Incentives and Building Community in Web3

Jun 17, 2022

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“What’s in it for me?”

Answering this question is key when it comes to introducing a new product or service. Defining the user benefits, and growing an organic community of ambassadors, and creating a flywheel of user adoption is the north star of growth. 

And usually it comes down to this central question to who you’re inviting and targeting - what’s in it for me? What’s in it for me to try it, and share it, and come back again?

This is where incentives come in. Everyone, whether they want to admit it or not, are driven by an incentive in transaction for an asked action. And on the internet, incentives are part and parcel of our existence. Some incentives you’ve probably done, or do on the regular: subscribing to an email address for a 20% discount code. Share a referral code to all of your friends to get $20 off. Hit a higher minimum to unlock free shipping. Use a loyalty app to get points that add up to a free purchase. Some of the core actions transactions behind successful incentive programs are purchase history, referrals, social signaling, curation, or sharing personal data. 

However, the majority of incentives, as we’ve seen, are short-term financial incentives. It’s hard to build a long-term and sustainable community when people are programmed around the incentive offer alone. As we’ve seen, startups that optimize on short-term incentives like Nate, which offered $50 off a transaction for new users after they built an account and profile, saw an initial increase in transactions, but decreased immediately after first purchase. This signals that users are “in it” for the wrong reasons - and not there to stay. Financial incentives alone do not create long-term community.

How Web3 Can Transform Incentives

One of the central tenets of web3 is putting power back in the hands of people, and transforming the creator economy to become a decentralized ownership economy. In turn, web3 seeks to transform what incentives look like, by establishing a layer of ownership into incentives. Think about it: the likelihood of a new customer becoming more invested as an “owner” or “member” versus a purely financially transactional “user” makes sense. The most common incentive used today in web3 is the token airdrop. These tokens give people a reason to try, join, or participate in a community, while unlocking a token of value. 

We’re not the only ones thinking about how incentives could transform in web3. In David Tomu’s piece, “Designing Incentives for Web3 Communities”, he talks about intrinsic (motivated by internal rewards, like enjoying a hobby) vs extrinsic (motivated by external factors, like a financial discount) incentives. He notes that both incentives exist on both web2 and web3, and the airdrop token model of web3 often creates an initial value but has the potential of dying off in value. This is because the community often has a “Holder” mentality, which is spectaculative and primarily financially driven, versus a “Contributor” mentality, which adds long-term value. He says, “We must switch from purely extrinsic incentives to an incentive model that includes both: extrinsic incentives to ensure liquidity and intrinsic incentives to ensure sustainability.”

In Sameer Singh’s “Bootstrapping Web3 Networks: The Limitations of Token Incentives”, Singh smartly points out how important it is to assign the right incentive to the right “action” taken on behalf of a user. He notes that “Tokens can be a blunt instrument to target this underserved niche because they can attract the wrong type of users — those drawn to financial incentives, and not the near-term utility of the network,” and marks that the type of participation - active engagement vs passive - require different strategies to cultivate the “right” type of contributor. He remarks, “[incentive] rewards need to be restricted to specific, desirable actions, not just adoption.”

It’s not just value, it’s also important to point out the importance of trust within incentive programs. People trying to ‘game’ the system to maximize individual rewards is a great byproduct of financially-motivated incentives. This fraud can be as small as using multiple email addresses for a discount or bigger as a more traditional NFT project rug pull. In addition, the regulatory future of many tokens and the practice of airdropping tokens remains uncertain.

Case Study: Superlocal

There are some great examples of what mutually beneficial incentive programs look like. For example with Superlocal, Web3’s version of Foursquare and Yelp, where you can check in and provide reviews of places you go, you earn $LOCAL tokens for high-quality check-ins (submitting a photo, etc). This incentives users to participate within SuperLocal (checking in) as well as optimizes for higher quality interactions (taking and sharing photos). 

This allows Superlocal to build a better experience for all of their users as they continue to grow. Now, Superlocal has a leaned-in group of early users who they can also tap into for feedback as they continue to refine their product. And in the future, due to the higher quality engagements, the app is more engaging for a new user due to this work. The token generates value for both the user and for the app.

Case Study: Try Your Best

Another example is Try Your Best, a web3 company led by Ty Haney, who was the founder of the successful exercise brand Outdoor Voices. Ty credits the flywheel of Outdoor Voices’s success to its expansive organic community efforts to scale the brand and sees web3 as a space and environment where brand-building can be community-led. Try Your Best is a platform for new brands to have a direct line with their potential customers to get their feedback in concept development, whether it’s on branding, storytelling, or the product development itself, all in exchange for tokens and exclusive access. As she sees it, “Making your community an extension of your team and sharing value with them is a new model we're calling 'community-integrated-commerce.”

An internet built with ownership and trust in mind creates sustainable value

At Unstoppable Domains, we believe the Internet should be owned by people. The way web3 is working towards incentivizing via more meaningful ownership models is a step forward. It’s of utmost importance for us in building our #UDFam community, that the quality of the community is the biggest incentive. As Melissa Cyrus, our head of Community states, “We create a safe and inviting space for like minded people to gather and learn more about web 3 and domain utilization. The value of the community itself is the incentive to join and participate. Participating in that is more valuable than a swag box or promo credits.”

We also believe that adding a layer of trust to incentives will allow for more quality interactions. This is where our NFT domains come in, and the levels of on- and off-chain data we can support. You can verify your social accounts as well as verify your unique identity via Humanity Check, which allows new apps and services to create more trustworthy incentive programs. The more people start using their NFT domain name as their digital identity and are fully in control of how they experience the internet, the more rewarding the experience will be. 

In the future, we’re designing for more meaningful incentives within our Login with Unstoppable product. We aim to give our integrated app ecosystem the information to reward users who have logged into and used their app multiple times: rewarding more meaningful interactions.

The future of ownership and how that impacts incentive models for communities, brands, and experiences is still nascent. However here at Unstoppable, we want to ensure you can start owning your digital self today so you can begin your journey into web3.

Start by getting your web3 name.