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.
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.
Direct-to-consumer brands eschew selling through intermediaries (e.g. department stores) in order to ‘own’ their customer relationships wherever they can. This means owning their contact information for future marketing, as well as their first-party data such as preferences or shopping habits for personalized offers or experiences. Brands have shown that direct-to-consumer business improves retention, lifetime value, and profitability, so it’s no surprise this has been a dominant trend among B2C companies for the past 20 years.
In DTC it’s all about ‘who owns the customer;’ in web3, the customer owns the brand as much as the brand owns the customer, and we believe this symbiotic evolution is transformatively positive for both parties.
This co-ownership model is achieved through brand NFTs, fungible currencies (eg. $FWB), or both, but it essentially means ‘tokenizing’ brand IP and allowing consumers to acquire, use and sell brand tokens at any time – frictionlessly, instantly and globally. Consumers get to own the unique asset itself, with all its possible benefits, but also own a share in the brand’s overall equity. This direct incentive alignment drives consumers to take it upon themselves to grow the brand as co-beneficiaries in its success. This is any marketer’s dream: an army of brand evangelists with a built-in affiliate model. Meanwhile, consumers passionate about their favorite brands get rewarded more directly for their evangelism. Win-win!
Consumers are already buying digital products. Last year consumers spent $2 billion on Roblox and $5 billion on Fortnite alone… and billions of hours on these platforms interacting with brands. But these assets are landlocked and can only be used within their native platforms. Web3 enables different digital products. Instead of being landlocked and ruggable, NFTs are interoperable and fully owned.
Brands are creating their own web3 platforms, not just products. Consumer giants like Nike understand the potential of a digital product line, generating over $186mm so far from NFTs. Late last year, they announced the launch of .SWOOSH, a community-based platform for digital shoes and jerseys that also unlock access to events, physical products, and co-creation opportunities. They are selling these digital products direct-to-consumer with creative ways to upsell and cross sell.
Secondary markets offer new ongoing revenue streams. Consumer brands today rarely capture any value when their items are resold. Unlike physical products, NFTs can be encoded with a ‘royalty’ such that every time it trades hands on the secondary market, a fraction of the payment is sent to the brand automatically. Web3 native brand Bored Ape Yacht Club has generated tens of millions in primary sale revenue, and more than $100mm in secondary royalties. That’s a new business model, and major traditional brands have noticed. Adidas and TIME have generated $5mm and $4mm, respectively, and Nike has earned more than $90mm in secondary royalties alone. The leading brands are adding custom secondary markets to their sites to retain traffic, stickiness and margins through a complete buying experience for consumers.
NFTs are powering supercharged loyalty programs. NFTs don’t have to be pricey to be effective. Starbucks is moving their 50-million-person loyalty program, which generated $15 billion in revenue last year, over to web3 platform 'Starbucks Odyssey'. They see NFTs improving that program by making loyalty ‘stamps’ ownable, and gamifying engagement in exchange for tradeable benefits like discounts and offers. As all marketers know, it’s always more cost effective to retain an existing customer than to acquire a new one. The incentivized nature of web3 adds a new dimension to loyalty and evangelism that big brands are starting to leverage.
NFT communities are dynamic peer-to-peer brand engagement groups. NFTs not only offer a new kind of DTC relationship for brands, but also for consumer to consumer. Token-based brand communities represent ‘fellow owners’ who are actively and organically interacting with each other about the brand in places like Discord and Telegram. This is also a low-effort way for brands to sustain a lively and engaged community: peer-to-peer brand discussions rather than more unidirectional engagements on Instagram and Twitter posts.
There are rich new consumer data insights in web3. Direct-to-consumer brands obsess about ‘first-party data’, essentially proprietary insights they glean about customers through their browsing and buying habits within their own ecosystem. Otherwise, brands have virtually no idea what customers are doing outside their four walls. This means rich customer data is splintered into silos across each brand’s incomplete picture, with no brand able to deliver an optimal experience for lack of full visibility.
Web3 data is much more interesting and powerful because it’s ‘open’ and tied to a consumer’s wallet address on-chain. Take a look at what other digital products they own, from which brands, and how they’re spending their money across all of crypto. All of this information is available and actionable on the blockchain.
