Primer: What is a tokenized community? How do they differ from DAOs? Let’s dive deep into communities with Jihad Esmail in this episode of On The Other Side.
Background
Working full-time in crypto since mid-2021
Before that, he was running a creator growth agency, helping YouTubers grow their audiences and make more money
When he first became exposed to NFTs, he tried pitching NFTs to the creators he was working with. The creators were not interested
His creator growth agency company got acquired and he went down the crypto rabbit hole
Started getting involved with Forefront, Seed Club, and other DAOs
Tokenized Communities
When he first got involved with Forefront, it was all about social tokens
The term social tokens were poorly defined
The ecosystem shifted from individual to community creation
“Most of the focus even around creators was focused on community tokens and finding ways that creators could coordinate and come up with new and novel economic models to coordinate. So social tokens became community tokens.”
- Jihad Esmail
In 2021, Nouns DAO was raising money on a consistent basis. This could become the model in which social DAOs operate under
In March 2022, Forefront published an essay called Tokenized Communities
Tokenized Communities has 3 traits:
United by a common theme or mission
Collectively governing capital using a token
The purpose of allocating that capital is to fund community projects
Defining Community Projects
Have kept them purposefully broadly defined
Community projects are anything that the community is working on that pushes their mission forward
For Forefront, they want the ecosystem to grow. Hence, they need to build tooling to make it more accessible
The End Game For Tokenized Communities
A good parallel is traditional brands
People are buying into a brand for status in a small niche community
A secondary reason why people hold on to NFTs of tokenized communities is for profit
Another reason is to flex their governance muscles and decide what the direction of the community is going to be
Governance, Power, And Control
When people purchase a governance token/NFT, they are purchasing political capital
“Now there's a very direct mechanism to say, hey, if this brand is cool, and there's a tokenized community that is helping to govern and steward this brand, I'm able to buy into it and actually have a meaningful say in where this brand is going to go.”
- Jihad Esmail
This sort of mechanism has been constrained to crypto native culture because the UX is poor and onboarding mainstream folks is not really possible
Another reason is that people are not attracted to the idea of financialization/investing in culture, unless they are in it for purely financial gains
Recommends people to read Toby’s Life After Lifestyle essay
People have looked at the Nouns DAO mechanism and tried to replicate it
However, these people have not meaningfully thought about how their culture/mission should be proliferated and the best economic model to proliferate it
Most DAOs who tried to replicate Nouns DAO’s perpetual auction mechanism ended up flopping because they don’t have the interest from whales or the speculation to sustain perpetual auction
Have to explore further to prevent getting trapped on membership that’s dependent on rich people
Moving Away From Transactional Relationships
The history of governance tokens has been purely speculative
There’s an aversion to creating governance tokens that are not going to make people money in the long run
When projects take in VC money, there is an expectation that there needs to be profits
In the last 6 months, projects are stating that they are not going to take in VC money
Need to experiment with more fun governance mechanisms
Are Tokenized Communities An Infrastructure Play?
💡 Many projects are building infrastructure instead of the final consumer app that people interact with. Are tokenized communities the equivalent of infrastructure?
Cultures are not static
Each community is competing for attention against other communities
Think that most tokenized communities are going to be forced to have specific points of view and niche down as much as possible
The niching down might happen at:
The product level — the community projects that are being funded
The community level — Adopt specific points of view to differentiate themselves from other communities who are in the same sector
Tokenized Communities: 10 Years From Now
Thinks that Reddit’s community points is a peek into the future
Initially, those community points are not going to be purchased, but to be earned
By earning those points, holders will be able to govern the treasury of a particular community
Still need to come up with alternate revenue models
To onboard the mainstream, people might not even realize that they are earning tokens on a blockchain
Difference Between A Tokenized Community And A DAO
A tokenized community is a subset of a DAO
All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.
On The Other Side ep 59 - The tokenized community thesis w/ Jihad Esmail
Very interesting read. Thanks!