Token Gating: Unlock The Future of Consumer Engagement

September 7, 2023

Token gating equips brands with the power to connect with customers, increase engagement, and create a community that cements their leading place in the market.

In this article, we’ll explore what token gating is, how it works, and its benefits. Then we’ll go over a few practical examples in the market. 

You’ll also learn how Mojito can provide the resources to make token gating possible as an enterprise brand web3 solution provider.

What is token gating?

Token gating (also known as tokengating, NFT Gating) creates value for customers by offering limited-access benefits, like private communities, events, or additional assets on a decentralized network. 

The catch? Only owners of the token can access these perks. 

This creates exclusive ecosystems where consumers must hold a set amount or specific version of a given token in order to access certain privileges. Token ownership provides potential access to many perks and rewards this way. Tokens are usually distributed through a free mint or primary sale, and can typically be traded on the secondary market.

Tokens can be purchased through a brand’s custom marketplace or places like OpenSea and bought with different types of cryptocurrencies such as Ethereum. 

Token gate in real life or online experiences

Web3 and token gating: How it fits together

Web3 refers to the third iteration of the internet: 

  • Web1 offered static informational pages.
  • Web2 invited users to create their own corners on the internet with social media.
  • Web3 gives everyone the power of digital ownership and sovereignty online. Web3 proposes a decentralized network and the ability for each user to control their own data.

All stages are popularly summarized into three words: read, write, own.

How tokengating works 

A token proves digital ownership of an asset, which can be verified on the blockchain.

"Token gating" limits access to exclusive offers for token owners only.

For example, a luxury brand might sell limited-edition watches that come with a tokenized certificate of authenticity of the physical product as well as a digital representation, and then provide token-gated access to private offers, communities, and events.

When someone earns or purchases a token with their digital wallet, the transaction is recorded on the blockchain, a public and decentralized ledger. 

There are many ways to get a token from a brand. Customers could have purchased a product that included one, or they could have bought a meme, image, or art piece as part of an NFT project. The original owner can also resell tokens. 

Once someone has a token, they can use it to enter your gate.

For example, if they join a private chat community on Discord, they could connect their digital wallet containing the token to get access. 

Or, they could scan a NFT QR code and get benefits directly from your brand --like how the Tampa Bay Rowdies operate their digital season pass, to increase season ticket holder engagement NFT holders scanned a QR Code in stadium at Food & Beverage locations. By scanning the QR Code the point-of-scale verified ownership of the NFT and passed on a discount, exciting season-pass-holders to spend more across the season of games. All powered by NFT QR Code based benefits or tokengated discounts.

You can leverage many opportunities, especially if you partner with an enterprise solution provider that can create the right system and support for you and your customers.

Token gating in a nutshell: A fan gets ownership of a token => they use it to access exclusive assets, experiences, and/or communities => they can hold the token and continue to receive benefits, or sell it on the secondary marketplace.

Embracing web3 and consumer engagement

The changing economy is teeming with possibility, and web3 innovations are transforming the landscape for everyone. Brands can embrace these innovations and create a remarkable experience for their most passionate customers.

But besides excitement and long-term trends, brands can’t ignore web3. Here’s the bottom line: Consumers continue to adopt web3 principles.

They no longer want to read information or solely interact online. They want a decentralized and intimate relationship with the brands they believe in. Consumers want to own their creations and assets and control their data. 

Web3’s allure for customers is about digital ownership.

We can see this shift with consumers’ changing sentiment on web2, especially as they face data privacy threats

While consumers might not know everything about web3, their habits point to it. The Washington Post shared some revealing statistics regarding American internet users:

  • 72% of users distrust Facebook with their personal data
  • 63% of users distrust TikTok with their personal data
  • 60% of users distrust Instagram with their personal data

With the rising distrust of Big Tech, along with the growth of the community economy and web3 interest, companies would do well to prepare for the continued shift in consumer behavior. 

Customers want to own their data and creations rather than large corporations. 

