Cryptocurrency - Bitcoin and the newer 'altcoins' increasingly cropping up - has generated feverish reporting since it first debuted back in 2008. We've all become accustomed to the idea of crypto tokens as digital currency, but beneath the hype, other utilities are quietly emerging. Perhaps the most interesting application of tokens is in their utility to power interactions on decentralised, blockchain-based platforms. From decentralised Airbnb, to the blockchain-based Facebook of the future, the token economy powering these pioneering platforms have many willing to bet on the fact that the future will be tokenised.
So, what are these tokens, or 'appcoins' as they've previously been referred to?
Tokens strongly linked to a particular platform or ecosystem are a little different from the 'altcoins' we're more familiar with. Instead, they are the vehicle used to transact value on blockchain-based platforms. This is because they're closely connected to a particular platform's ecosystem and in that way also act as shares in that platform.
While these coins have value within the ecosystems they're embedded in, and can be converted into real cash on exchanges, they would not be used as a means of purchase in commercial transactions outwith the platform.
Take as an example the decentralised social media platform Steemit. The site's token, Steem, can be used for value transactions within the Steemit ecosystem. In this case, it's distributed among content creators (i.e. people posting and commenting on the site) via peer-to-peer 'microtipping'. Due to the influences of supply and demand, these tokens may become more valuable in time as the platform becomes increasingly popular, meaning that theoretically, early buyers of Steem could be set to cash in in future.
Tokenization heralds the age of social media 3.0
Therefore, these tokens represent the identity of a platform, and the first wave of decentralised, blockchain-based social platforms see tokens as a way to increase the value of a site for users.
"When the internet began, the users played a very passive role. They simply watched, or listened, or read about content online on the PC," says Kevin Yeung, CEO of FanX, an upcoming decentralised live streaming platform.
Clearly this isn't the case anymore with the passive observer recast as a 'producer' in the modern internet age, interacting with content and creating their own.
"The problem that we've seen for the past two stages of social media is that users don't own the content," says Yeung. They contribute content to the platforms, but they do not own it.
"So, what FanX is trying to do is to establish the social media 3.0 era, which means we want to return value that users, readers and consumers generate, and rekindle value within the communities."
At a glance, this would appear a noble endeavour - at a remove from the platforms dominating 'social media 2.0', which aggressively monetise sites through advertising and squeezing personal data from users.
"We don't like using the term 'monetisation' because we think that is essentially what the centralised platforms - Periscope, Instagram, YouTube - do," says Yeung. "They monetise their users and content generators.
"We think of it this way: We're acting as a foundation to try to balance this ecosystem for communities to interact with each other and to maximise economic incentive amongst each other without intermediating the creation among them."
Therefore, tokens can add a means of allowing decentralised, peer-to-peer interaction - a form of tipping your favourite content creators. The hope, Yeung says, is to one day leverage this as a means of facilitating these relationships, with users being able to say to their favourite creators: "Hey, tomorrow's my birthday, can you sing a happy birthday song to me for thirty seconds? How many tokens would you like to do that?"
YEAY uses tokenization to drive Gen Z engagement
This is similar to the idea behind YEAY and the upcoming launch of the WOM token. YEAY is an ecommerce platform where Gen Zers and young millennials post short videos recommending their favourite products to each other. Fashion makes a large part of the content, with activewear dominating teen recommendations, and the site currently monetises by posting affiliate links and taking commission.
CEO Melanie Mohr decided to appoint an advisory board for her company made up of young people under the age of 19. But these aren't just any teens, most are already successful business people, with one member appearing in the Forbes '30 under 30' list at the age of 14.
It was the advisory board that advocated the integration of crypto into the site, which had previously adopted a points based system.
"After a while, the teenage advisory board said, 'hey, why not coins instead of points?' You should look at how you could tokenise," says Mohr. "So they were actually the driving force for pushing us into the crypto-entertainment space.
"They are already very much into digital currencies, as teenagers, if you think about it, have been into crypto for years. Because in their games, you get digital assets and you get rewarded, and that's why, for them, it's so natural."
Like on the FanX platform, the token will be leveraged on the site to make peer-to-peer micropayments between members, in order to 'reward' their contributions. These are based on characteristics of the teens' reviews such as how honest they seem (combating the issue of sponsored content that plagues Instagram), and whether it's a well-made and convincing product review.
Mohr will be launching the WOM token independently of YEAY, but this will act as the first use-case where it's integrated - although Mohr's plans for the ecosystem extend beyond this.
"We really decided to create a new protocol, and really create a protocol that could not only work on our platform, YEAY, but that could work across all other publishing platforms," says Mohr.
Mohr is hoping to claim an early movers advantage and become the de-facto token system for newer social media sites.
"There are a lot of young and up and coming social networks for the young generation," she says. "They usually have very young CEOs, who, for example, are only 19. And they are so focused on their products - they already have great traction - but have not really thought about monetisation yet."
When decentralised platforms launch tokens, the founders typically reserve a share of the tokens for themselves as well as directing money raised by the token sale back into the platform.
"And so we're talking to these up and coming social networks about seeing WOM as a tool to monetise," says Mohr. "And of course, if they are up and coming networks, they are more eager to adapt their system and their platform to the WOM token protocol."
But she doesn't see the model as solely appealing to newcomers. "Looking into other apps that could also use the WOM token, frankly, it could even be pursued by Snapchat or Bitmoji," she adds.
It's easy to see how a token system would be built on top of the Snapchat ecosystem and fit seamlessly into the already gamified elements of the platform. Social media 3.0 - we may well have arrived.