Welcome to episode 12 of Understanding Crypto, the podcast where James Burtt and Paul Abercrombie demystify the world of Web 3.0 and cryptocurrency, as well as what it means for you and your business. In this episode James and Paul explain creator coins and social tokens, including the basics, and how to properly utilize them within your communities. 

Rare Use Case

Social Tokens and DAOs are the hot topics being discussed in the crypto realm at the moment, however proper use case adoption, and successful use cases have yet to be seen. A survey was done in a room of 40 and of those 40 people only two said they use DAOs. The rarity of DAO usage can be attributed to two factors: it's used by community administrators, or a layperson heavily involved in the world of Web 3.0. [Listen from 3:03]

Creator Coins and DAOs

A creator coin is an individual, group business or entity issuing their own cryptocurrency. They are designed to be specifically used between creator and community, to be used for payment of services between the creator and their community, or to unlock access or benefits. They act almost like a membership card, and a community is built from holders of the same creator coins. The DAO aspect comes into play when creators begin to merge all the technologies together. "The creation of a social token with the creator, or the creator coin giving access to voting rights within the DAO that makes certain decisions within the community," Paul adds. "When you start to overlay all of this stuff, you really start to supercharge an offering and a stack of tools that you can use if you're a creator to really help you drive your community forward," he remarks. [Listen from 5:22]

You shouldn't launch a social token or a coin to create a community. Rather, you should build your community and fanbase so that when you create your coin or token, you further ignite your community. It drives engagement and gives people a sense of belonging and identity. People crave tribes, and as that tribe grows, so does the value in your community. Creator coins however, cannot be used as investment mechanisms. The value of a coin depends on the popularity of a community so there is high risk, and constant fluctuation. Creator coins can increase in value if the community is buoyant, but they are not financial instruments. [Listen from 8:55]

Incentivize and Strategize

Getting people within your community to create something for the community is a good way of incentivizing the community. Creators can do this by positioning coin rewards and what this will inevitably do, is drive the value of the community, thus driving the value of the coin. It's a cyclical reward as these individuals give value to the community, whilst also getting paid for the value they bring, and ultimately driving up the value of the entire initiative. Paul and James' coins aren't released to them all at once, but rather they are vested over time, and what that does is that it keeps them in the game for a long time. It keeps them incentivized to grow their community. "You want to incentivize people to stay in the community… give them a utility map of usage for that coin that allows them to stay in the community because the more people that hold the coin the stronger the coin is going to become," James says. [Listen from 12:02]

Minting your own tokens serves no purpose if there is no liquidity pool, and no ecosystem to make it work. It's a full-time job, and the buyers have less protection. You end up going down the road of having a cryptocurrency, and you're going to be treated differently by the regulators. Also, if you take full control and do it on the open exchange and not via a third party, it's going to be very hard to drive traffic because you have no community around your coins. "If you've already got a community it's a good way to monetize and to galvanize the community into all walking forward for a particular benefit or purpose, but you do so with the responsibility of creating an economy that other people have brought into," James says. [Listen from 18:14]

Community and Confidence

You have to have a purpose for doing creator coins. What are you trying to do, what utility are you trying to drive, and what value are you trying to bring to people? Paul and James stress these points, while expressing their own excitement at what they can do with their own creator coin. They've been building their community for more than 18 months. One of the downsides of creator coins however, is that a creator can simply stop what they're doing and the value of the coin will plummet because people will sell their coins. In this case, there has to be confidence between creator and community. [Listen from 23:07]

Key Takeaways

• The value of a coin depends on the popularity of a community.
• You should build your community and build your fanbase so that when you create your coin or token, you further ignite your community.
• You have to have a purpose for doing creator coins.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram