This article was first published on ChainNews, by LeftOfCenter.

It's time to revolutionize the internet charging model with tokens. The road to revolution should start with creators and innovators.

With the rise of the creator economy, knowledge content products are being produced and disseminated at an unprecedented pace on the internet, with many creators gaining numerous fans and even monetizing their work. The era of "全民创作" (Universal Creation) has quietly arrived. However, most creators still cannot make a living from this, fundamentally due to structural issues in the internet revenue model: the use of a free product model subsidized by advertising is not true market pricing, leading to the dilution and thinning of income for most long-tail creators.

As the crypto economy continues to develop, the internet is beginning to transition from Web 2.0 to Web 3.0. Whether in content creation, music distribution, platform infrastructure, or various functional Web 3.0 tool products, the ecosystem surrounding creators and community economies is gradually improving, making the ownership economy a reality:

Creators can issue tokens supported by their future revenue potential, fans can purchase tokens to "invest" in creators and share in their future economic success; this also opens up additional funding sources for creators and a new way to interact with fans.

Unlike ICOs, which have been widely criticized for issuing tokens out of thin air, community tokens are issued based on certain value support, whether it be the creator's profitability, popularity, or reputation. The open and permissionless nature of crypto economic primitives facilitates the formation of a fan-oriented value discovery market. Compared to physical assets on-chain, this value, which originates from internet communities, is easier to capture.

Before the on-chain solutions for real assets are perfected, community tokens may become one of the most promising incremental markets to connect with the real world.

The Rise of the Creator Economy

The creator economy is on the rise.

The creator economy is not just a trendy label, but a structural transformation that is quietly happening and has already occurred during the Web 2.0 era.

One important piece of evidence is that for a long time, a large number of platforms connecting creators and consumers have emerged on the internet, covering almost all categories from music, education, knowledge sharing, blogs, images to videos.

On these online platforms, people are selling their skills, knowledge, and creativity to make a living in ways independent of traditional organizational forms. The products or services sold include, but are not limited to, writing, videos, games, filmmaking, education, and music. Eric Feng, a former partner at Kleiner Perkins, refers to this group as Digitally Native Vertical Creators (DNVC).

a16z investor Lin Ji calls this the creator economy and distinguishes it fundamentally from the gig economy that has become popular in recent years. She believes that the gig economy is a labor commodification model driven by homogenization and scale effects in a division of labor society, while the creator economy emphasizes making a living through heterogeneous skills. It is a passion economy that sustainably accumulates personal brand effects and audiences, with the ability to monetize individuality and has sustainable development attributes.

As human civilization matures, human needs evolve. As a "worker," work is not just about making money; it is about combining career development with a sense of achievement and freedom, meaning that work is not only about making a living but also about having significance. With the rise of the internet and the emergence of various platforms that directly connect creators and consumers, a new employment model transformation has been catalyzed. The previous market, which merely matched jobs, can no longer meet people's needs, creating opportunities for new types of creator platforms.

A 2017 study by the McKinsey Global Institute showed that 20% to 30% of the working-age population in the U.S. is engaged in "independent work," commonly known as freelancing. Additionally, the proportion of job opportunities provided by digital platforms like Uber and Etsy is also rapidly increasing, covering the entire industry spectrum, from digital natives monetizing personal interests as YouTubers, podcasters, and game streamers to those who are non-traditional creators, such as teachers, salespeople, farmers, chefs, and buyers, all transitioning to self-employment through digital media.

Most People Cannot Make a Living from This

On the surface, this seems like a good business.

There are many well-known influencers on YouTube, Instagram, and TikTok, and media often exaggerates for various reasons, leading people to mistakenly believe that there are money-making opportunities everywhere on these platforms.

According to Forbes, in 2019, the highest-earning YouTuber was 8-year-old Ryan Kaji, who made $26 million from unboxing videos. The Dude Perfect team, known for their sports trick shots, earned $20 million, and beauty blogger Jeffree Star made $17 million, all from ad revenue or sponsorships. Some smarter individuals have begun to monetize their traffic dividends; for example, Middle Eastern beauty influencer Huda Kattan started her own business, developing the eponymous beauty brand Huda Beauty, which is valued at $1.2 billion.

