27 February 2023
Read Time: 8 minutes
Tokens have become a powerful mechanism for attribution in the Web3 ecosystem, representing everything from membership and identity to ownership and property rights, governance, reputation, certification, and more. By leveraging the unique properties of blockchain technology, tokens can provide an immutable and transparent record of a wide range of attributes, thereby providing trustworthy proof of identity, ownership, participation or contribution, aka. proof-of-X.
Tokenizing proof-of-X in turn can trigger smart contracts to automatically unlock corresponding outcomes or rewards. For example, a smart contract could be programmed to automatically reward community members for their contributions, such as the creation of member-generated content or the recruitment of new members. The smart contract could record and verify the contributions, and automatically distribute rewards, such as access to exclusive resources or unlocking incremental perks.
In other words, by using tokens and smart contracts, decentralised systems can ensure both fair and transparent attribution, as well as automatically unlock any corresponding permissions, benefits or rewards. Or in web3 terms, enabling user ‘gate & gain’ based on tokenized attribution and auto-executable smart contracts.
Instead of just focusing on X-to-earn, we should look at both sides of the equation, or X-to-Y, where X is the conditional part (proof-of, verb-to) and Y is what it unlocks (rewards, access, status, …).
Let’s explore both sides of the X-to-Y ‘coin’.
In the world of web3, attribution has taken on a whole new dimension thanks to the ability to tokenize user actions, interactions, and transactions. With immutable ledger technology, it’s now possible to individually and digitally attribute all sorts of user credentials and reputation data to specific individuals or entities.
By using tokens to represent these digital (and IRL) activities, it’s possible to create an immutable record of who did what, when, and where. This has significant implications for everything from digital marketing to community engagement and brand loyalty, as it allows for a level of transparency and accountability that was previously impossible.
Tokenization is the process of converting rights to an asset or proof of activity into a digital token, which can be stored and managed on a blockchain. In a community setting, tokenization can be used to support both the attribution of acts of contribution and the overall reputation of members by creating a system for tracking, verifying, and rewarding effort and contributions.
Tokens can be used to represent a wide range of attributes in a community or brand loyalty setting, providing a secure, transparent, and verifiable record of the rights and value of each member.
In an earlier post, I’ve discussed the potential of web3 and tokenization in enabling new ways to recognize and reward social capital. By leveraging tokens and smart contracts, proof-of-X attribution can be mapped to community-specific reputation and reward models. The social and financial value of a community is tied to a member’s presence, engagement, and impact, and a reputation system can be built to recognise value-contributing activities.
Smart contracts can be programmed to include conditions that trigger the attribution of proof of contribution, such as the completion of a specific task or the verification of a particular milestone. Smart contracts can also record and store information about the contribution and the contributor, such as the amount of work completed or the verification of specific skills or credentials. This information can be publicly accessible and immutable, providing a transparent and tamper-proof way to attribute proof of contribution. By using smart contracts to attribute proof of contribution, decentralized systems can ensure fair and transparent recognition of contributions, without the need for intermediaries or centralized authorities.
In the context of web3, unlocking community access and rewards (aka “gate and gain”) can be supported by smart contracts and tokens. By using tokens as a form of value exchange, communities can create a way to “gate” access to certain activities and benefits based on a member’s level of contribution or commitment. For example, a community might offer different levels of access or perks to members based on the type or number of tokens they hold, which in turn would be a reflection of their level of engagement and contribution to the community.
Smart contracts can be used to automate the gating process, ensuring that only members who meet certain criteria or have a certain level of tokens “gain” access to certain benefits. In this way, gate and gain becomes a self-sustaining system that incentivises members to invest and contribute more, while also creating a sense of “inclusive exclusivity”. Moreover, the use of tokens also provides a way to layer incentives for members to exhibit desired behaviour and contribute to the community’s bigger purpose.
By using smart contracts, it is possible to automatically trigger certain actions or events based on specific conditions, creating a more efficient and reliable system for automating workflows and user engagement.For example, a smart contract could be programmed to automatically trigger a reward or payment when a certain task or milestone is completed. Alternatively, it could be used to automatically trigger the execution of a specific action, such as the transfer of funds or the release of a document, when certain conditions are met.As such, smart contracts can be used to replicate IFTTT (If This Then That) models in a decentralised system. With tokens as the immutable proof-of-X (If This …) and auto-executable code triggering unlock-of-Y (… Then That), X-to-Y becomes the new programmable incentive paradigm for web3 communities.
By leveraging tokenized attribution and smart contracts, brands can automate the process of recognising desired behaviour and rewarding customers for their engagement, and incentivise them to participate in the brand’s community and innovation processes.Tokens can be used to establish proof of relevant brand loyalty attributes by representing a customer’s loyalty in a measurable, quantifiable way.Let’s say a brand wants to reward customers for their loyalty based on how much they have spent on the brand’s products or services. The brand can create a loyalty token that represents a certain amount of spending. For example, 1 token can represent $10 spent. Every time a customer makes a purchase, they are awarded a certain number of tokens based on the amount they spent. These tokens are stored on a blockchain and can be used to unlock rewards, such as discounts or exclusive content.Beyond purchase loyalty, tokens can also be used to attribute proof of brand support and advocacy, by registering and recognising brand referrals, social shares, event participation, community contribution, etc. In this way, the number of tokens a customer has accumulated becomes a proof of their brand loyalty and love.The tokens can be transferred between different platforms or applications, allowing customers to use them across a variety of contexts. By using tokens to represent these loyalty attributes, the brand can create a more quantifiable way to establish proof of customer loyalty, which can be used to unlock rewards and incentives.Here are some examples of how smart contract enabled X-to-Y workflows and gamified engagement can help to foster brand loyalty:
In summary, smart contract enabled X-to-Y workflows and gamified engagement can help to foster community and brand loyalty by creating flexible and programmable ways to attribute value contributing behavior, and automatically reward community members and brand customers accordingly. In other words and to go full circle, the power of web3 attribution is the ability to assign and validate proof-of-X, and at the same time unlock value-of-Y, all done seamlessly through programmable smart contracts.
About the author: Tom Vandendooren helps brands with product-market and go-to-market fit and currently supports a web2.5 community start-up. He enjoys keeping fit with the outdoors to compensate the good life (aka wining & dining). Connect with him on Medium, LinkedIn, or Twitter.