Social Tokens for Creators Explained

a16z General Partner Chris Dixon and Kevin Chou, founder of Rally, social tokens and NFTs and how they can help create new revenue models and communities of fans for creators. This video was recorded during a16z's NFT Summit, a conference featuring the best NFT builders and thinkers discussing the latest trends in NFTs, co-hosted with the Stanford Center for Blockchain Research. Find all the talks from the NFT Summit here: https://bit.ly/NFTsummit Check out a16z Crypto Startup School here: https://bit.ly/a16zCSS

• 0:14Speaker 2

  I would now like to bring back our general partner, Chris Dixon, who will be in conversation with Kevin Chu, who founded Kaban, the mobile gaming company, and is also the founder of Rally, an open network on Ethereum where creators can launch social tokens. Thank you, Kevin and Chris for joining us. I will hand it over to Chris to take it away.

• 0:38Speaker 1

  Thank you, Ariana. Hi, Kevin. How are you? Hey, Chris. Good to see you. Good to see you. Can you maybe start by just telling folks what is Rally?

• 0:49Speaker 0

  Rally is a social token project. And when we say social token, we really mean both fungible and non-fungible. We actually started the project three years ago as a non-fungible token project. And then as we were working through all the economics and the technology, we decided to start with fungible tokens first. But at the end of the day, what we're trying to do is take creators, um, artists, communities, brands, and help them tokenize their their identities, put them online, enable fans and collectors and and um people all around the world to participate in economies that are being built by these by these unique uh creators.

• 1:31Speaker 1

  So can just to kind of help explain, could you give an example of a social token?

• 1:36Speaker 0

  Yeah, I think uh, you know, today we work with about 120 different creators. Um one of our kind of earliest uh and most successful has been a Grammy Award winning band called Portugal the Man. And what they wanted to do was create a new form of a fan club, and they were really excited in long time, you know, Bitcoin and other crypto enthusiasts, and as they learn more and more about what would be possible with their own social token and how to create true fan engagement and interactions and not just always be kind of cash grabbing, you know, from their fans, but really rewarding their fans and creating ways to participate and earn um and grow with their fan base. Uh that was one of the things that that really excited them about creating a social token. Their fans um have been creating music archives and sort of live concert footage for for over a decade.

• 2:22Speaker 0

  And so they work together with 14 of their super fans create this new social token on Rally. And by holding a certain number of rally, you get access to these music archives and kind of different hangouts and kind of a permanent, you know, Discord backstage pass uh alongside the band. Uh, and then the band is increasingly doing things like you know, virtual concerts and hangouts and other things where you pay a certain amount of social tokens and you get access to that that type of event.

• 2:49Speaker 1

  Yeah, I kind of think of it as so you know, we just had Dieter from Dapper and NBA Topshot on there, you know, he they're obviously creating NFTs and uh for a very large community, the NBA, right? And as is, I think Kevin earlier talking about the crypto art community, which is also sort of this, I mean, it's large, relatively speaking, probably hundreds of thousands of people kind of collecting and sort of participating. Um, I kind of think of what I one way to think of social tokens and what you're doing is more on the sort of the on the other side of the spectrum on the smaller networks, not not necessarily small, but but they but they could be, right? They could be a community of a thousand or ten thousand people, which which is really the bulk of the internet, right? Is smaller networks on Discord, on Twitch, on YouTube, on Twitter, whatever it might be.

• 3:35Speaker 1

  And those folks who have those networks may have challenges today monetizing, right? Maybe they have an avid following, but like maybe they may have to make money offline or do some other thing, you know, or they get sort of the breadcrumbs through advertising or um, and so you're trying to sort of provide a new model for those folks, the long tails that is that one way to think about kind of how did both fungible and non-fungible

• 3:57Speaker 0

  tokens fit into that. Yeah, so that that's a that's a great point. So there's kind of two dimensions of this. One is I think we we think a lot about how do uh fungible tokens and non-fungible tokens coexist in the same economy. So if you think about a game, which is kind of my background uh in terms of building games for over a decade, um, almost any game that you play, you're talking about Fortnite a little bit earlier. They use something called V-Bucks in a game, right? You can't, you know, whether you're playing in Europe, you're playing in the US, you're playing in Japan, you're not using yen, you're not using dollars, you know, put into that game and then buy the virtual assets, you're buying the V-bucks first, and then all of the assets in the game are generally denominated in V Bucks, right? And so when you have a built-in community, when you have an environment where everyone says, hey, we're gonna use this currency uh to as a basis of the economy, uh, there's something really powerful about that.

