Beyond Crypto: How Web3 Is Transforming the Creator Economy

Disclaimer: The Industry Talk section features insights by crypto industry players and is not a part of the editorial content of Cryptonews.com.

With more than 50 million creatives transforming their passions into a product, the creator economy is made up of all manner of influencers, digital artists, gamers, journalists, and bloggers who make great content and build up a growing fanbase. 

The creator economy rose to prominence on Web2 platforms like YouTube and Instagram, but an emergent breed of services, such as Patreon, and Twitch are helping the growth of direct creator-to-fan content, sidestepping the traditional gatekeepers and opening the door to new methods of monetization. 

However, those new platforms may soon be surpassed by the growth of Web3 technologies like blockchain, cryptocurrencies, non-fungible tokens, social tokens, and DAOs. These new concepts promise to transform the way creatives distribute content, claim ownership and monetize their work. 

Generating Royalties With NFTs 

NFTs have become the most successful way for digital artists to monetize their work in the Web3 industry. Examples of popular NFTs include the Bored Ape Yacht Club and CryptoPunks, which are highly sought-after, limited edition collections of JPEGs that are traded on decentralized marketplaces, with their values based on their rarity and other traits, as well as their prestige. 

By owning one of these NFTs, the holder essentially belongs to a kind of social club and can be entitled to lots of privileges, such as accessing an elite metaverse in the case of BAYC. The authenticity of each NFT holder’s ownership is publicly verifiable on the underlying blockchain it’s minted on.

NFTs are purchased with cryptocurrencies such as Ethereum and they have become an extremely profitable way for some digital artists to monetize their work. However, the potential of NFTs goes well beyond straightforward sales. One of the defining features of Web3 is that it makes it possible to track and generate trailing commissions for NFT creators. The underlying smart contract can be programmed so that the original creator earns a tax on all future sales of that token. These royalties will be automatically deducted from any future sale price and paid into the creator’s wallet. This capability makes it possible for artists and other creators to benefit from the long-term appreciation of their content – the more popular and successful it becomes, the higher its value, and the bigger the commission. 

Before NFTs became popular, digital artists faced severe challenges when it came to monetizing their work. After all, why would someone pay for an image when they can just right-click and download it for free? The missing link was that of patronage and proof of ownership. While anyone can view a JPEG online, only one person can now claim ownership of that image. 

NFTs will make it possible for emerging content creators to be fairly rewarded for the popularity of their work. A good example is Valeria, a 14-year-old digital artist whose generative GirliesNFT collection sold out in January 2022, raising 392 ETH (around $1.2 million at the time). The 10,000 NFTs focused on underrepresented women in the crypto space, and the sale included rights to the underlying art for both commercial and personal use, excluding merchandise. 

As Web3 and NFTs become more familiar, more influencers will move to tokenize their viral videos. Already, even some of the biggest Web2 social media apps, like TikTok, are getting in on NFT creation. In TikTok’s case, it has partnered with Immutable X to allow creators to launch video NFTs that can be gifted or sold to fans on the network. In the case of video NFTs, one of the most promising utilities is streaming royalties that could be generated from subscription revenue and programmatic advertising. 

Social Tokens To Power Creator Economies

Social tokens, which are also sometimes called creator coins, community coins, or personal tokens, are an emerging class of digital assets similar to cryptocurrency. They’re primarily backed by the reputation of an influencer or community, and can be thought of as being similar to owning shares in that person or community. They provide value for different participants, including die-hard fans, speculators, and, of course, the creators themselves. 

Social tokens promise to create a booming creator economy, firstly by helping influencers and content creators to better monetize their audiences through newer, more efficient business models, such as the sale of tokenized content using his or her creator tokens. At the same time, social tokens could be used to raise funding, with holders entitled to a certain percentage of revenue from future sales of content. In turn, this would create new financial instruments and new participants in the form of speculators. 

Finally, social tokens will result in economic alignment between creators and their fans, as the value of those tokens will theoretically increase as the creator becomes more popular. That should create a powerful dynamic, wherein fans are incentivized to act as an ambassador for that creator. 

