maybe act closer to DAOs, or are really about creating mutual value or value towards some sort of bigger outcome.
I think there's going to be huge opportunities in both of those. I think the longer-term opportunity is communities driving some bigger mission. And then I think the short-term opportunity, also a big opportunity, is these creators who are really focused on building amazing fan clubs that are economies that create value for the creator and for the fans at the same time. So hopefully, that's a little bit of a window into the mind I have and how we sort of break these things up.
“I think the longer term opportunity is communities driving some bigger mission. And then I think the short term opportunity, also a big opportunity, is these creators who are really focused on building amazing fan clubs that are economies that create value for the creator and for the fans at the same time.”
CR: Okay, so personal tokens are basically like me, Cami, I did launch a CAMI token very early on, just to test. But basically, say, I'm an influencer, and I launched this token, and I have my followers and I want to thank my followers for like, retweeting me or whatever, and so I'll distribute CAMI tokens for my follower base, and that's a personal token, right?
JS: Yeah.
CR: Okay. With a brand token…
JS: I think that’s one example. The other example would be like what Alex did, where he used it to raise some money to go do something. That's a bit regulatorily more challenging, and I think your example is more useful for the audience, but I would put that in there as an important distinction.
Brand Tokens
CR: Definitely, yeah. So there can be more sophisticated use cases for personal tokens. Would a brand token be The Defiant launching a token? Or would that be more community? Where would you put that?
JS: I think, the beautiful thing with tokens is we can get them to do whatever we want really, right. So depending on what you're trying to incentivize, I would say, would ultimately define that. In my mind, I see brand tokens as existing organizations that are going to bolt on some sort of token to their offerings, so maybe it looks more like a loyalty reward point that is cooler, right.
So I bought a lot of Supreme Gear. I don't have a lot of Supreme Gear, maybe I'm not that cool. But if I was that cool, then I would also maybe earn tokens for my continued patronage, and maybe once I got to a certain level, I'd get access to a community or get access to merch drops that other people wouldn't get, or I'd get some sort of badge in the community that signifies myself as being a big fan or one of the 1,000 true fans sort of thing. So, I think it's a more manageable, accessible way for brands to start benefiting from some of the value that social tokens can have without really distributing any ownership or governance or broad decision making power to their community.
Creator Tokens
CR: Got it, okay. And then the creator token, that would be similar to the personal token, but I assume the difference there is that rather than an influencer engaging with their followers, it would be more of a creator, right, someone who is producing something, and maybe that product is what fans are investing in, music, art, whatever. There’s a creation there, is that the difference?
JS: Yeah, fans and supporters of a creator or a creation, and often people are backing like there's two reasons why somebody might buy a creator coin or social token that's focused on a creator. One is the belief that they will be more famous and popular in the future. And it's smart for me to get in now versus in the future, which is maybe the speculative angle of it. But more interesting, I think, is that owning these tokens unlocks special relationships or access or experiences with the creator.
And I think interestingly, you're able to design an economy that both rewards fans for creating value for an individual creator, and then also rewards those fans with access and reviews of their work or backstage passes. The sky's the limit with what perks could be unlocked with these tokens.
But I do think the unique thing for creators is that, for true fans, they have the ability to do something that costs next to nothing for them, but is extremely valuable in the fans eyes. Can you imagine having a one-on-one with Dixie D'Amelio? I don't know if you're a TikTok fan, but people would really lose their mind over that. And if I was able to earn enough tokens by proving myself as the true Dixie D'Amelio fan and unlock that, there's a lot of value to be created there.
“I do think the unique thing for creators is that, for true fans, they have the ability to do something that costs next to nothing for them, but is extremely valuable in the fans eyes.”
Community Tokens
CR: Totally. Okay, and then for the community aspect, what's a good example of a community token?
JS: So Friends with Benefits we talked about earlier, but one that I'm really excited about is called Songcamp, so songcamp.mirror.xyz, you can see all the interesting things they've been doing. In my mind, Songcamp is a community that is almost like a record label. But I think if you reimagine what a record label would be like in Web 3.0, you wouldn't call it a record label, you probably call it a community of people creating music and marketing music together.
And so what they do is they create Songcamps where you come together with two or three other people. The very first one they ran brought three groups of three musicians and producers together along with the visual artist and a team that supports the business side of promoting this thing. And then they produced music together, released three audio-visual NFTs, auctioned them off on Mirror and generated over $30,000 worth of revenue for the three teams in a matter of two weeks. It's a really short creation time, a really exciting sort of output and outcome.