• 4:53Speaker 0

  And a creator or any other community online, I think has the ability to say, hey, we're gonna we're gonna create value in this new community together. And this token can represent kind of the the community um uh all across the globe, and we're gonna build value and denominate things in this um in this new token. And that can be things like all sorts of different NFTs. Uh and so what what we've wanted to create with Rally is a way to create both social tokens or fungible tokens and non-fungible tokens all working together in the same economy. That's kind of one kind of unique approach that we take. The second approach that we take is um we have sort of a I don't know, WordPress ask or Shopify asked sort of way of thinking about things, which is we just want to we want to make technology super simple. And I think you know, uh created my first uh internet site in 1996, and it was a it was difficult to create a website and get it hosted and and um and get it working uh you know back then.

• 5:48Speaker 0

  And then you know, WordPress comes along 15 years later, it just makes it super simple to stand up a new website. And I think we're we're sort of at this um, you know, maybe dot comesque era for crypto where you know kind of a uh it's getting into the mainstream, but the the total number of these uh users and in crypto is still sort of in the tens of millions, you know, right now, not the billions that you know we see connected to the internet. And I think one of the um things that have always proven true in technology is just by trying to lower the bar and making it easier and easier to uh get into a new technology, uh, you sort of expand the top of the funnel. And by working with creators and musicians and and athletes and others um YouTubers and Twitch streamers who have you know reasonable size audiences, we try to make it pretty simple.

• 6:34Speaker 0

  They have a first-time crypto experience and then graduate into you know deeper and deeper um your web three experiences over time.

• 6:42Speaker 1

  Yeah, I remember Web2 in the Web 2 era, sort of mid-2000s, they were similar. It reminded me of sort of crypto today. You had this enthusiastic community doing blogging and other kinds of social behaviors. And I think it was people were uh first starting to realize the internet could be kind of a two-way, like a true two-way medium, kind of read, in fact, one of the most popular blogs of the time was called ReadWrite Web, because it was instead of a read-only web, it was read write. And that was sort of the big idea. Now, of course, we have read write and value, right? Web3. Um, but uh and then and then as you said, you know, in that case, it was like Twitter and Tumblr and Facebook and a bunch of things came along, which took all of these kind of this primordial soup of all of this inventive excited enthusiasts and and then made it so simple that anyone could, you know, in a few clicks have a blog, have a Twitter feed, et cetera.

• 7:33Speaker 1

  And that's when it really just kind of took off. And that's right. So the hope is we're gonna have that cusp right now with crypto.

• 7:41Speaker 0

  And I think uh, you know, today if we look at crypto projects that are are doing significant things, you know, you have a real you have a great blockchain development team that knows you know, smart contract you know, programming, you got to get together, you have to do a bunch of research on understanding the economics and then you know, write a white paper to try to explain your economic ideas. It's it's complicated. It's like you know, the there's no um there's no set way of doing things. And the design space is very large. And for a creator or for a community or for a brand or an artist, what we try to do is simplify that and sort of you know, create these templates with these kind of ways that you can um just kind of out of the box, have a social token, have a whole set of NFTs, have the ability to make additional NFTs, you know, over time and our uh coming NFT platform and just make it super simple.

• 8:28Speaker 0

  But it it's sort of a you know, I don't want to call it thumb down, but it is it is just a basic set of of things that are kind of all pre-assembled, and you sort of open it up and then you can you can start there with just the the standard package, and then over time you can say, you know what, I want to customize this, I want to edit this, and then we we try to make it easy to get started and then give you some powerful tools over time as you get more familiar um you know with crypto.

• 8:54Speaker 1

  Your background is in video games. Um you were one of the early kind of mobile gaming entrepreneurs. Um, you know, I think there's there's clearly a lot of really interesting kind of overlaps uh with NFTs and gaming. Um there's an emerging area, people are calling play-to-earn games, which I think are very cool, where instead of the kind of the economy all only sort of uh going back to the game creators, it's kind of a peer-to-peer economy. Um, and there's sort of more and more games coming out that are doing that, like um uh anyways. So um, you know, I guess how do you see NFTs and gaming kind of growing and emerging in over the next couple of years?

