NFT Membership Mechanism: A Guide for Brands and Users

Original Title: “The Art of NFT Memberships: A Guide For Brands and Users”

Author: RANDY GINSBURG

Translator: Queeny, The SeeDAO

For decades, exclusive membership mechanisms have been a way for brands to build deep relationships with their most active customers. Many businesses customize their membership strategy to some extent; however, most mechanisms follow one of two basic models:

Paid Membership: Users typically pay a fixed amount of dollars monthly or annually. In return, they receive a predefined package of exclusive member benefits. These benefits include event tickets, access to premium content, product discounts, and more. This is the most popular membership model today, adopted by clubs like SoHo House, retailers like Costco, and publishing media like The New York Times.

Free Membership: Users do not need to pay any fees for membership. Instead, after registering, users receive different levels of benefits based on their individual purchasing activities or related criteria. This membership model is usually not used to set barriers for the community but rather to cultivate customer loyalty, such as Walgreens' myWalgreens.

There is nothing inherently wrong with these traditional models; however, with the introduction of non-fungible tokens (NFTs) and related Web3 technologies, membership mechanisms are receiving the upgrades they desperately need. These changes are simultaneously unlocking new growth opportunities and revenue incentives for businesses and NFT holders.

If you have been considering incorporating NFTs into your business or planning to join an NFT-based project, this article contains everything you need to know.

What is an NFT-Based Membership Mechanism?

In short, an NFT-based membership mechanism is a membership-exclusive system that uses NFTs as access keys to unlock various services and rewards. It is also referred to as "NFT thresholds," and these membership mechanisms use blockchain technology to verify NFT ownership and grant holders various exclusive member benefits.

Like traditional membership mechanisms, NFT-based membership mechanisms can take many different forms. For example, NFT ownership can unlock exclusive online communities like BAYC, provide voting rights in DAOs like LinksDAO, or grant access to private dining clubs like Gary Vee's Flyfish Club to experience the joy of cooking.

The benefits offered by NFT-based membership mechanisms can vary depending on the brand's core products. For instance, OneOf's OnePass is a collection of 2,600 generative art NFTs, and OnePass NFTs provide holders with a complete set of online and IRL benefits corresponding to its business model. Holders can gain early access to OneOf NFT drops, receive invitations to OneOf's virtual and live events, access OneOf's private Discord channel, and more. Additionally, there are different tiers of membership to meet the needs of various buyers. For example, with a Titanium membership NFT, users can gain additional benefits from 11.6 million dining, entertainment, travel, and retail partners over the course of a year.

Why Choose an NFT-Based Membership Mechanism?

NFT-based membership mechanisms are more advantageous than traditional membership mechanisms for several reasons. First, because they utilize blockchain technology, membership NFTs cannot be forged or duplicated. This helps brands prevent fraud, and individual users do not have to worry about losing physical cards or forgetting login information.

In other words, the main benefit of NFT-based membership mechanisms lies in promoting two-way collaboration between brands and holders. Through scarcity, incentives, and liquidity, membership NFTs ensure that brands and holders are aligned with the future success of the project.

Next, let’s take a closer look at how the aforementioned aspects—scarcity, incentives, and liquidity—serve the interests of brands and holders within NFT membership mechanisms.

1. Scarcity and Membership NFTs

In an interview with nft now, OneOf co-founder and CEO Lin Dai explained that with NFT-based membership mechanisms, businesses can better "cultivate communities and provide super service to their most loyal customers." In short, rather than using a "one-size-fits-all" approach, brands can limit the number of memberships through NFTs to create scarcity, allowing them to better plan and focus on how to provide an exceptional service experience for core holders.

It is worth noting that holders are not the only ones benefiting. Dai explained that by offering benefits that resonate more deeply, brands can "build a super active community of buyers" who are "loyal advocates and ambassadors for the brand."

This fundamentally differs from many other traditional membership mechanisms, which cannot limit the number of members who can achieve a certain status. For example, consider airline loyalty programs. Unlimited membership leads to too many members competing for a limited number of benefits or trying to redeem their rewards simultaneously, such as searching for seats on popular routes.

2. Two-Way Incentives for Holders and Brands

In a typical membership mechanism, the economic value of a membership card does not increase over time. But for NFTs, the situation is entirely different, creating a whole new dynamic. For the first time ever, the value of a membership mechanism—and the value of the membership card held by an individual—is no longer solely determined by the brand. Instead, it has become a two-way street.

Since membership NFTs have intrinsic monetary value, there is a shared motivation for holders and brands to increase the price of membership over time.

"The value of membership NFTs depends on the brand's commitment to providing utility and benefits, as well as the efforts members put into promoting the brand, creating a true partnership," Dai explained. In traditional membership mechanisms, businesses may become complacent and gradually cut back on member benefits. Similarly, users may turn to other brands offering similar benefits. However, with NFT membership mechanisms, both parties are motivated to actively seek new ways to enhance brand quality, thereby increasing the value of the NFTs representing membership.

3. Liquidity: Selling Membership NFTs

Perhaps the most significant distinction between traditional membership mechanisms and NFT-based membership mechanisms is that membership NFTs can be traded on the open market. If users try to exit early, many traditional membership mechanisms will charge them several months' fees. Worse, brands sometimes force users to complete confirmation steps across a series of web pages, making the exit process extremely difficult.

NFT-based membership mechanisms provide holders with flexibility.

If lifestyle or needs change, you can easily resell your membership NFT on any marketplace you prefer—and actually make money from it. Dai said, "During your membership, you not only enjoyed years of benefits and perks, but your influence, along with the community's influence, is now reflected in the value of the membership NFT. When you resell the NFT and exit the mechanism, you gain returns once again."

At the same time, because secondary royalty structures can be embedded in smart contracts, brands can earn a predetermined royalty percentage each time a membership is resold. This further reinforces the consistency of the incentive mechanism: the appreciation of membership NFTs allows current holders to profit from resales while enabling brands to earn more from secondary royalties.

In some cases, such as Vaynerchuk's Flyfish Club, token holders can also rent their membership to others for a period. For holders, this allows them to treat membership as a source of income while still enjoying some privileges from time to time. For those considering purchasing NFTs and joining the membership mechanism, it also provides them with a chance to try it out.

The success of this model is evident. Take the Flyfish Club as an example. 1,500 NFTs sold out within minutes. The initial price of its NFTs was around 2.5 Ethereum, and the current resale value is nearly double that figure.

Hold On! Good Things Take Time

Unfortunately, for most people, obtaining traditional membership is much quicker and easier because they do not need to overcome any technical barriers. To ensure that NFT-based membership mechanisms continue to gain traction, businesses must invest time and resources to improve the onboarding experience. For brands currently considering adopting NFT membership mechanisms, it is crucial to minimize the learning curve for non-crypto users—ideally achieving a level of user interaction with Web3 technology that feels seamless.

To this end, finding the right processes to facilitate user onboarding is key. Dai noted that this was one of the main factors OneOf considered when creating OnePass and one of their most important value propositions. Users can complete registration with just an email and a phone number. When it comes to purchasing NFTs, any mainstream credit card can be used for payment, so users do not have to go through the hassle of buying cryptocurrency.

The results are evident. By prioritizing usability and user experience, OneOf has quickly grown to become one of the top NFT platforms among non-native crypto users.

To emulate these success stories, brands considering adopting NFT-based membership mechanisms need to carefully review various options when implementing the mechanism on their websites and platforms, finding those that provide the smoothest onboarding experience. For example, there are many payment providers that allow individuals to complete payments without using cryptocurrency.