“...they produced music together, released three audio-visual NFTs, auctioned them off on Mirror and generated over $30,000 worth of revenue for the three teams in a matter of two weeks. It's a really short creation time, a really exciting sort of output and outcome.”
And what it proves is this ability to come together to curate, to generate revenue on chain, and then to automatically split that revenue between the creators and the community, which is Songcamp itself. And so I think they're just about ready to kick off their second group or cohort or Songcamp 2.0, I think is what they're calling it. So I think if you want to have an example of a project that is building community first that is all about co-creating together and generating value on-chain and returning some of that value to the broader community, there's no better example than that project right now.
From Companies to Communities
CR: So interesting. Okay. And then, do you think companies in the future will look more like communities? How far do you think this movement goes? Does this replace the traditional company or will it always be something that lives on the side of big corporations and is something like community tokens on DAOs? Or will it always be more focused on more niche areas like art or music?
JS: I think we’re at the early stages of a complete transition and how we organize economic activity for human beings. And so how long it takes for that to happen, I don't know. There's a lot of friction that exists in the no man's land between the meatspace world and legal agreements, and the on-chain and smart contract based organizations. And so, I think there will be sort of parallel economies that are operating for some time.
But I think if you just think about the power of an organization, like WallStreetBets to move markets, to have huge economic impacts, and just imagine if they also had a bank account and a shared decision making process, and you start to see the potential size and scale and impact of these open, broad, worldwide, easily accessible organizations, that right now are more memes or more based on Reddit threads or ideas that I believe if we're able to start charting out better templates and tools will ultimately be captured in tokens. And when that happens, I think you're just going to see, for better or for worse, really major economic impacts being driven by these communities on the internet.
“...if you just think about the power of an organization, like WallStreetBets to move markets, to have huge economic impacts, and just imagine if they also had a bank account and a shared decision making process, and you start to see the potential size and scale and impact of these open, broad, worldwide, easily accessible organizations...”
Unintended Consequences
CR: So interesting. You said for worse, and instantly I started thinking, what could be the unforeseen consequences of something like this?
JS: Well, there are so many. On a very practical level, the idea of what if all of a sudden I don't like you, or maybe The Defiant writes something negative about Seed Club, and my community all of a sudden took exception to it and you had a token, and we have the option to short your token, you know, that takes canceling to a whole new level, if all of a sudden we just collectively short your token. So that's one thing.
More broadly, what we're talking about here is the ability to direct resources. And so people can come together in a permissionless way without identity in many ways, to direct resources. And so you can direct resources for good, which are the things that us and our industry is really excited about pointing to. But you can also direct it for bad. And I think we need to recognize that.
“More broadly, what we're talking about here is the ability to direct resources. And so people can come together in a permissionless way without identity in many ways, to direct resources. And so you can direct resources for good, which are the things that us and our industry is really excited about pointing to. But you can also direct it for bad.”
One of our main goals or values at Seed Club is curation, and making sure that, if we're partnering with people, that we're partnering with the right people, because our identity is intertwined the second we put our name on a project. And so we think that there'll be a number of curator roles that will really focus on trying to, not police, but indicate quality or good values or good people. So I think we'll need more and more of that. Because the risks across the board from people just trying to start meme coins that they rug pull, which we're all familiar with already, all the way through to really trying to organize capital pools to go sway politics or to... really, whatever your brain can come up with is a negative outcome, I could see how a community token could be in some way beneficial to that.
Unlocking Value
CR: Okay,this question is for both the good and the bad side. But what exactly in this model, in the DAO token model, how is this different? How is this changing the Web 2.0 model? Why is this different? Like, why is this different from me putting up Social Token Inc. incorporated in Delaware, having a bank account, having a bunch of employees raising money, doing it the old way, how does this change things?
JS: Yeah, and I think across the crypto space, we'll just see the same benefits that we've seen there, chunked down into communities, so there's a removal of friction. The speed at which capital can flow in, that revenue can flow in, the idea that PartyDAO, which is a DAO building a mechanism for group bidding on NFTs such that individuals are able to compete and try to win really large NFT auctions, was funded within a couple hours. And that was split up and there's developers working on it. And over the course of a couple months, they've gone from idea to audited smart contract. So I think speed is one of them.
I think accessibility is the other. I could have put in point 001 ETH, or all the way up to one ETH into PartyDAO, it could be anywhere in the world. I just need to make a transfer from my address to their address, and all of a sudden I'm in there. So there's a great reduction in the cost. Ownership is, and your cap table is, represented on-chain. So like there's a lot of reduction in friction, and bookkeeping and stuff there.
