Token-Gating, Loyalty, and SIWE in 2022: How Brands Can Use NFTs to Unlock New Experiences and Create Brand Loyalty
Token-Gating, Loyalty, and SIWE in 2022: How Brands Can Use NFTs to Unlock New Experiences and Create Brand Loyalty
How token-gating works, how loyalty will change with tech, and the best software to make it happen.
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Overview
Token-Gating. Web3-privy marketers and anyone that spends enough time reading up on e-commerce news has no doubt seen countless articles extolling the benefits that can come from gating content using NFTs. The ability for retailers and content producers to control how work is distributed and consumed has obvious benefits, from access to exclusive experiences, content, communication, products, and whatever else can be dreamed up. But what are the limits in 2022 for what token-gating can do? Is this purely a marketing gimmick? We’re going to discuss why token-gating is desirable, what problems it tries to solve, and how companies are using it to create new forms of interactivity online. We’ll also dive into loyalty, and how token-gating, loyalty, and SIWE will be increasingly interwoven on the web.
What is Token-Gating?
Simply put, token-gating can take an otherwise ambiguous NFT and use it to access an exclusive area, content, physical products, or whatever else can be dreamt up. It turns an NFT into a multi-pronged tool that can be a ticket, key, coupon, membership, or perk.
Token-Gating can allow NFTs to do the following:
Act as tickets (certain people can access an event)
Act as keys (certain people can unlock something)
Act as coupons (certain people can get % off a product)
Act as memberships (access into a community)
Access to certain communication channels (Huddle01 or token-gated Zoom)
Access to certain products in online stores (traditional token-gated commerce)
Access to in-person events (retail stores, concerts, pop-up events)
Access to virtual events
Access to airdrops
Access to future NFT releases
Access to certain online meetings (think DAOs)
Turns out, NFTs can do a lot of things, and they’re far superior to traditional tickets. I wrote about this in-depth in a previous article here.
Although many progressive e-commerce sites are now utilizing NFTs for gating merchandise, you could just as easily use NFTs as a coupon on a product page. Simply connect your wallet, and the applicable coupons are activated at checkout.
Some of these use-cases have been written about to death, so I won’t elaborate too much on membership. Flyfish Club is the most notable example of this idea, but for those of us who have no desire to spend 800 dollars on dinner, you can always join Sky Club. Social connections/networks on-chain will continue to gain attention and grow in both relevancy and size. These ideas are no longer purely restricted to online activities. FWB Fest took place from August 12-14th of this year, and might be my favorite example of what communities like this are capable of becoming. In a nutshell, FWB FEST was a get-together with music, speakers, and events, and you needed an FWB FEST NFT to get into the festival. IRL NFT ticketing/token-gating. We’ve seen mini activations of these ideas at conferences like NFT NYC, but seeing them work entirely on their own legs is exciting to watch.
Why Token-Gating?
As mentioned before, token-gating transforms NFTs into an everything card online. Users can access a multitude of different types of content with a single verifier, and it can simplify the process of interacting with brands and communities online. People are familiar with SSO (Single-Sign-On), and this is similar in a few regards. As you’ve well noticed online, the most common SSO options are through gargantuan organizations (Google, Microsoft, Apple, Facebook, to name a few) and force the user to adhere to whatever privacy policy they decide. These companies track our behavior and sell that data, and until web3 cookies become prevalent there’s a decent chance using NFTs as SSOs will offer more privacy by comparison.
Token-gating embraces the idea of digital ownership, and incentivizes owning digital memberships and engaging with some of the ideas so often touted by web3. The killer app for token-based membership doesn’t exist… yet. Once it does, it’ll become as commonplace as apps like Yelp and Google Maps are for finding restaurants. The token-based membership app that can be utilized easily by any brand/restaurant/company is just waiting to be created.
What About Loyalty Programs?
These ideas lend themselves very well to the idea of web3 loyalty programs. Current loyalty programs can be stale, and consumers don’t care about them, or forget they’ve signed up. The best examples of loyalty programs that work and have high visibility are hotel, airline, and credit card programs. This comes as no surprise, because the economic incentives to utilize these programs feels like a no-brainer. The real question is, how can you get people to participate and feel excited about your brand?
