Tokenization Community: Discussing Value Sources and Sustainable Development

Tokenization, as a mechanism, aims to incentivize networks and communities to create collective value and allows contributors to participate in and share the value created. This is one of the most striking features of Web3 technologies and tools in community applications. By aligning incentives among members and stakeholders, tokenized communities can maximize social capital and utility value. Communities become true ownership economies by issuing their own tokens, where members can not only connect with like-minded peers but also interact directly with their favorite creators and brands, while sharing the collective value co-created.

The value of community token assets mainly comes from three aspects: utility value (, which refers to the access rights, uniqueness, or benefits provided by the assets within the community ); social capital (, which includes community belongingness and vitality, member status, and reputation ); and ownership value (, which pertains to community governance and resource allocation rights ). This ownership economic model enables users to establish, operate, and own their own communities and networks. Ownership stimulates the drive to enhance community value and share appreciation, further promoting network effects and driving rapid platform development. However, to achieve self-regulation and self-sustainability of the community ( sovereignty ), it is essential to consider transferring capital resources and income streams to blockchain-based funding and monetization models. Without this step, the community will be unable to capture any value for redistribution or reinvestment.

It is important to note that tokens are not a shortcut to solving product-market fit issues. While tokens can play a role in attracting user attention and initiating initial member activation, the core value proposition of the community needs to go beyond mere ownership. To sustain value appreciation, the community needs to be able to monetize its social capital or utility value. Therefore, tokenized communities can provide and monetize three types of value:

1. Access/Network Value: Community access, sense of belonging, and connection centered around a common theme, mission, or goal. Monetization can be achieved through token-gated subscriptions, brand sponsorships, or affiliations.

2. Output/Production Value: The utility, tools, products, and services provided by or for the community. Monetization can be achieved through blockchain transactions, revenue sharing, or royalty distribution, as well as token-gated business or market exchanges.

3. Ownership/Governance Value: Governance and resource allocation of the community roadmap. Monetization can be achieved by selling governance and/or security Tokens as equity.

In the long run, the most vibrant communities will be those that can provide and capture value in terms of belonging, practicality, and ownership. Regardless of the monetization model a community chooses, its value capture mechanism should be broad and non-exploitative. The primary focus of any community Token economic model should be to create value for and through the community, rather than extracting value from its members or outsiders. Furthermore, any value captured by the community should be directly aligned with the value co-created by its members. This does not mean that all value should be redistributed to members, but at least some portion of the value should accumulate in the community's treasury to support ongoing projects.

Tokenization communities can be seen as capital allocation networks centered around memes. The value growth of community tokens is based on how effectively they incentivize token holders to fund meaningful collaborations to spread common memes. Tokenization communities transform community members into entrepreneurs, creating a network composed of various projects, products, companies, and sub-communities that are collectively committed to achieving a common meme or mission.

The core concept and commitment of the tokenization community is to create a self-sustaining and self-reinforcing positive cycle. In this cycle, community members actively participate and put in effort to gain social status, utility rights, and/or equity, thereby creating incentive mechanisms and network effects that encourage members to invest and contribute more. Cooperation and individual initiative are the driving forces of this positive cycle, serving as the natural power that keeps the cycle running. Cooperation ensures that members identify with the common goals and shared values, based on the principles of symbiosis and mutual benefit, which in turn is the premise for active participation and tangible contributions from members to the community.

In a thriving community, tokens act as programmable incentives for creating and capturing value. Smart contracts will define how these tokens are earned and what kind of value or holder rights these tokens unlock. In other words, programming encrypted tokens can incentivize community members to invest and contribute to achieve specific outputs and outcomes.

Tokens will only appreciate in value when the underlying community can provide and monetize value in a sustainable manner. For a tokenized community to become its own micro-economy, it needs to adopt more profit-oriented thinking and actions similar to those of profitable enterprises. This does not mean that every community, or every tokenized community, must be profitable, but at the very least, value and profits should flow to token holders to maintain the token's value. Currently, many token projects are not profitable at all (or lack a path to profitability), or there are obvious issues with their mechanisms for distributing value and profits.

To become a community that can continuously create value (rather than exploit value), it may be tempting to identify the community's true profitable product or value proposition from the start. However, following Simon Sinek's golden circle framework, we should think about the "What" (i.e., outputs, products, propositions) only after clarifying the community's "Why" and "How." Applying this approach to the community, the appropriate steps should be as follows:

Why --- The purpose of the community: Why is not just about making money; that is merely a result. Why is a common goal, reason, or meme. It is the fundamental reason for the community's existence.

How --- The positive cycle of the community: How it involves creating the right dynamics, culture, and incentive mechanisms to attract the right members, capabilities, and resources to collaboratively promote the dissemination of core goals, missions, or memes.

What --- The value of the community: What is the comprehensive social and practical value provided by the community, when the Token becomes an important tool for promoting a positive cycle, ultimately needing to realize its monetized value.

By adopting this phased framework, it will ensure that the token is not launched prematurely before establishing a "minimum viable community" and validating the "community-market fit". Starting small and developing organically from within will allow you to test and adjust your positive feedback loop, but more importantly, to gain input from a committed and like-minded core team to shape the community's value proposition and Token model design.

When launching a positive cycle in the community, there is no single correct model. In the three value dimensions of access, utility, and ownership, any one of them can be chosen as the starting point to drive the positive cycle. Ownership can lead to access, just as access can lead to ownership. The DAO roadmap of a certain Web3 academy is based on gradually increasing the value of a worthless Token to a valuable Token, progressing through stages from earning to owning, then to token-based governance, token-gated utility, and ultimately achieving income and Token liquidity. Brand communities have an advantage as they can build on an already established brand and product foundation; thus, tokenization can achieve a production-network-ownership (utility-access-ownership) positive cycle. This is also the main idea behind tokenized loyalty programs or transforming brand communities into DAOs.

Ultimately, regardless of how you choose to plan the value roadmap, a healthy community will be one that can sustain a positive cycle of value creation and value capture, which includes:

• Attract capital resources or generate income on-chain
• Effectively allocate these resources and revenues to achieve maximum impact (i.e., disseminate mission/goal/meme)
• Ensure that value flows back to the community in proportion to its contributions (i.e., value appreciation rather than exploitation)

This also raises the question of how the community and DAOs manage collective governance to maximize on-chain revenue, but this is a topic that requires deeper exploration, involving subsequent in-depth research into monetization and governance strategies.

Although we are in an ownership economy where users have more power and ownership than ever before, DAOs need to strike a balance at this point to ensure they can earn enough funds to at least sustain their core team.