I think doing anything on-chain, especially around a token gives you the ability to plug into the broader open web innovation. My belief is that so many of these social tokens are going to plug into DeFi, like DeFi tools will be cornerstones of how social tokens or communities generate revenue or create value in the world. And I'm of the belief that we're still in the very early stages of innovation in DeFi and in the open web. And so having the optionality to kind of plug into these other money legos, I think, is huge.
“I think doing anything on-chain, especially around a token gives you the ability to plug into the broader open web innovation. My belief is that so many of these social tokens are going to plug into DeFi, like DeFi tools will be cornerstones of how social tokens or communities generate revenue or create value in the world.”
And I think ultimately, owning a token and having a say in what you do in an organization is transformative. Not only does it functionally give you more power in a place that traditionally you wouldn't have any power, like I have no ownership over XYZ Facebook group, or no say in what happens there. There's a very centralized decision making process and with a token that changes it. And there's also an emotional difference where I think as an owner in FWB or in Bankless, or in SquiggleDAO, or in Songcamp, I feel an association and allegiance to that in a way that's very different than if I just subscribed or was a member or a follower of something.
And I believe that there's a lot of value that human beings have to contribute to projects that, because there aren't incentives to do so right now, aren't being done.And it's going to be interesting to see if tokens can be a tool to start to unlock a lot of that latent value or capital.
“I believe that there's a lot of value that human beings have to contribute to projects that, because there aren't incentives to do so right now, aren't being done.And it's going to be interesting to see if tokens can be a tool to start to unlock a lot of that latent value or capital.”
Economic Design
CR: So well said, I love that. Okay. About the token itself, I'm thinking about the business model, and how value accrues to these tokens. What are some of the things creators or token issuers should keep in mind when designing them?
JS: That's a huge question. Let’s see if I can answer it succinctly. So our belief in Seed Club is that you want to design an economy for your community and not just borrow one from someone else. And so the idea of thinking through what you're ultimately trying to achieve is key.
But I think there are a few templates that are emerging. One of the templates is what the Rally communities developed with a Rally creator coin, where it's really about trying to design an economy where there's a lot of transactions that are happening there, where there's a lot of buying and selling and donating and rewarding, like using a coin as a means of exchange within a micro economy. And the Rally network actually rewards creators and communities with network rewards for creating value within these micro economies. So I think that's one option.
I think what we work mostly on is, the core template is, token gated access. So I hold a certain number of tokens which represents an ownership or a stake in a community, and also unlocks experiences. So, Friends with Benefits, we even saw an interesting experiment from the ForeFront community today where you can almost think of it as like an evolution of the membership site where instead of paying a monthly subscription to get access to content that's behind a paywall, I just own a certain number of tokens and that gives me access to content that's behind a paywall or a community that's behind a paywall.
A thing to note there is that it's actually not the best business model. So it's not you getting subscription revenue from your subscribers. And that's money in your bank account every single month, something that you can use to pay people to go do work, pay yourself. Holding tokens to get access creates a sort of network value or community value. There's demand on the token supply, and therefore, probably the price of the token supply goes up as more people are interested in it. But you're not getting monthly revenue from somebody who's holding 65 FWB tokens every month.
“Holding tokens to get access creates a sort of network value or community value. There's demand on the token supply, and therefore, probably the price of the token supply goes up as more people are interested in it. But you're not getting monthly revenue from somebody who's holding 65 FWB tokens every month.”
And so I think the true value unlock here will be for these communities to identify other ways of, well, A, either leaning into the brand and a belonging piece, and people just wanting to have ownership in this thing because of the social capital signal that it has, which I think is powerful. This is Safemoons and Doge, and all sorts of stuff, the meme coins, and/or really figuring out how to drive actual value from within the community, like revenue.
And so I think subscription is going to be an interesting one that'll get paired with token gated access. I think NFTs are really what play so well here, whether you're creating NFTs as a creator and selling those off and generating revenue for your community, or you're curating NFTs and using the Zora marketplace to earn a fee from helping to auction off NFTs from your fans or communities or other culturally relevant media that's out there. So I think NFTs are probably the most interesting innovation as far as generating on-chain revenue that communities can use.
And I think, as I spoke to before, we're going to see some interesting experiments from communities, rolling out financial products, whether that's being a nice front-end for a lending protocol, or doing some interesting token set where you can generate fees from. So I think those are the three interesting ones that come off the top of my head.
One that we're also pushing forward with Seed Club is education. So the idea of being able to be the source for the best knowledge and insight on a certain thing and people being willing to pay to learn from the best. So I think there's a mixture of innovative new models that come from the broader crypto ecosystem, and also tried and true models like subscription and education and merchandise.