Setting aside those successful inspirational stories and the beautiful visions painted by the media, the data tells us another side of the story.

Data shows that in 2017, 17 million creators in the U.S. earned about $7 billion across 9 platforms. However, the reality is that the actual earnings are concentrated among top players, and most creators cannot make a living from this. In fact, only 3% of YouTube channels earn above the poverty line, meaning that 97% are struggling below the poverty line, making it far from enough to rely on this for a living.

Moreover, most ad-supported platforms, such as Instagram and TikTok, do not share revenue with users. In this case, the only way to monetize is to gain a large following and then sell one's own products.

Like the internet itself, creators on these platforms also follow a long-tailed power law distribution. Power law distribution, or the Matthew effect, in this case, means that a few people hold most of the earnings, while the majority earn very little, due to the principle of winner-takes-all.

The Internet Revenue Model Has Structural Problems; Free Models Do Not Maximize Platform Revenue

The fundamental reason for this problem lies in the structural issues of the internet revenue model: the use of a free product model subsidized by advertising is not true market pricing, which dilutes and thins the income of most long-tail creators.

In fact, most traditional businesses determine pricing through repeated testing of customer willingness to pay and competitive processes. However, this is not the case for digital information products in a bilateral market. The reason is that products based on internet business models rely on network scale effects as their key to success. In other words, for an industry without technological barriers, the key to its success is the size of the network scale.

To expand this network effect, these platforms generally adopt demand-side economies of scale. Specifically, the platform subsidizes most consumer users with a free model to quickly capture the user market, while having some revenue sources to subsidize.

Most mainstream internet platforms currently operate under this model, including YouTube, TikTok, Pinterest, Reddit, Tumblr, Google Search, Facebook, etc., where content consumption is free, allowing for rapid user growth, while they rely on advertising client payments to subsidize creators on the platform.

This leads to revenue ultimately flowing to top creators, while most long-tail creators cannot share in the pie.

An effective improvement solution is to adopt a differentiated pricing model, specifically a tiered pricing model to attract some consumers to make purchases (or increase consumption), thereby minimizing consumer surplus.

Consumer surplus refers to the difference between the price consumers are willing to pay and the actual price paid, represented on the supply and demand curve as the area between the equilibrium price and the demand curve. In a market with a downward-sloping demand curve, some consumers are willing to pay more than the market price.

For example, if the market price for a latte is $5, but you are willing to pay $10, your consumer surplus is $5. There may also be other pricing demands from consumers in the market, ranging from $20, $15, $12, to $9. In this case, if people can purchase goods according to their willingness, more consumer surplus will be generated, which is the total revenue paid minus the total revenue at market pricing. Under other conditions, the lower the market price, the more consumer surplus there is; the more elastic the consumer demand, the greater the consumer surplus.

Perfect differentiated pricing is when merchants charge each type of consumer a price that exactly matches their willingness to pay, minimizing consumer surplus and maximizing profits for the merchant.

How Willing Are People to Pay for Digital Content?

In an ad-subsidized free model, a uniform free pricing model is used, which clearly cannot achieve effective differentiated pricing. For highly flexible cultural and creative products and services, there is still significant consumer surplus to be tapped, making it a very suitable industry for differentiated pricing models.

In fact, the differentiated pricing model is one of the key features of fan economics, which provides services by meeting the needs of different loyal fans. The intrinsic attributes of the cultural and creative industry naturally align with fan economics, as cultural and creative products hold different values for different people, especially for die-hard fans who may be willing to pay a higher premium for their idols' products.

As Kevin Kelly, founding executive editor of Wired magazine, said, "Die-hard fans are those who will buy all your works. For example, they are willing to drive 200 miles to hear you sing; even if they have already bought your book, they are still willing to pay for the hardcover, paperback, and audiobook versions; they are willing to pay for the DVD version of the 'best' videos from your YouTube channel; they come to one of your organized gatherings every month."