• 9:35Speaker 0

  Yeah, I uh I think it's a really um exciting space. And I think gaming is is certainly one of the major kind of use cases or or kind of virtual worlds uh being one of the uh major use cases for NFTs. And I think you know, the gaming community has experimented with all sorts of economic designs around digital assets. Um so I think a lot of the a lot of the um I see with NBA Topshots, for example, is doing some. Really cool things that we've learned with uh video games and over the last couple of decades. Uh, but I think what we'll see is kind of not just you know, collectible NFTs aren't just going to be collectible items. Uh, there's going to be real a bunch of different use cases for them in a gaming context. There's of course where you had kind of given the earlier um example of swords and other functional items, you certainly have cosmetic items uh and fashion, you know, basically emerging as one of the really important areas of gaming and NFT use cases.

• 10:30Speaker 0

  So in that case, you're wearing it. It's the way that you or your digital avatar appears to others uh in a gaming or virtual world ecosystem. I think there's going to be a whole incredibly rich uh category now that you can create true and authenticated uh scarcity, you know, of fashion. I think the kind of supremes and in other you know equivalents will start to emerge uh in the metaverse um, you know, around that uh we have composable you know items in games. So a lot of things, you know, starting with MMRPGs 25 years ago is where things like I gotta go and collect some blender scraps and then I gotta go and farm some, you know, um uh I gotta go get some uh you know uh I don't know, something else in the game that basically put these two things together, and now I've got you know a horseback saddle that I can use.

• 11:17Speaker 0

  Um and so the idea of like having to go collect a bunch of things and then put them together to create a new thing is uh kind of one of the core things that we we do in the gaming industry. And so I think we'll see that emerge in the NFT space, where today we just kind of think about these NFTs as singular items. But what happens when you design them as sets uh and people have to collect them, almost like playing, you know, McDonald's Monopoly or something like that. I got to collect a bunch of them, put them together, and then that that creates something new. Uh so I think you know, there's there's a number of different um uh that's kind of one slice of or dimension of how NFTs will evolve. And then I think the you know, the the pricing and price discovery mechanisms around uh NFTs will will merge as well.

• 12:03Speaker 0

  So I think today um, you know, there's a lot of focus on auction, right? So when we think about Beeple or Blouse, you know, NFTs that grab the 69 million, you know, numbers and and so forth, those are those tend to be highest priced auction mechanisms. But you know, I think um the the reality is when we look at things like eBay, for example, where it was all auctions for a long time, and then people learned and eBay learned over time that actually people don't like auctions. Uh, there's certain classes of of items, uh, if you're talking about a one-of-a-kind, you know, piece of art in auction mechanism is is the best way to do price discovery for them. But if you're just trying to buy a stapler, you know, on eBay, you know, it's probably you know, an auction mechanism, you know, is not the best way to sell that item, right?

• 12:51Speaker 0

  And so lots of different ways to uh in the gaming space has really evolved to try to create lots of different ways to um create price discovery and and make the experience of buying something easier without escrowers, without deposits, without having to deal with duration of time, you know, escarros or escrow's and auctions um to to buy an item that you really want. Uh so I think we're gonna, you know, there's gonna be a lot of that that that starts to happen now that we can go back to um in the gaming space experimenting with these assets that have real ownership attached to it.

• 13:25Speaker 2

  Great. Thank you, Kevin and Chris. Uh, I want to make sure we get to some audience questions. Um, first one, someone says that they will be launching their social token very soon on rally. Very exciting. Um, do you have any tips or suggestions for this emerging creator?

• 13:47Speaker 0

  Yes, uh well, well, thank you. Um the the number one thing is to really this is

• 13:53Speaker 2

  a real question. It's we did not script this one. I know it's not on stage, but I swear it's not.

• 13:58Speaker 0

  Kevin, you're so awesome. How do you become so awesome? Uh yeah, sort of nothing to do with this. Uh so thank you guys for that. Um, the number one thing is really think about building a community. And so creating ways for your fans to earn uh tokens as you first create this token and launch it into the world. Uh, I think is probably the most important thing is to really think about this as building a community online, getting a group of people who are going to be your most passionate followers and supporters. How do you get them engaged with creating you know value together in this new online community that your uh journey that you're embarking on?

• 14:35Speaker 1

  I would just I would just add to that. Like I think this is the I think when we look back on this period and we say what sort of NFTs work and what didn't, the key dividing line will be community, right? This is why crypto punks is so strong. This is why NBA Top Shot is so strong. And I think on contrast, you know, there's sort of these one-off transactional things happening now where there's really no community, which I think could be the which I think are the things that were less likely to work. Um I don't know. So yeah, I can't emphasize it enough. The good news is there's you know, we've spent 20 years collectively figuring out how to build communities on the internet. So now we have a sort of a complimentary piece of the puzzle, which is how to monetize this.