CR: Wow, that's so interesting. It seems like this is just emerging, people are just starting to figure out exactly what the business model around social tokens can be. Right now a big trend seems to be emerging around fans holding tokens to get access to different experiences, and that in turn indirectly raises the network value of the token because it increases demand. If the team is holding its own treasury of their own tokens, and the token value is increasing because demand is increasing, could revenue come from there? Could the team start earning some preset rates of their treasury every month?
JS: Yeah, I think a great example is the Whale community, which is one of the early social tokens. Their moderators in that community started getting paid, I can't remember how many tokens a month, but it's some amount of tokens every month to provide value to that community.
And in the early days, when the token was new, it equated to maybe $150 a month for this work that they were doing. And as time passed, and as the token value went up, I think at the top of the market, these people were earning close to $15,000 a month for the value they're creating. So without a doubt, the opportunity here is to have a native token that you can use to reward value that's being created for the community. I think what's interesting is to think through how all those pieces play together and drive to some sort of long term outcome. That's something we're really thoughtful about. Because how you distribute tokens, to whom, what sort of lockups are involved, where’re the protections that are put into place, and how do we do it in a safe and ethical and smart way, there's still a lot of work to be done there.
“And in the early days, when the token was new, it equated to maybe $150 a month for this work that they were doing. And as time passed, and as the token value went up, I think at the top of the market, these people were earning close to $15,000 a month for the value they're creating.”
And I think we've seen some really, really great, unfortunate situations with hacks that have happened in the space where they're sort of token supplies that were able to be dumped on the market, and then just seeing these communities rebound from it, come back even stronger with better operational security and management practices, etc.
So, I think we're sort of through that early awkward stage of trying to learn best practices of how to operate and set these up in a basic way. But where that next level unlock comes from around how we actually use tokens to really unlock exceptional value within these communities, I think that’s the opportunity that's up for grabs right now. And that's why we work in the way that we work in. We want to work with as many smart people who are trying to push interesting ideas in the space forward as we can and help them as much as we can. Because we think there's a number of inflection points that have yet to come, and it’s going to be really exciting to be a part of that.
“...that next level unlock comes from around how we actually use tokens to really unlock exceptional value within these communities, I think that’s the opportunity that's up for grabs right now.”
Role of NFTs
CR: Yeah. And how do NFTs interact with these tokens? You've mentioned NFTs already and ways people are using them. But I'm interested to hear how you think these things come together?
JS: Yeah. So we start with the creator community's needs first and foremost, and then look at how we can use tokens and crypto tooling to really empower them. And so, I look at a fungible token or non-fungible token as to two tools that we have in our tool belt. I think NFTs are a great way to kickstart. I think I just shared a tweet recently about how to bootstrap a DAO and core to that was around this idea of auctioning off NFTs as the very first action a community could do, or the first action a creator could do, coming into the Web 3.0 space as a way to generate revenue on-chain, which can be a challenge to do.
I think NFTs also work as great membership cards. So I can go out and be a lot more specific around who gets these cards, because so much of the nuance to creating a strong tokenized community is thinking through who should be in and how accessible that is. If community is your product, you don't want to have just anybody rushing in, especially if people are just chasing the speculative value of a token rather than actually wanting to participate. And so NFTs actually give us the opportunity to invite people into the community that have either proven themselves to be bigger fans or that we think would be good members of that early community. So a much slower, more controlled way of managing that and that on-chain membership role essentially.
“If community is your product, you don't want to have just anybody rushing in, especially if people are just chasing the speculative value of a token rather than actually wanting to participate.”
And then I also think that NFTs become a core product or byproduct of communities. I think we'll start to see a lot of communities creating drops, creating artifacts that represent creative interpretations of what's happened in their community or that captures culturally significant moments in their community. I always think about, in the development of Apple, there are probably a few moments that if there was an NFT that had captured the launch of the first iPhone, or the founding in the garage, or the Steve Jobs commencement speech at Stanford, these things, if they were represented as NFTs within the Apple community, those things would be worth a lot of money and would probably generate a lot of value for that community.
“...if there was an NFT that had captured the launch of the first iPhone, or the founding in the garage, or the Steve Jobs commencement speech at Stanford, these things, if they were represented as NFTs within the Apple community, those things would be worth a lot of money and would probably generate a lot of value for that community.”
So I believe that NFTs and NFT marketplace auction houses are going to be to Web 3.0 what WordPress was to Web 2.0 where WordPress allowed every company to have a blog and to have a voice in the world and I think NFTs are going to allow every community or company to have these on-chain artifacts that represent historical context for their development and growth.