"If you have about 1,000 such die-hard fans, you may not necessarily become extremely wealthy, but at least you won't have to worry about making a living."

According to Kevin Kelly's concept of 1,000 True Fans, anyone engaged in creative or artistic work—artists, musicians, photographers, craftsmen, actors, animators, designers, or authors—can sustain a living with just 1,000 loyal fans.

a16z partner Li Jin believes that in reality, only 100 true fans are needed. Creators can segment their audience and offer tailored products and services at different prices. According to her, humanity is currently in a trend of detaching from employment relationships, with many people transitioning from company employment to independent individualized businesses. This is also what she has been focusing on in the creator economy.

In fact, free is no longer the best model; there is increasing evidence that people are willing to pay for digital content. Most traditional news publications have successfully established paid platforms, such as The Washington Post, Financial Times, Business Insider, The Wall Street Journal, and the often-cited classic case of The New York Times (which currently has subscription revenue twice that of advertising revenue); Spotify has half of its active users as paid subscribers.

Internet Products Begin to Explore Diverse Monetization Models

Since the advertising model is unreliable, why not make money directly from consumers?

In fact, some platforms and tool providers in Web 2.0 have realized this change and are creating more diverse monetization models for the core users of the platform—creators—beyond advertising.

For example, the world's largest UGC video platform, YouTube, has evolved from initially only offering ad revenue sharing to now providing creators with various monetization channels, including brand collaborations, live streaming tips, shops, and paid subscriptions. TikTok, the overseas version of Douyin, launched a creator fund in July this year, planning to invest $200 million to support this creator initiative, while also introducing a tipping mechanism similar to Bits.

Additionally, compared to the Medium model, creator platforms like Substack tend to attract creators more because they offer a self-setting pricing power scheme, allowing creators to set their own prices. Typically, content creators can set up a monthly subscription model (with a minimum of $5 per month), and the platform, Substack, takes a 10% fee from this.

Patreon is another noteworthy platform for fan-paid subscription models. Positioned for creator sponsorship, Patreon allows creators to set up their own membership plans, with a wide range of creative forms, including but not limited to photography, adult game development, independent musicians, YouTube talk show hosts, video directors, painters, and writers. The sponsorship mechanism is primarily set by the creators themselves, offering great flexibility, with options for monthly payments, per-piece payments, and premium features that provide fans with more privileges. Generally, the higher the fee, the more privileges and rewards are enjoyed. Of course, creators can also purely share free content with readers or publish works to gain sponsorship income, even achieving stable income from this.

For example, the author of The Bitcoin Standard, economist Saifedean Ammous, has set up his membership plan on Patreon, divided into three tiers, with the first two tiers priced at $25 and $50 per month, respectively, enjoying the same privileges, including allowing sponsors direct access to the manuscript he is writing, participating in online live courses, and joining online forums and Telegram groups; the highest tier is $300 per month, which, in addition to covering the privileges of the first two tiers, also offers one hour of Austrian economics courses and private lessons on the latest Bitcoin research each month.

Of course, it is also possible that fans do not seek specific returns, purely wanting to support creators in completing something they wish to accomplish. Therefore, Patreon, in some respects, resembles less of a transactional relationship and more of a situation where one party willingly pays to sponsor, while the other expresses gratitude through rewards, lacking the coercive nature of a transaction.

Emerging platforms like Substack, which directly connect consumers with creators, empower creators with pricing power, forming a market based on that price, where consumers in the market vote with their wallets on whether a product has value. If they are willing to pay for it, a value market based on that work is formed.

In other words, as more of these platforms emerge and are gradually adopted by creators, individuals who previously had difficulty quantifying their value within large organizations can form free pricing for their works through these markets.