• 15:12Speaker 2

  That's right. Yeah, yeah, absolutely. Um someone also asks, do you believe that the future of social tokens will be more about creating communities around single creators or large groups of creators?

• 15:27Speaker 0

  Uh both. So I think there's there's obviously people who are large enough for uh or large enough, you know, you pick uh you know your your favorite NBA athlete or or musician. Uh that's global fan communities that's kind of a large enough single entity to drive a very large you know community to spring up around them, or clearly community has already sprung up around them. Uh, and then I think there's there's others, uh, for example, we have uh the art token or Matty Mo. Well, he's an individual, he's always really focused on a collective of artists that he helps um you know fund and get started and promote their, and they all promote each other's work. And they've just been doing incredible work uh on Rally uh and using you know OpenC and other platforms to do their NFTs and using their social tokens as a way to uh help fund and and um you know uh pay artists that are located all over the world.

• 16:19Speaker 0

  Uh and so it's it's it's really I I think there's there's an opportunity for both to emerge. I think both will be equally strong.

• 16:27Speaker 2

  Awesome. Um yeah, I think I think I can see a lot of potential in either of those two uh directions. Um more practical note, somebody asks, how does Rally make money?

• 16:41Speaker 0

  So I I think there's um a couple of there's there's different business models that are being explored. Um personally, and the way that we've we've shaped Rally is to follow in the footsteps of Bitcoin and Ethereum. And so we think a lot about creating a central use token um and sort of designing the network in such a way where rally tokens are kind of behind under the hood powering all the different social tokens and and uh NFTs, and that if we create a network where individuals and communities are creating social tokens that are used by hundreds of thousands and eventually millions of people all throughout the world, that the rally token will be used to uh as kind of collateral backing and a governance token to manage the network, and then that we are not trying to be a company, we're trying to really create a network um where other businesses can build a business and not worry about rally being a traditional company that's trying to uh you know earn revenues and do an IPO at some point and eventually potentially competing against our own ecosystem.

• 17:42Speaker 0

  So we believe very much that kind of especially in social, creating a decentralized network, which I believe starts with having a uh a business model uh or an economic model that does not incentivize a central company to exist at the core of the network is really important. And that's kind of how we design rally um is is to follow in the footsteps of of uh some of the pioneering work that a few of these other projects have done.

• 18:07Speaker 2

  So a very a very crypto native business model, which we're we're very excited about. Um great. So uh someone else asks, do rallies broad ranging applications and use cases make it more difficult to attract creators. For example, if Twitch streamers become the most obvious creator use case, will it be difficult to attract clothing brands to your platform?

• 18:31Speaker 0

  Um we're definitely taking the path that is harder to get started. I will absolutely admit that. So because we create the the platform such a way that's truly community run, there's multitude of use cases and integration points. So people have integrated rally into their Twitch um, you know, bots and and OBS. They've integrated into Clubhouse now, where there's um kind of third-party apps that have APIs, they pull in the rally um stuff into those APIs to create applications that create like token holder only rooms, you know, for example. Uh, there's people that are like Jaws, uh an EDM artist who has artists submitting tracks to him all the time. He's created an application that allows people to um uh submit tracks in it for all of his listeners to to vote on the tracks and then boost the tracks that they like, you know, with their token.

• 19:20Speaker 0

  Uh so they've created all sorts of these use cases, and it's much harder because we don't have like this singular thing, go to Rally IO and see everything happening. We really think about everything as trying to be as decentralized as possible. So we try to create you know multiple ways that you can interact and use these social tokens where your audience already is, whether that's on Twitch, whether that's on Discord, whether that's on your own website. Um I think ultimately that's really powerful because we don't want rally brands or rally to be at the center of what you as a creator are trying to do with your community, but it is harder to uh get started, obviously a purpose built, you know, clothing. brand you know network will will clearly you know be maybe easier to understand uh how to use if you're a clothing brand operator uh but i think we we try to take the approach of of creating you know kind of an easy to use but uh pretty horizontal technology for any type of creator uh community to to create tokens around.

• 20:21Speaker 2

  Perfect. Well thank you Chris and Kevin. This concludes our session and um yeah thank you both so much.

• 20:29Speaker 0

  Thank you both. Thank you.