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January 21, 2022

Web3 Future: How Community Tokens Are Monetizing Online Communities & New Ways to Make Money Online

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The social fabric of the internet is fundamentally changing with Web3, and enabling anyone online to monetize their talents and habits through the use of community tokens. Technically a "social token," community tokens are a great way for NFT artists and developers to create and maintain engaged online communities of supporters through an exchange of real-world value.

Whether it's playing a video game, trying out a new platform, or supporting community initiatives, community tokens harness the power of social capital and turn it into financial gain for members of online communities. There are all sorts of community tokens each contributing to the future of the internet, so let's review each of them and how some people use them to make money online.


What are community tokens?

Community tokens are cryptocurrency coins that have a specific function within a particular community, and do not have any utility outside of that community. Typically, a token only has value when it is exchanged within its respective community.

A great example of community tokens that you're probably already familiar with is the fake money used in video games. Whether you've played games like RuneScape, Fallout, or Pokemon, each of these games have their own "money" which you can earn and spend inside of the game. This money does not have any real-world value, and only works as part of the fictional economy of the video game world.

We can use this example from video games to better understand how real-life community tokens work (more or less.) When it comes to the Web3 world, community tokens are the currency of choice that is earned and spent within a particular online community, and essentially enables its members to participate in a micro-economy, where they work for and spend tokens in their specific ecosystem.

Much like a video game, Web3 community tokens are paid to members who complete tasks that benefit the community at large. However, unlike a video game, many community tokens are actually exchangeable to real-life currency, and therefore enable members of a virtual community to make real-life money.


What are some examples of Web3 community tokens?

There are many different community tokens out there, and new ones are being created every day. As the Web3 world grows, more and more communities of people with specific interests are cropping up, and they are minting new tokens to represent ownership in their communities -- each with their own function. I have found that there are three main types of community tokens: Web3 game tokens, DAO governance tokens, and community engagement tokens.


Web3 Video Game Tokens

Rather than re-invent the wheel, popular Web3 video game platforms such as Decentraland and Sandbox have instituted their own virtual currencies not unlike the currencies of old school video games like RuneScape. However, these Web3 video game tokens are exchangeable for real-world money such as the US dollar, and have utility that is usable within each game.


Decentraland's $MANA Game Token

Decentraland is a 3D video game where players can chat, build, and play together not unlike other 3D peer-to-peer video games like RuneScape and SecondLife. This virtual world uses a video game token known as $MANA to price all commodities in the digital world. It enables players to buy and sell things like virtual real estate, virtual clothing, and virtual services that their digital avatars can then use in-game. Players can also build things like clubs, skyscrapers, and even cities using the virtual land that they purchase.

Decentraland players can also earn $MANA in the game by performing jobs similar to what you may see in real life. Many players exchange $MANA for completing tasks as simple as virtual tours or even marketing virtual art on the behalf of in-game artists. Others use their design skills to create virtual buildings and environments for owners of digital real estate. This takes serious real-life skill with 3D design tools like Blender and AutoCad, comparable to an architect in the physical world, only these designers are not constrained to the natural laws of the real world, and so can design virtually anything.

$MANA is exchangeable to the US dollar, currently at a rate of 1 $MANA for $2.80 USD as of January 2022. This means that it's entirely possible for someone to make a living entirely in a virtual world, by performing services and selling goods that other users want to buy.

What's more is that this whacky new way of making money isn't even that new -- NPR actually wrote an article as far back as 2006 about people like Reuben Steiger that actually made real-world money with virtual businesses transacting entirely on SecondLife. The idea has existed long before the cryptocurrencies of today, and may well represent a new opportunity for many of us in the Web3 world.


DAO Community Governance Tokens

Aside from video games, there are also unique community tokens that are used specifically for the "governance" of an online community, specifically a DAO.

DAO is an acronym for "decentralized autonomous organization," and it is an innovative Web3 business structure comparable to something like an LLC (limited liability company) in the United States. What makes DAOs unique is the fact that these organizations are flat, with no specific figureheads or C-Suite executives making decisions. Rather, DAOs operate by deferring decision-making control to an automated smart contract that is reliant on the inputs from the community.

Members of the DAO community buy into the organization and are given a certain amount of governance tokens in exchange, which give them a proportional amount of voting power, relative to other members of the DAO. This is how the organization makes decisions, taking a vote from  its members on critical decisions, rather than being driven by a select few leaders at the top.


