Partnered With:

Will NFT fragmentation be the key to the growth of social tokens?

Read this article in 8 Minutes

Social token issuance is primarily centered around an "asset," not a community

The Fractionalization of NFTS Will Lead to Better Social&NBSP; Tokens

Originally written by Brian Flynn

In the past few months, there has also been renewed interest in social tokens due to the rapid growth of NFT. This article is both a reflection on the evolution of social tokens over the past year and a reflection on how the rise of NFT will shape the future of social tokens.

Currently, the value of social tokens is often due to the ability to hold tokens to restrict access to certain portals. For example, when you hold a certain amount of a certain social token, you can access some of the private channels in Discord that are populated by some of the top creative people in crypto. This approach became popular in the summer of 2020, when a Discord bot called Collab.Land was used to set up token ownership barriers for communities.

I launched a social token called Jamm, and I tried to set Jamm's token holdings as a threshold for reading my blog posts. Back then, reading my weekly blog post required holding 100 tokens, or about $50. While this led to better price discovery for my content, I couldn't get any value out of what I was writing, and distribution was severely limited by the barriers to entry.

To sum up, although holding tokens as a portal access threshold is the most basic function, it lacks the ability to continuously create value. Here are its problems:

No consensus on value: Early stage token holders have a hard time agreeing on how much value community development will bring

Lack of incentives: Anyone with enough tokens can join the community, but there are no incentives for them to contribute to the community.

Unchained Cash Flow: Communities do not receive revenue from new members entering the community, their revenue comes from buying tokens when new members join.

A better option: fragmentation of NFT

Fragmentation of NFT has long been regarded as the best solution to NFT liquidity. There are also platforms that are working in this direction, such as Niftex (not to be confused with NFTX, please), which breaks NFT into pieces so regular collectors can invest in expensive collectibles as well. While these platforms have made some progress, why would people want to buy a piece of fragmented art? The problem arises from the absence of a key ingredient: perpetual royalties.

The concept of perpetual royalties for NFT was first proposed by the SuperRare team and later adopted by platforms such as Zora, which introduced the ability to set royalties for NFT.

NFT creators will have two options in the future: independent or collective. While individual creators can earn royalties through the resale of NFT, the collective model is a new way to build distribution. By fragmenting NFT royalties, creators can get more circulation. These scraps of royalties can be expressed in the form of tokens, which creators can distribute to users who help them sell NFT, potentially selling the coins at a higher price than if they sold them independently.

Social token issuance is primarily centered around an "asset," not a community

Instead of issuing social tokens around a community or an idea, issue tokens in lieu of royalties on digital assets. This gives the members a more specific goal (such as the successful sale of NFT) than the vague "growth" that can be dragged on indefinitely.

After that, you can use these fragmented shares to create a portal access medium such as Collab.Land with a token threshold, giving share owners a short-term, consistent goal. When the NFT is sold, these fragmented share owners are paid in proportion to the number of tokens they own. And community building is secondary, as the pursuit of the shared benefits of selling digital assets naturally creates a community.

There are two levels of ownership: ownership of an NFT and ownership of a portion of royalties

With the development and popularization of the above model, creators will fragment their royalty income in order to make more people own their works. In the future, there may be two kinds of buyers: buyers of the whole NFT and buyers of the fragmented NFT. If you're just guessing the future value of the asset, and you think you can help sell it successfully in the hope that you'll get royalties, you'll buy a fragmented NFT. If you wanted to take ownership of the asset and claim it to others, you would buy the entire NFT.

The key difference is that fragmentation of NFT encourages buyers to contribute more to the success of creative work in the form of NFT.