Tom Vandendooren

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’.

Attribution in a web3 world

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.

Tokenized attribution

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.

• Identity and membership: Tokens can be used to represent a verifiable digital user identity when engaging with a brand or within a community. This can be useful for ensuring secure and efficient access to resources, as well as facilitating secure and verifiable transactions. Tokens can also be used to represent membership in a community or loyalty program, in order to access exclusive benefits and services.
• Participation and contribution: Tokens can be used as attribution and recognition of participation, contribution or achievement. As such they can be linked to any evidence of value or loyalty adding efforts.
• Reputation, certification, and accreditation: Tokens can reflect a member’s reputation and the value that they bring to the community. This can include certifications and accreditations earned through their contributions and efforts.
• Ownership and property rights: Tokens can be used to represent ownership or property rights over both digital and physical assets. Tokens can also be used to represent the provenance of a product or asset, allowing for secure and efficient tracking of its origin and ownership history.
• Permissions and privileges: Tokens can be used to represent various levels of access and permissions within a community or loyalty program. For example, members with higher levels of tokens may have access to exclusive resources or services, while members with lower levels of tokens may have more limited access.

Reputation, attribution and smart contracts

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.

Unlocking access and rewards

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.

X-to-Y: redefining IFTTT

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.

Brand value and loyalty

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:

• Loyalty rewards: A brand can create a loyalty program that rewards customers with tokens for their purchases or engagement with the brand. These tokens can be stored on a blockchain, and customers can redeem them for rewards, such as discounts or exclusive content. The use of smart contracts can automate the process of rewarding customers with tokens, making it easy for customers to earn and redeem their rewards.
• Community engagement: A brand can create a gamified engagement model that rewards customers for their participation in the brand’s community. For example, customers could earn tokens or rewards for creating content, referring friends, or completing challenges. The use of smart contracts can automatically trigger the distribution of rewards based on specific conditions, making it easy for the brand to manage and incentivise engagement.
• Authentication & augmentation: A brand can mint an NFT with each consumer transaction, creating a dynamic and composable digital entry point specific to the goods being purchased, with endless possibilities for new and creative loyalty and after-sale engagement. Beyond the obvious value of provable ownership and authenticity (vs. counterfeiting) these non-fungible twins can also be programmed to unlock relevant after-sales services and incremental holder-only benefits. NFTs can incorporate references to provenance, warranty data, service records etc. to automate customer care and optimise the overall customer experience, without the need for the owner to manually register product purchase data.
• Product feedback and innovation: A brand can use a smart contract enabled IFTTT workflow to collect feedback from customers and incentives the submission of new product ideas. For example, a brand could reward customers with tokens for submitting feedback on new product features or for submitting ideas for new products.

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.