All Tokens are Social Tokens

My highest conviction belief about the crypto/web3 industry is that every company, project, and token is fundamentally social in nature.

What does that mean? It means that whether you’re an artist making art, a developer building infrastructure, a fund trading liquid markets, or anything in between, your success hinges at least as much on social dynamics as it does on the underlying technology, craft, data, etc.

Three quick takes to elaborate.

First, owning tokens is social.

We buy coins, NFTs, and even Friend Tech keys to belong to larger groups, to affiliate, to self-express. Of course, there are lots of speculators around who are just “in it for the money,” but I do think a meaningful slice of folks who buy Ether, or a CryptoPunk, an edition from an artist they like, or a bag of Chainlink tokens are doing that for social reasons as much as economic ones. It’s tribal. We purchase these things to say something about ourselves, our belief systems, our hopes for the futures, our tastes… and to participate in communities that share those ideas.

Second, selling tokens is social.

When an individual or a team sells a new token, the sale event (and whether it succeeds or not) is dependent on that person or group’s reputation. Think about liquid tokens first. Polkadot raised 9 figures in its ICO largely by appealing to Gavin Wood’s social capital as an Ethereum co-founder. And this same dynamic plays out in NFTs as well. Let’s use an artist for example. How does an artist sell out a collection of their work? Well, likely, they built up credibility over time. They formed relationships, shared ideas, publicly talked about their creative process, and forged good will via those activities. Then when it came time to mint, they dipped into that good will to sell their art. In either case, the monetization of these tokens – fungible or not – is rooted in social dynamics.

Third, trading tokens is social.

Crypto markets are driven by stories more than anything fundamental. When you trade tokens of any kind, you’re essentially trading derivatives of people’s attention: prices go up when something has a lot of attention on it and prices go down when that same thing falls out of favor. For example, in 2023, you could tell in advance which coins would do well because there was a lot of latent energy and interest around them in advance of the price pumping, whether it was Jack Butcher’s NFTs or HarryPotterObamaSonic10Inu ($BITCOIN). Social activity around a project is one of the only coherent signals in the industry.

When you take all these observations together my conclusion is that social energy drives all aspects of crypto/web3. Ownership is social, monetization is social, trading is social… all of it is social. Many people miss this point and focus too much on “fundamentals” like the underlying code of a protocol, the merit of an artistic work, and so on. These things matter to an extent for sure, but in my view, at the end of the day, crypto is driven dominantly by qualitative things like stories, reputation, and group identity. And in this way, all tokens are social tokens.