The vision for DTC was always for brands to create and sustain lasting relationships directly with their consumer. Instead of a consumption-based relationship with the consumer, in web3 brands and consumers “win” together in a more participatory model. In the traditional sense of DTC, the financial relationship comes down to a “buy now” moment. With web3 and NFTs, it is a ‘buy into now,’ with a value exchange loop that doesn’t end; brand and consumer are intertwined by shared incentives to create value for each other. Consumers benefit from utility and perks, or from resell potential from a liquid ‘always-on’ market. The brand or creator benefits from transaction volume via embedded royalties… in the words of Charlie Munger, “show me the incentive and I’ll show you the outcome."
It’s certainly not a straightforward to simple step for a global brand to integrate blockchain technology into its existing framework. Those that have succeeded in making the web3 leap like Starbucks, Nike, adidas and Sotheby’s have all done so in different ways – sometimes it’s through membership, sometimes it's through loyalty and rewards, sometimes it's simply through a new digital product line. Brands that will be the winners of this DTC revolution are the ones who see its potential to not only supplement their existing business, but offer entirely new kinds of value to their consumers.
Why are global brand giants like Nike and Starbucks getting into web3?
Sure, it might be because younger consumers show an appetite to buy digital products, but the true answer is more fundamental. Global brands are building in web3 for one major reason: data.
Interacting with consumers in web3 introduces a whole new kind of CRM with a richness of data not available to brands in web2. Marketers can see a connected wallet’s complete web3 activity, including interactions with other brands, interactions with other consumers, spending levels, and more.
As a result, the latest trend among global brands in web3 is not to sell NFTs, but to give them away for free – with a focus on building a large tokenized community rather than immediate revenue. When you sell NFTs, naturally you’ll convert fewer than if they are free. The more NFTs you distribute, the more wallets you connect. The most wallets, the bigger your addressable audience and the more you know about them.
Building your web3 audience with free NFTs is a low-cost, low-risk way to develop an engaged and incentivized community. You do not need to deliver as much value on Day One as you would with a high-price NFTs, but instead build up the value proposition over time as you learn more about your consumer.
The most common way to do this is with a free ‘membership’ token distributed to existing users, allowlisted communities, or even the general public. Nike is minting free .SWOOSH ID (~300k so far in beta) for users to co-create and engage in its emerging web3 ecosystem, while Starbucks minted free ‘earnable’ Stamps to users who complete brand engagement ‘journeys’. In both cases, these global brands are onboarding their existing users to web3 and/or attracting web3 native users into their ecosystems, and enriching their consumer datasets at the same time.
This is the next evolution of consumer web3. No more quick and dirty cashgrabs. Instead, brands will focus on building their web3 dataset, seeding their web3 community, and growing consumer value over time in order to increase lifetime value and evangelism.
Build your web3 audience with free NFTs
Here are proven ways you can capitalize on this growing trend:
So what questions can you ask the data?
🤔 What percentage of existing customers converted to our free NFT? How many of those wallets have any prior web3 activity? How many are brand new to crypto? What’s different about these customers compared to those who did not convert?
🤔 Of the new users to your brand, what’s their prior web3 activity? How do these users differ from your existing customers who converted?
🤔 Of those with prior web3 activity, what third-party collections and platforms have they interacted with, how often, how recently, and how much was spent? What are the other most popular NFTs your community owns?
What happens next? Ok, your free NFT strategy worked, and you now have a large and active web3 community clamoring for more. This is when it gets exciting:
🎁 Token-gated experiences: Brands can offer value to web3 audiences by gating content, merchandise, events, and more behind ‘token-gates’. These are webpages or mobile apps that require a user to prove ownership of a specific NFT in order to access or interact. This is an immediate way to make a free NFT valuable to the owner.
🎁 Token-based personalization: More than just an access token, where all NFTs within a collection carry effectively the same value, brands can also detect that someone owns a certain trait, number, or set of tokens, and then deliver a personalized experience around that.
🎁 Token-based collaborations: Web3 interoperability makes brand collaborations and community cross-pollinating extremely easy and effective. Brands can offer token-gated value not only to their own NFT audience, but others as well. This is an effective way to reward holders, create buzz and grow community.
How can Mojito help?
Web3 is moving past its experimental phase into its early adopter phase, and innovative brands are already staking out their territory and setting the bar high. This means the time to start building your own web3 community was yesterday.
Mojito has powered free NFT drops for the Milwaukee Bucks, Liverpool FC, Sotheby’s, CAA, Lyrical Lemonade and more. Get caught up quick and build a foundation for future campaigns with low-risk, low-cost free NFT activations powered by Mojito.
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