What the heck are ‘social tokens’ — and why would anyone want to use them? 

Communities on the internet have long gathered around shared interests: enthusiasm for a piece of media, discourse around certain ideology or plain ol’ meme sharing. 

Now, artists, musicians and other creators who have amassed large followings are trying to turn their online communities into digital assets, by launching their own cryptocurrencies. 

The idea is that creators with a sizable following can use tokens tied to their community — called “social tokens” or “creator coins” — to build micro-economies. A growing number of creators are using social tokens to augment their digital presence and bolster audience engagement. For instance, during a recent event at the art auction house Sotheby’s, Nigerian artist Osinachi doled out token rewards to attendees who shared selfies in front of his art on social media. 

Recently, platforms like Roll and Rally have even emerged to take care of all the technical work for creators who want to launch their own token. 

But what exactly are "social tokens” and how do they work? And are there any downsides to them?

Owning a ‘piece of the community’

On today’s version of the Web, supporting creators involves giving fiat currency directly to that person, using payment tools like Patreon. In return, the creator can reward fans for their financial support with early access to content, content exclusive to paying members, or other perks.

In theory, social tokens represent the opportunity to develop a more complex financial relationship than that.

“When you think about YouTube, Patreon, Twitter, Substack, etc, you can't have an ownership stake in these communities,” says Bradley Miles, CEO of the social token platform Roll, which recently raised $10 million in venture funding. But by using a creator’s social token, “an audience member can uniquely own a piece of that community and share in the benefits,” Miles says.

Tokens could be used to reward people for engaging in the community's discord or reading newsletters, for instance. But token holders will also own an asset that could appreciate over time.

“If I'm part of a community and I hold the token, and the token is rising in value, I benefit from being a community member,” said Connie Digital, a digital artist and musician who has launched his own social token, called $HUE.

People launching their own crypto-tokens isn’t new. After all, anyone with internet access can launch a token named after themself using Ethereum. 

Allie Strasza, a Twitch streamer, did just that. In 2017, her partner helped her launch $ALLIE on Ethereum. However, Allie found that the user experience didn’t provide many benefits for her online community. Transactions were expensive due to Ethereum’s gas fees. There was also no liquidity to foster buying and selling the coin. And without a Web3 developer, she couldn’t build any use cases for her coin. 

So Strasza turned to the social token platform Rally. Rally runs on an Ethereum sidechain called the RLY Network — a separate blockchain that runs in parallel to and is compatible with Ethereum but which has its own consensus rules. 

Rally uses the RLY Network and its native $RLY token to support social tokens and provide liquidity for users who want to cash out their coins.  

The RLY Network gets its liquidity from the non-profit organization $RLY Network Association, though the goal is for the network to eventually be self-sufficient. There is also $30 million in liquidity on the decentralized exchange Uniswap, through the ETH-RLY pairing.

Rally provided Strazsa with a website that made using her coin much easier for fans, as well as a way for fans to purchase her coin using a debit or credit card. Fans who hold a certain amount of $ALLIE get perks. 

For example, those with 10 or more $ALLIE are guaranteed entry into Allie’s card game tournaments. Holders of $ALLIE also have a shot at getting randomly selected to participate in a game — and the more they hold, the higher the probability of getting selected. $ALLIE holders also get exclusive access to Allie’s NFT or branded merchandise.   

$ALLIE now has over 400 users, Strasza says. The coin is worth about $32 USD with a total circulating supply of 147,000. 

Not all fun and games

As straightforward as this may sound, money is complicated. Madrid-based Belgian digital artist Skeenee, who has launched a social token called $SKULL on Roll, has learned this firsthand. 

Skeenee had the idea to launch a social token after visiting another NFT artist in the virtual world program Cryptovoxels. That artist had been using social tokens as a promotional tool. “At the time, I was already organizing promotional events, but my rewards were NFTs — I was basically giving away NFTs for free.” 

Soon after this conversation, Skeenee decided to launch a social token using Roll. 

Unlike Rally, Roll runs directly on the Ethereum blockchain. This lets users more easily put their coins on common, Ethereum-based decentralized exchanges like Uniswap. Also unlike Rally, Roll draws its liquidity directly from users — and in return provides them a share of the ETH-denominated transaction fees on Uniswap.  

Roll helped Skeenee launch his own social token, called $SKULL, by building the $SKULL smart contract, creating a 10 million token supply and hooking $SKULL up to the decentralized finance app Uniswap.

But although Roll took care of the development of his social token, Skeenee says he still had to spend lots of time struggling to create a white paper educating his fans on how his social token works. 

“Thank God that I have a partner who is used to such an endeavor, because me, as a creative, I don't think my brain is made to take care of such technical tasks,” Skeenee says. 

Despite the laborious initial setup, $SKULL now has a liquidity pool of $400,000 on Uniswap and a market capitalization of over $2.2 million, according to CoinGecko. Users can purchase some of Skeenee’s NFTs exclusively with $SKULL or hold the currency to gain access to art competitions. 

Social tokens may help some creators better monetize their work. But having a coin with a floating price tied to your identity can also have unforeseen psychological effects, says Connie Digital.

Connie Digital chose to name his token HUE because it is a color theory term and lends itself to clever word play, such as calling his token holders “HUEmans.” He gives fans who read his newsletters $HUE, and they can use coins to buy Connie Digital’s NFTs. 

But when $HUE was first listed on Uniswap, he remembers how droves of users tried to exchange $HUE for ETH, which caused the price of $HUE to crash. 

“On an emotional level, that hurt because I put all this time and energy into trying to build this thing up. And then once people could sell it, they sold it,” Connie Digital said. 

 The price of $HUE returned to around the same price as before the pump, but the incident still stayed with him “It was a little disheartening,” he says.

“If I had named the token $CONNIE or something associated with my actual name and I saw people dumping it, I think it would have had an even stronger emotional effect because now my name and likeness are tied to the token,” Connie Digital says. “And I think that could really be quite dangerous.”