Web3 ownership and transparency reinforce that goal. In turn, brands can win consumer trust, loyalty, and engagement. 

Token gating is the best way for brands to get started. Patrons can unlock exclusive community features, loyalty programs, intimate access to brands for super fans, and customer buy-in with assets. 

If you want to see first-hand how your brand can leverage token gating and community memberships—and keep up with web3 trends, analysis, and profiles—sign up for our newsletter.

What are the benefits of token gating?

In this new and sprawling landscape, there are plenty of ways brands can use token gating to increase their value and win loyal customers. NFT token gating has many creative uses and benefits, and many have yet to be discovered.

Ten token gating benefits

1. Viral growth opportunities

Word of mouth is the most effective form of marketing, and web3 token gating helps fuel it. 

Whether through a surprise “drop” or project release, fans get excited and spread the word about the opportunity. 

They share value increases of the token or the cool art that comes with an NFT. All this buzz ignites online activity and grows your reach.

Fan clubs are one example of this—as we’ve seen influencers and celebrities experiment with in the past—such as VeeFriends, Flyfish Club, Stoner Cats, Bored Ape Yacht Club, and more.

2. Increased brand loyalty and engagement

When customers collect and own a piece of your brand, they are more likely to become long-term buyers. Not only will they continue to purchase from you, but they will also serve as natural ambassadors of the brand. 

Additionally, any private community or exclusive perk will continue to increase their loyalty and positive brand perception.

3. More scarcity-linked value

When something is perceived as scarce, customers see it as more valuable—especially in the luxury market. Token gating can offer limited access to products, events, and communities, adding an incentivized component in purchasing or investing in your brand. 

Companies can also offer token-gated products with extreme exclusivity, adding a high collectible value to the brand.

4. High-growth communities

One of the most powerful benefits of token gating is its potential for powerful brand communities. 

When super fans have a chance to buy into a private community, they help build and grow the brand. Not only do they generate buzz for the company, but they also help establish purpose and acceptance that can only be found in tight-knit communities. 

5. Logistical and security advantages

Token gating also provides a more efficient system for selling and reselling event tickets and other logistic-heavy customer experiences. 

For example, if your brand holds an important event, it can be made available only to token holders. If they cannot attend, they can sell it to other token holders, keeping the event exclusive to the target audience. 

Offering a secure transaction method also avoids many kinds of scams and other unfortunate realities of ticket-buying.

6. Additional value to products

Your overall value can increase as you create digital assets, communities, and other valuable components through tokens, especially if attached to your products.

When a customer buys a product that comes with an NFT and token-gated advantages, they know they’re getting more bang for their buck.

7. Token-gated commerce for exclusive sales

Sell highly limited products to specific token holders to generate more value and interest in joining your web3 community.

8. Valuable insights with traceability 

When you use token gating, you can easily trace who uses your benefits and when, as well as who they sell to. You can use this information to improve your overall brand and find out what interests people.

9. Customer buy-in

Not only would customers get exclusive value from tokens, but they could possibly turn a profit when they sell them. When they join a token-gated community and club, they invest in the brand with the potential for real return on investment.

10. Recurring revenue

If your token gating is linked to a card or art as an NFT, you make a percentage of that sale and further revenue when it’s resold.

This is a substantial opportunity—considering that your project could increase in value as it becomes more popular. It can increase your revenue or help you re-invest as you build your brand’s future in web3.

Examples + use cases of token gating

1. Enriching brands through social clubs

When Liverpool FC wanted a way to build its fanbase community, Mojito knew it could utilize token gating for the best solution.

The club launched the LFC Heroes Club collection on Sotheby’s Metaverse. These NFTs not only provided great art and collectible assets but jump-started a digital membership club.

This technology establishes ways for sports teams to connect with their fan base, rewarding them and even converting them into partial owners through distinct forms of on-chain digital collectibles. 

These digital assets can be seamlessly claimed, purchased, sold, or held.