Crypto Finance and Bond Tokenization

A more thorough improvement is to issue bonds backed by creators' future income, allowing fans to purchase bonds and enabling them to trade, tracing back to the "Bowie Bonds" issued by internet music pioneer David Bowie.

In 1997, glam rock musician David Bowie launched "Bowie Bonds," issuing bonds backed by the royalties from all albums he released before 1980. These bonds were subsequently purchased by Prudential Insurance Company for $55 million. This 10-year bond had an interest rate of 7.9%, about 1.5 percentage points higher than the market benchmark rate of U.S. Treasury bonds.

At that time, this transaction was quite favorable for Bowie, as it allowed him to prepay ten years of royalties and licensing fees without having to give up ownership of his songs.

This was a bold financial experiment. Before this, the practice of packaging illiquid assets into bonds was common only in housing and auto mortgages, but David Bowie was the first to apply this method to music copyrights, pioneering the packaging of intellectual property as a financial product. This move garnered admiration from many financial experts, as he truly understood the value of intellectual property.

The rise of crypto finance and its series of crypto economic primitives can maximize the "value discovery" of intellectual property. Take basketball player Spencer Dinwiddie as an example; he initiated a crowdfunding campaign called Gofundme with a target amount of 2,625.8 BTC equivalent in USD (approximately $24.6 million).

This crowdfunding was backed by his NBA contract income, issuing tokenized bonds based on Ethereum for fans to purchase and invest. After months of negotiations with the NBA, Spencer Dinwiddie received $13.5 million in advance from his $34 million contract income through this campaign, and in return, investors could earn a monthly 4.95% interest and have the opportunity to join his All-Star Weekend events.

Essentially, this is a way to tokenize debt. Compared to borrowing money from institutions, fans can become investors, opening up additional funding sources for stars and enabling more diverse interactions with fans. For fans, this plan allows them to "bet" on the player's success and earn money based on the player's future performance.

Fan-Oriented Value Discovery Platforms

As the crypto economy continues to develop, the internet is also transitioning from Web 2.0 to Web 3.0. Whether in content creation, music distribution, platform infrastructure, or various functional tools, the ecosystem surrounding creators and community economies is gradually improving.

Zora: Helping Limited Edition Creators Capture High Premiums in the Secondary Market

Zora is a platform that allows creators and designers to release limited products in the form of crypto tokens, enabling creators to issue limited edition artworks and merchandise as crypto tokens. Each token issued on the platform promises to be redeemable for a real product in the physical world.

If one wants to issue 100 pairs of limited edition sneakers, 100 specific tokens will be generated, which can be sold and traded over the internet, allowing for dynamic pricing of physical products based on public market supply and demand.

As buying and selling operations occur, the prices of these tokens will fluctuate. This means that before the token is redeemed for the actual product, holders can still sell it for potential gains, although they may also incur losses, with the transaction fees going to the creator. When a token is finally redeemed for a physical product, it will be destroyed and permanently removed from the market, at which point the creator will receive the income for the product at the token's price at that time.

What Zora aims to do is to reshape the buying and selling model of limited products, helping creators/brands capture the high premiums generated in the secondary market. For example, the Kanye x Adidas collaboration Yeezys are priced at only $220, but due to high demand, they are resold on secondary markets like StockX for ten times the original price, with all those high premiums going to scalpers. With platforms like Zora, creators can create their own markets to achieve true price discovery and capture value from subsequent secondary market transactions.

Zora x RAC

Of course, the most notable classic case is the limited edition personal token TAPE issued by Grammy Award-winning artist Andre Anjos, known as DJ RAC, on Zora. Each TAPE token represents the cassette version of RAC's latest third studio album, BOY. The TAPE token is priced based on a bonding curve, initially set at $20, and eventually sold out rapidly, with prices soaring to hundreds of dollars.

Currently, compared to the issuance price, the TAPE token has increased 83 times, selling for $1,698.