Ethereum Name Service, $ENS Governance Token

One great example of a governance token is $ENS, which gives members of the Ethereum Name Service (ENS) decision-making control of the organization. Similar to the Domain Name Service (DNS) we know today, ENS is quickly becoming the naming protocol of Web3. Instead of a website ending in "dot-com," users are now buying domains ending in "dot-ETH" which point not only to websites, but also Web3 wallets to facilitate money transfer.

In November 2021, the Ethereum Name Service airdropped $ENS tokens to all of its community members. Specifically, users that bought an ENS domain name (such as mine, Lexxx.eth) within a certain window of opportunity. (These tokens are actually still claimable until May 4th 2022.)

$ENS governance tokens allow members to vote on future decisions for the protocol, and the claiming process actually allows you to either retain your voting power, or delegate it to someone else in the community. Not only does this make the ENS protocol more community-focused, but the airdrop provided the community with a significant amount of real-world money for anyone that decided to exchange it.

As of January 2022, $ENS tokens are exchangeable to the US dollar at a rate of 1 $ENS for $23.25 USD. One thing to keep in mind with this token, and other airdropped governance tokens, is that they are typically one-time drops, and do not provide an ongoing form of compensation like other community tokens. As such, airdrops are a great way for projects to incentivize their supporters to take part in the project, specifically in making use of functional platforms (like ENS, MetaMask, or OpenSea) to encourage adoption.


Community Engagement Tokens

Community is at the center of Web3. That much is obvious, especially as more communities organize into DAOs. As such, a third type of token I have seen growing in popularity is the community engagement token. These are tokens that are awarded to members of an online community for their contributions to that community.

You can think of this as a way of paying members for their services that benefit the community or project, the way you'd be compensated at a real-life job. Engagement tokens can be a great way of compensating users for writing about a project, sharing it with their networks, and referring new users. These sorts of tasks can help the community grow, and so the greatest contributors to a project's growth can be compensated accordingly.


Rug Radio's $RUG Token

Some communities, such as Rug Radio, award advocates with $RUG tokens just for being a part of the community. Rug Radio is the first decentralized media platform on the blockchain. Every one of their media programs, hosts, and audience members are a part of the Rug Radio community, and can collectively decide what content they put out, how it is distributed, and what messages are being delivered.

The $RUG token is automatically farmed by holders of any of Rug Radio's utility NFTs. This passively rewards token holders the longer they hold onto the token, and will yield $RUG for five years.

This is a great way of compensating advocates for the work they put into growing the platform, specifically those Rug Radio members that write thought leadership articles about the platform, share it with their networks, and refer new users to the project.


Proof of Attendance Protocol (POAP)

Other communities have started to use the Proof of Attendance Protocol, referred to as POAPs, as a type of memento that proves someone attended or supported a particular event. POAPs are currently positioned as "bookmarks of your life," designed to highlight unique, bespoke virtual experiences.

These tokens are slightly different from other community engagement tokens, in that most community tokens are exchangeable for real-life currency and are used as a form of compensation, while POAPs are more like collectibles. Although they may be tradable and could potentially hold value, their primary utility is related to digital events. These can be things like community town-halls, or rewards for completing certain actions.

Project leaders and artists could leverage POAPs in their community to enable perks like private chatrooms, and even serve as raffle tickets during limited-time events. Not only that, but these tokens could be used to easily identify a regular supporter of a project and afford them exclusive benefits such as heavier voting power in weighted polls.

POAPs are primarily used as a community identifier and a way of engaging members of an online community without incurring significant costs on either the issuer or the recipient. This is a key differentiator between engagement tokens like POAPs, and the other tokens I've covered so far, as most of them require considerable gas fees in order to issue as well as claim, which can be a barrier for users with limited financial resources.


Community Tokens are a New Standard in Online Value Exchange

Although there are more and more of community tokens emerging every day, each with slightly different uses and utility, it's clear that this new form of digital currency is going to be vital to the future of the internet moving forward. As more projects and platforms pop up, we'll continue to see various communities utilize these social tokens as a way of rewarding the support of their members and funding future initiatives.

This is a significant shift away from the centralized monetization models of Web 2.0, that now enables anyone to make a living online by simply supporting and maintaining their favorite projects and platforms. Whether users are making a digital living playing metaverse video games, contributing to the critical decision-making and governance of a DAO, or simply showing up and bringing their attention and enthusiasm to the table in exchange for collectibles, community tokens represent the new value exchange that Web3 users will come to expect.

Photo of Omaralexis Ochoa, host of The Gay Pro, and author of this blog post.

Omaralexis Ochoa

Data analyst, podcaster, pasta-lover... I'm many things, but above all, I'm a creator. I created The Gay Pro because I love sharing stories of queer success, with the intention of empowering and inspiring other queer leaders.