The whole idea around the commitment-loyalty model of customer loyalty is that customers with higher commitment towards a brand will also be more loyal.
The five commitment dimensions include:
Affective commitment: underlying experience of feeling, desire-based attachment
Normative commitment: standards and norms, especially of behavior
Economic commitment: purely commitment from an economic perspective
Forced commitment: you have to buy this, or you have to buy a similar product
Habitual commitment: routine or subconscious, addictive, ties into normative
Keep the above in the back of your head. Growing and retaining customers through incentives has worked for decades, and it will continue to work. A loyalty program that works usually encourages brand advocacy, improves retention rates, increases average order value, and ultimately attracts more customers.
Moms everywhere rejoice! 20% off when you spend 100$ or more?!
Why do customers join loyalty programs?
To earn rewards on everyday purchases
To have early access to sales or exclusive merchandise
To have a stress-free experience and/or make life easier
To save money
To see just how applicable NFTs can be to customer loyalty programs, let's think about what loyalty programs normally look like:
The Types of Loyalty Programs
Points Program - You accumulate points and can use them for perks or product
Tier Program - ranked program, earning more rewards by buying more and engaging
Value Program - donating % of sales profit to a societal cause (philanthropy)
Paid Program - you pay for benefits (think Instacart and free delivery)
As a thought exercise, I'd like for you to think about each bullet above and how brands could utilize them to increase brand loyalty using web3 tools. How could each of these examples be used in a loyalty program to token-gate merchandise, token-gate part of a website, or add-up to an experience?
Although it hasn’t been released yet, I’m a firm believer that Starbucks’ entrance into web3 will be a success, and it will offer incentives and rewards using NFT token-gating. I encourage you to read this entire post here: https://stories.starbucks.com/stories/2022/starbucks-creating-the-digital-third-place/
The quote I’ll put from that article is:
“We believe NFTs have broad potential to create an expanded, shared-ownership model for loyalty, the offering of unique experiences, community building, storytelling, and customer engagement. And, while doing so also being a source of accretive business that can benefit a number of stakeholders in the process, while creating a new type of digital ecosystem to complement Starbucks current digital platform offering.
We plan to create a series of branded NFT collections, the ownership of which initiates community membership, and allows for access to exclusive experiences and perks. The themes of these collections will be born of Starbucks artistic expressions, both heritage and newly created, as well as through world-class collaborations with other innovators and like-minded brands.”
Think about how the above could be applicable for lots of other brands besides Starbucks. While no two brands are alike, they share one thing in commons: humans. Loyalty programs that work for one company can be adapted, utilized, and successful for others. Companies that wouldn’t be the right fit for traditional loyalty programs won’t usually be the right fit for web3-based loyalty programs. Once a name like Starbucks runs with this idea and makes it successful, it will create the new benchmark.
The Relationship Between Token-Gating and SIWE (web3 SSO)
As with web2 SSO (Google, Facebook, Apple, Microsoft), web3 SSO (Ethereum) will make life on the internet easier in time. Instead of managing multiple accounts to login, you can manage logins with just Ethereum. This is referred to as Sign-In With Ethereum (SIWE). Luckily, SIWE is free. All users do is sign a message, with no blockchain transactions required.
But how does a new type of SSO become a game-changer for brands who have token-gated merch?
New options for SSO may appear on your favorite sites soon.
Much like with current cookies, a web3 equivalent of this might very well turn into utilizing SIWE and choosing to voluntarily disclose info to the service you’ve connected to.
Suppose you’ve already joined the Froot Loops loyalty program (great choice!), and you signed up using SIWE. But now, you’ve got a taste for Frosted Flakes, so you decide to go to their site and sign up for their separate loyalty program. Turns out, both are owned by Kellogg’s. Customers who have joined the Froot Loops Fruity Friends loyalty program get 40% off their first 4 boxes of Frosted Flakes when they purchase the cereal through a token-gated e-commerce portal. Perhaps a rival cereal company (General Mills) knows about the Frooty Friends program and wants to entice customers to try their product. They can use another company's NFT loyalty program to get customers in the door!