This case demonstrates that issuing personal tokens based on crypto economic primitives and establishing fan communities for sustenance or even profit is feasible. More importantly, RAC has also practiced community ownership economics by distributing personal tokens RAC to loyal fans and the community, showing us that the fan token economy is not only theoretically coherent but also has the potential for real-world application.

Community Ownership Economy

The internet has flattened the world, allowing people from all over to discuss common interests online, and the rise of the crypto economy and Web 3.0 enables people to become a community of interest by holding the same token, receiving incentives from the system based on their contributions.

Imagine a scenario where you, with a keen sense, see the future potential of a certain creator. You can purchase the community tokens they issue to own a part of the project, similar to buying stock in a company and betting on its future. Once this project succeeds in the future, it will directly reflect in the token price, allowing you, as a fan, to not only share in your idol's success but also have a say in their income and career direction.

This is the ownership economy.

In the community ownership economy, the entire community and creator are a community of interest, working together to develop and promote products. In a creator community, community members and creators are equally important; in a decentralized protocol community, the user base of the protocol is as important as the developers; in a token issuance project, the holders and issuers of community tokens are equally important.

With the rise of crypto economic primitives and creator infrastructure platforms, along with some Web 3.0 tools, the realization of ownership economics in the real world has become possible.

Most community tokens are based on the ERC-20 format on Ethereum, meaning they can be traded without permission, creating a natural market. For community members, simply holding the tokens issued by the community signifies participation in that community, and any achievements related to that community will reflect in the token price. For loyal fans, they can invest significant time and effort to earn tokens and receive due rewards. Of course, they can also directly participate in the market by investing money to purchase tokens, meaning that even if they are not loyal fans, they can bet on someone's future to earn returns, similar to buying stocks to invest in a company.

In the case of RAC, RAC adopted a retroactive token distribution mechanism similar to Uniswap to reward loyal fans, airdropping a large number of RAC tokens to supporters from platforms including Bandcamp, Patreon, and Twitch. These fans are either paying members (indicating a willingness to pay), peripheral buyers (indicating loyal fans), or those who have redeemed physical tapes with TAPE tokens (indicating they are not speculative investors). This aligns with Kevin Kelly's description of die-hard fans who are willing to pay for all versions of your published works and the "best" videos from your YouTube channel. This airdrop is clearly worthwhile, as it incorporates the most valuable users into its community value system.

In the ownership economy, tokens are not just a financial investment tool; more importantly, they are equity tokens. For example, issuers can set up tiered community member models, requiring a certain number of tokens to access a specific Discord channel, read certain community-exclusive content, receive limited giveaways, and experience early releases. Since ownership can be verified on-chain, it is very easy to verify access rights. There are now Web 3.0 community chat applications like Syndicate that can verify asset ownership in a trustless manner. For instance, one can use Syndicate to create a Chainlink whale community, setting the parameters of the chat group to require holding at least 1,000 LINK tokens to join.

Syndicate User Interface

The ownership economy allows individuals to become part of the community, reflected not only in economic rights and exclusive content but also enabling their opinions to be better heard as individual units of the community, primarily through governance voting. All these elements encourage the smallest member units of the community—individuals—to become active participants and advocates for the community.

Community Token Issuance Platforms: Foundation, Roll, Fyooz

Foundation is another token issuance platform targeting artists and designers, founded by former Dharma product designer Matthew Vernon. Similar to Zora, Foundation allows artists to issue ERC-20 tokens representing physical items, which can then be sold on secondary markets or redeemed for physical goods. Unlike Zora, which sells tokens on the Uniswap platform, Foundation has chosen to develop its own protocol to make the pricing model more suitable for art sales. For example, every transaction fee generated from secondary market trades of works published on the Foundation platform will go to the artist. Like Uniswap, Foundation also uses a bonding curve to define the relationship between supply and price, but allows designers to customize the minimum and maximum prices for token sales, addressing the issue of the last few items being unsold due to high prices on the Uniswap platform.

Roll is one of the earliest platforms in this field, serving as a community token issuance platform aimed at helping content creators establish monetization relationships with fans. It aims to introduce community token technology stacks to residents of internet communities, allowing creators and their fans to easily earn, spend, and trade community tokens.