So NFTs also unlock, you know, great membership keys. I'm a huge fan of what the Art Blocks team is doing with generative pieces on-chain. And these collectibles, so whether it is Bored Apes or CryptoPunks, I think there's a lot of interesting creativity that's happening over there. So, unlimited opportunity with what NFTs can do.
And I think that the relationship between NFTs and fungible tokens is also really interesting where a creator could auction off a one-of-one NFT, could then go ahead and distribute 500 free NFTs to some of their biggest fans, invite them all into a Discord, start creating things together, and then airdrop fungible tokens to each of them and stand up an economy and open the doors to more people to come in and to participate and to earn and to own part of it. And so there's like a really natural progression that can happen there.
CR: Okay. So the NFT would represent the more exclusive membership into a community, and then the token would be something that's more widely distributed?
JS: I think we could look, through that lens, at an NFT as like the proto-social token. There is a challenge. If you just open up the purchasing of a social token on Uniswap, anybody can come and purchase it, right, for good or bad. And what I'm suggesting is that being more thoughtful about who the people to invite into the community to start with is actually essential to create long term value in that community.
So I look at an NFT as a proto-social token that is a lot less liquid and therefore beneficial to start. But then eventually, the value of having a more accessible, more open, the ability for other people to come in and for a market to develop around it, is also extremely useful. It builds the sort of book value of a community, and so the two work really well in different stages: so early stage, NFTs; later stage, fungible tokens.
CR: Got it. So interesting. I love how this whole movement is less than a year old. This is really the cutting edge of, what do you call it, the creation economy? It’s a whole new business model basically, right?
JS: Yeah. I think the thing that I hear time and time, again, from creators and individuals that are building in the space is how much it feels like the early internet. I feel like I'm in the early internet again. I feel like this is my spacetime, right. There's this intuition that there's a huge shift that's happened and also this understanding that it hasn't fully clicked yet, which is both a driver of people trying to figure out how they can put these pieces together, and also super exciting because the unlock that happens once we're able to really, I think that unlock is already happening, but the scale of potential of it is just still so much larger and so people are really excited about that prospect.
Billion-Dollar Networks
CR: Perfect. Okay. And then to end, and this is a good segue from what you just said, earlier in the conversation, you mentioned that you think that there already are billion dollar networks that just haven't materialized yet but do you think they're already here. If you can say, which do you think they are?
JS: So I think so much value is represented in brand equity or in community equity. I mean, for Coca Cola that exists on their balance sheet as the brand has value. I think we talked about WallStreetBets earlier. I think there's like an intangible but massive value that exists in this community of people who identify as folks who have allegiance to WallStreetBets.
And I think that you go across any category and probably identify communities that exist there, whether that's your favorite huge musical artists to fashion brands to climate activists, you name it. I think there's so much affinity and value represented in their brands and their influence and their authority that they can't capture right now that is maybe captured by the YouTube advertising or Facebook advertising.
And so I think, really what I'm talking about, they're already existing billion dollar communities is that those communities exist, they just haven't had the tools to recognize that value. I also think we can just look at what's happening over in governance tokens in DeFi as an example of it, right?
Like, there is this belief that those governance tokens will lead to direct revenue and value coming back to the tokens. But right now, it's a bet on the meme that Uniswap is going to be the major player in the AMM space, or that Aave is going to be the major lender in the peer-to-peer lending space. And so I would say those are two examples that lead me to believe that there's billions of dollars to be unlocked in communities already. Some are closer to being unlocked than others. And I think the exciting part is like, okay, well, what are the pieces and the education, the context, and the regulations and all the building blocks that are going to allow us to unlock a lot more of that.
And I think the exciting part, for me, I always describe social tokens as being able to bring the value of social capital that exists in the future into the present and being able to invest it to accelerate the growth. Just like we would do in a public company, or in a startup, where we're taking the promise of future revenues and investing it today. I think there's this idea of like, authority and reach and brand that communities are able to create together, but they don't really have the mechanisms to reward and to incentivize and to capture that value. I think at the core, that's what social tokens do. And the world where we as individuals and groups of people on the internet are empowered with a bank account and a decision making process and the ability to accelerate our growth, I think it's really exciting, as I hope I've got across through our conversation today.
“I always describe social tokens as being able to bring the value of social capital that exists in the future into the present and being able to invest it to accelerate the growth. Just like we would do in a public company, or in a startup, where we're taking the promise of future revenues and investing it today.”
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