Social tokens are not just some untested concept. Already, a number of platforms provide tools for creators to mint their own tokens and distribute them to fans, creating their very own token economies. One of the most interesting platforms to do this is Unit Network, which has built the technological and economic infrastructure for mainstream adoption of the token economy. With Unit Network, any business, project or individual can create their own token, be it an “industry token”, a “community token”, “social token” or something else, complete with a wallet infrastructure and marketplace to distribute those assets. 

Unit Network’s infrastructure ensures that all tokens have inherent value, as opposed to being backed by speculation and brand recognition alone. Newly created social tokens can be backed 1:1 by a combination of Unit Network’s own native token, UNIT, and so-called “Blue chips”, which are wrapped versions of BTC, ETH, DOT, SOL, MATIC, and other popular cryptocurrencies. 

Social tokens based on platforms like Unit Network will finally enable creator economies to become a two-way street, providing valuable utility to holders. They’ll serve as the foundation of sustainable economies that creators can use as a liquid pool of capital or generational asset base when needed. They will enable even the most niche of creators to generate a thriving ecosystem around their content, and potentially power multi-billion dollar economies for the biggest influencers and brands. 

Collective Distribution Through DAOs

While social tokens will provide the foundation for creators’ economies, decentralized autonomous organizations will enable superior distribution models via an interdependent ownership mechanism that encourages influencers, operators, and their fans to collaborate. 

DAOs make it possible for creators, their fans, other contributors, and speculators to become shared owners within a collective. Every participant is essentially a shareholder in that organization. Compared to traditional media structures, where executives make all of the decisions and creators are essentially treated like contractors, DAOs offer an alternative organizational structure that better aligns the incentives of all stakeholders. DAOs change the relationship from one of “creator and consumer”, to one where all participants are “co-creators”. As a result, creative DAOs are more like peer-to-peer networks rather than traditional hierarchies. 

This happens because the DAO is essentially a kind of crowdfund made up of its creators, supporters, and community members. Participation in a creator DAO will require ownership of the DAO’s social token. In this way, all participants are invested in the DAO. Revenue received from advertising, subscriptions, events, and other avenues is then pooled into a treasury that publicly records all cash inflows and outflows. This pool of funds is universally owned and distributed according to the community’s consensus. 

Platforms such as WoozDao and Colony provide complete toolkits for anyone, including businesses, clubs, charities, and influencers, to create a DAO and manage their collective’s activities in a transparent and secure way. With Colony, DAOs can also create their own token, and it also has a feature known as “Domains” for building multiple treasuries. Domains can be created for each different project, department, or team, each with their own separate budget that’s controlled by the DAO. 

DAOs enable creator communities to leverage the extensive benefits of Web3 technologies. For instance, creator DAOs can mint their digital assets as NFTs, in order to manage and monitor them and track ownership. In this way, the creators, operators, and participants all collaborate on the NFT assets, which can return royalties to the DAO based on the performance of the content, leading to profits that are shared among the community. 

When media went from print to digital, creators lost much of their ability to control their assets, and consequently the value they generate. With NFTs, digital media finally becomes a revenue-generating asset that can be secured through smart contracts and cryptography. 

Content creators and influencers will therefore have a choice: They can forge an independent path or form a collective. As independents, they’ll realize the full upside of their digital assets and keep all of the royalties they earn for themselves. However, the collective model will in many cases prove superior, with the community working together to enable new distribution channels, with royalties split through the fractional ownership of NFTs. 

Web3: The Future Of The Creator Economy?

For content creators, the biggest question is this: How can they make a living out of their passion, especially when the content they create is nominally free for all to consume? By utilizing Web3 technologies such as NFTs, social tokens and DAOs, creators, and influencers can invite their communities and fans to participate in their success by taking a direct stake in their work. This is something that simply couldn’t happen in the world of Web2 and it provides significant opportunities for monetization that far exceed the unfair revenue-sharing models offered by the likes of YouTube and Instagram.

With Web3, the fans become both long-term investors and active assistants in boosting the reach of content creators, with benefits for everyone involved.