Roll provides a toolset for community platforms, making it simple to issue and distribute their own community currency. Additionally, issuers can customize the value of the currency, meaning that the methods of acquiring and spending the currency are determined by the issuers, allowing community entities to capture value.

Roll was created by Bradley Miles and Sid Kalla, who previously worked at CoinDesk. It has received two rounds of funding, totaling $2.7 million, with the first round of investors including BitMEX CEO Arthur Hayes, internet celebrity Gary Vaynerchuk's VaynerX, venture capital funds Techstars Ventures, Hustle Fund, Techstars NYC, and the second round including iFabric Ventures, IOSG Ventures, and William Mougayar.

Unlike most crypto projects, Roll has not issued its own token but has been steadily progressing in product growth and creator onboarding. Roll has now onboarded 300 creators and attracted stars like Akon to issue personal tokens on Roll. As of September this year, the total market value of community tokens issued on the platform has approached $250 million. Roll will continue to collaborate with a series of musicians, creators, and organizations next year, allowing these organizations and individuals to create community tokens based on Roll's infrastructure and API.

Fyooz is a newly emerging community token issuance platform that allows ordinary people to invest in projects involving artists, brands, talents, etc., and share in the success of their idols' careers, not only in the workplace but also in economic terms. Notably, Fyooz is incubated by the decentralized autonomous organization DuckDao, which has a strong community foundation, meaning Fyooz has the community genes to attract fans.

So far, Fyooz has attracted attention through collaborations with two rappers, Lil Pump and Lil Yachty. Among them, rapper Lil Yachty released his personal token YACHTY, which sold out at a price of $15 within 22 minutes. According to the Fyooz app, this transaction generated a total revenue of $276,006. YACHTY token holders enjoy various exclusive rights related to Lil Yachty, including receiving blind boxes prepared by Lil Yachty's mother, Venita McCollum (who published the book "Raising a Rapper"), obtaining personal items from Lil Yachty's career, and participating in online parties with him. Another rapper, Lil Pump, plans to issue his personal token PumpCoin on Fyooz in early 2021. PumpCoin will allow fans to interact directly with the rapper and engage in other unspecified interactions with Lil Pump. Due to SEC regulations, PumpCoins are only available outside the United States.

When we talk about the ownership economy, it is not limited to creators; it actually applies to a broader definition of creators—those who contribute time, effort, or money to become part of a community and bet on its future by holding community tokens, such as decentralized autonomous organizations Duckdao and DXdao, as well as Karma DAO.

Are Community Tokens a Bubble?

Cryptocurrencies and blockchain are often criticized as bubbles, scams, and Ponzi schemes because they do not connect with the real world. Some even believe that cryptocurrencies and blockchains without incremental markets can only survive through zero-sum games, ultimately collapsing to zero over time. However, we believe that before the on-chain solutions for real assets are perfected, community tokens may become one of the most promising incremental markets to connect with the real world.

Why do we say this?

Unlike ICO token issuance, community tokens are supported by certain value; however, this value was intangible before Web 3.0, mostly diluted in the form of advertising revenue on internet platforms. Generally speaking, issuers of fan tokens have a certain level of popularity, and the tokens they issue are essentially backed by the issuer's reputation. The issuance method is also a form of fair distribution; initially, the tokens have no value, and the founders will customize rules for initial distribution while retaining a portion themselves. As long as there are fans willing to pay, value will be generated, and the more popular the issuer, the higher the token price.

Compared to physical assets on-chain, ChainNews believes that this value, which originates from internet communities, is easier to capture. With a series of user-friendly token infrastructure, various Web 3.0 tools, and most importantly, educating non-crypto natives about the benefits and use cases of community tokens, we can help them extract the community value scattered across various internet platforms and return it to the value creators—the community initiators and their members. This is precisely what platforms like Rally, Roll, and Fyooz are currently striving to achieve.