With ownership of an LFC Heroes Club NFT, fans gained entry to a community with virtual hangouts, match day activations, generous giveaways, spirited competitions, real-world meetups, guest appearances, discounts on Liverpool Club merchandise, and other benefits.

While the NFTs are original, authentic, and limited edition digital collectibles, the project goes beyond memorabilia. It delivers real-world utility and benefits to its owners.

Brand-led membership programs are one of the next major things in web3. There is no better place to start than the global sports community, which has long united people worldwide around a common passion. 

This pioneering launch by LFC pushes the frontiers of worldwide fan engagement, with a ripple effect anticipated across diverse industries as major brands embrace the practice.

2. Elite access 

Lyrical Lemonade released an NFT project collection of different carton designs. The media and events company took full advantage of token gating when it limited the NFTs to 500 and required ownership to get exclusive access to rewards.

Holders get merchandise only available to them and exclusive NFT ownership opportunities. Owners also get tickets to the Summer Smash event.

Mojito facilitated the project by building out the token-gated website and platform to make the project successful.

Toni Sudimac, Head of Partnerships at Lyrical Lemonade, stated in an interview with Boardroom:

“Our thing was that we wanted to protect what Lyrical was and not make any abrupt changes because the last thing that we would want to do is alienate our supporters. So that’s where the idea for the Carton collection came in. We wanted to kind of test the waters and do it in a way that was true to us.”

The test worked. Because of Lyrical Lemonade's success, the organization wants to invest more in web3 opportunities. 

In the same article, Sudimac expressed his wishes to streamline the entire token-gated experience, mentioning that at future festivals he would like holders to scan their NFT for direct access at the entrance. 

Token gating, web3, and brands

As web3 provides more opportunities and consumers increasingly crave community, endless possibilities exist to create a growing and loyal customer base.

Web3 applications and opportunities are new and developing, and the brands that take advantage now will position themselves for future growth opportunities unique to them. 

As managers and leaders work to find ways to introduce their brand to web3, they can utilize token gating to get started and leverage its practical uses now.

Choosing your partner to launch token-gated experiences

When you’re developing your token-gated project, there are many factors to consider. 

You want the process to be user-friendly and enjoyable for your customers. You also want it to be successful, secure, and able to position your brand for continued growth. 

The right partner can deliver your infrastructure, UX, and go-to-market so that you can successfully launch your web3 initiative. 

Mojito's consumer engagement platform makes using blockchain technology, NFTs, and token gating simple. 

Our solutions combine the user-friendliness of web2 platforms with web3 benefits. You can create your own NFT platform marketplace, mint NFTs, launch NFT drops, nurture customers, generate reports, and more.

Mojito’s winning API and enterprise SaaS solution provide you with the following (and more):

  • Token gating setup and management 
  • Dynamic NFT setup and management
  • Simplified wallet setup and management (non-custodial and custodial options)
  • Memberships, rewards, and loyalty program setup and management
  • Fiat and crypto payments on primary and secondary sales
  • Free mints, buy-now drops, Dutch auction, and standard auction
  • Secondary marketplaces to list for sale and make offers
  • Minting setup and smart contract deployment
  • Smart contracts and automation 
  • Insights and reports
  • Multi-party royalty splitter 
  • Product guides, FAQs, and technical support

Web3 memberships are the future of brand loyalty, and token gating makes it possible to customize and build your club for passionate customers. Communities fuel brand growth, and it’s never been a better time to get started with web3.

Once brands build a thriving membership online, there’s no telling where that momentum will lead. Devoted fans become ambassadors, launching a buzz campaign that doesn’t stop.

But if companies want to maximize their success, they need to start now. This is the perfect time to build a community foundation so that you become the market leader when web3 adoption comes full circle. 

Learn how to take advantage of token gating and web3 opportunities with Mojito. Get in touch with Mojito today to bring your web3 strategy to life and make your token-gating vision a reality.

WEB3 RESOURCES FOR BRANDS

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