Cross-platform and cross-company incentives can be made easier by using web3 wallets. SIWE removes interoperability barriers between companies, departments, and partners. A couple clicks to login to a new site is easier than making a new account for every single company site to participate in a loyalty program. Ease of use translates into a larger user base.
You can learn more about SIWE here: https://eips.ethereum.org/EIPS/eip-4361
Token-Gating Options and Choices
Now that I’ve got your mind going about how token-gating and SIWE can be a real game-changer when it comes to loyalty, let’s take a look at a few products and open-source projects that can be utilized. These programs and projects were chosen because they’re doing something different.
Novel
Novel is not unlike many other companies that have sprung up in the last year oriented around token-gating products. This solution is geared towards Shopify, and aims to be a simple plug-in-play way to easily token-gate merch, sell NFTs alongside physical products, and add community perks along the way. You can gate using ERC-20 tokens, NFTs, and allowlists. The UI is sleek and fits into most branded storefronts nicely.
Trait-based gating from Novel is incredibly cool. As Novel puts it “The ability to segment NFT benefits based on the attributes and traits of a specific NFT. Think: NFTs with a gold background get access to a VIP experience.” A brand could create an NFT collection and have merchandise that is only redeemable by NFT holders that have NFTs that possess certain traits.
Most notably, Novel is being used by Liquid Death for certain merchandise within their online store. The checkout process looks similar to a regular e-commerce experience, but in this case you have to connect your wallet to verify you’re a holder of an MHDC NFT before you can add the item to your cart.
Check (it) out. Connect your wallet to add this t-shirt to your cart.
The author wearing a token-gated shirt
Unlock Protocol
Unlock can be used as a way to help creators monetize more directly, and is strictly a protocol, not a platform. Unlock states that its mission is “about taking back subscription and access from the domain of middlemen — from a million tiny silos and a handful of gigantic ones — and transforming it into a fundamental business model for the web.” Integrations for Unlock work already for Discord, Shopify, and Wordpress, among others. It’s free to use, there’s tons of documentation for devs, and everything we’ve previously mentioned in this article is theoretically doable with it. NFT ticketing, airdropping memberships, and easily setting up membership parameters with no-code are possible. Unlock is open-source, and has an active community. There’s so much to dive into with Unlock, and you could easily spend days just reading the dev documentation. I encourage you to visit the project and learn more.
Lit Protocol
Lit is very similar to Unlock, but newer. You can add Lit to your application to use it as a token-gating service. You can create token-gated files, meetings, and new ways to engage with e-commerce storefronts. This project is very new, and the documentation for using it is still being fleshed out. Because the mainnet is still in an alpha state, the default network is not technically decentralized yet. But the technology works, and you can use the Lit JS SDK to do many things you’d otherwise need to pay for. Open-source and free.
Tokenproof.xyz
Tokenproof’s website says it all. Token holders need to have a way to prove ownership without having to actually connect their wallet. Fraud still runs rampant in web3, and we need to be able to securely prove ownership of tokens without any risk of theft, be it IRL or virtual. People online have learned the hard way that every time they connect their wallets to a site online, they run the risk of having something bad happen. Smart-contract hacks are still a major concern, and sites that look identical to popular web3 domains can be spun up and used for nefarious purposes methodically, without a way to retrieve tokens after they’ve been stolen.
Tokenproof “allows individuals and organizations to carry proof of ownership that links their Ethereum account directly to their mobile device. Token owners can easily authenticate ownership of their digital assets by generating a Tokenproof while keeping their actual tokens safe in cold storage.”
Essentially, Tokenproof issues credentials that can be used as proof of ownership of the web3 wallet. You prove ownership IRL by using the Tokenproof Mobile App. Verifiers (people scanning QRs at an event) can use Tokenproof to verify ownership of tokens along with setting specific rules for authentication (ownership of certain NFTs).
As part of Tokenproof’s ethos, they realize that tokens and NFTs may very well become a part of everyday life. Just as you wouldn’t share bank routing information with every fast food restaurant and gas station, you shouldn’t be connecting your precious web3 wallet to every single site you visit.
Tokenproof’s documentation site is straightforward, and enrollment is easy (yes, you have to connect your wallet to begin). If you’re regularly using a web3 wallet, you owe it to yourself to look into this. Offline and online use-cases cover everything we’ve mentioned above and more. Visit https://docs.tokenproof.xyz/ for more.
Submarine.me
Ok, now this is cool. If you’re familiar with Pinata.cloud, they’re the people behind Submarine.me. This platform allows for you to token-gate just about any content you can imagine. You start by picking how you want your content to be unlocked. Pick between NFT ownership, retweets, location, or credit/debit payment. Next, you upload your content to the app (currently up to 100MB). Lastly, you receive a link and can share it with your community.
A cool easy to use option for podcast episodes!
So, if you’re a musician and you’re dropping a new track, maybe you can offer a demo for free for your fans, so long as they retweet your original post about the new demo. Or, you have an experimental podcast that is only accessible to download by verifying you own a particular NFT. Submarine.me is available for all Pinata Pro members, but the prices are reasonable. This is an easy solution to token-gating that anyone can use, and host their files using Pinata on IPFS.
Cal.com for web3
You can see where this is going. Cal.com (for web3) is a new type of calendar where the only way you can schedule a meeting is if you share the same tokens, DAOs, or NFTs with the other person. Cal is positioning itself to be the decentralized anon solution for setting up meetings. It has Huddle01 directly integrated, and you can even ask for crypto payments to be sent as a requirement for booking time to chat. You can organize group meetings that only members of a DAO or token-based community can join. Check out the site and read more.
Huddle01
Recording via IPFS or Filecoin is a cool option you won’t find in other video chat apps
Because Zoom is too mainstream, let’s mix things up with Huddle01. You’ve probably heard this mentioned online, but it is definitely worth looking into and learning more about. There are no fees, registration, or tracking with Huddle01. Finally you can have the fully decentralized video experience you’ve always been wanting, with direct recording of video calls to IPFS and Filecoin. As expected, meetings can be token-gated, you can use NFTs as avatars, and web3 logins are the norm. This is a better deal than Zoom, since you don’t have to pay, and you get 100GB of storage right out of the gate. Why not make an NFT collection with your friends and try it out?
Conclusion
We went over a lot in this article, from spelling out what token-gating was useful for, to touching on loyalty programs and how token-gating relates to SIWE. Showcasing various token-gating applications can help us to understand where web3 is going, and how people are thinking of utilizing NFTs and tokens in the future to build communities and provide decentralized ownership to content creators. Understanding how loyalty programs have worked in the past is essential to understanding where they’re going with web3. The fundamentals of human nature will continue to persist, but will be accelerated and supercharged with these new tools. Hopefully this article has connected some dots and allowed you to see how interconnected all of these ideas are.
TL;DR:
Token-gating allows brands and content creators to engage with their audience in new and unique ways.
As the internet evolves, so will methods of brand loyalty. We can turn to the past to see how the fundamentals of human nature persist.
SIWE may become the SSO we wished that SSO was, even if privacy concerns remain an issue and are yet to be fully resolved.
Options like Novel, Unlock-Protocol, Lit Protocol, Tokenproof, Submarine.me, Cal.com, and Huddle01 are quickly becoming legitimate protocols and useful ways to utilize the benefits of token-gating.
This technology is going to supercharge the future of community engagement and interaction online.
Need help with your web3 go-to-market strategy? Eager to dive into web3 and NFTs, but not sure how to approach it? Reach out to immutablelabs.io and schedule a chat with one of our experts!
References:
https://www.shopify.com/retail/token-gating
https://coinmetro.com/blog/what-is-token-gating/
https://novel.com/post/product-update-gated-discounts
https://novel.com/post/product-update-trait-based-gating
https://unlock-protocol.com/guides/
https://www.joincolossus.com/episodes/82387967/danco-token-gated-commerce?tab=transcript
https://blog.cryptostars.is/web3-introducing-loyalty-3-0-7cbc90aaf757
https://blog.spruceid.com/why-sign-in-with-ethereum-is-a-game-changer-part-2/
https://clevertap.com/blog/customer-loyalty-program-examples/