IIP: 120
Title: Launch Forefront Social Token Index ($SOCIAL)
Status: Proposed
Author(s): Forefront DAO , 1kx, Carlos Gomes, @JosephKnecht, @DocHabanero, @alerex, @overanalyser
Gov Review: @sixtykeys
Created: 11/08/2021
1.0 Abstract
To provide the industry with a low-cost investment product providing passive exposure to the social token revolution.
2.0 Market Information
2.1 Market Research
Ultimately, this index could be the preeminent social token crypto product. We expect that this portfolio is appealing for the vast majority of crypto participants as everyone will want exposure to social tokens.
The combined market cap of the proposed index is just over $3 billion. This was a mere $170 million 6 months prior. The social token sector is growing fast and it’s not unreasonable to expect a sector market cap north of $5 billion in 2022.
2.2 Size of opportunity
“My view, as I’ve stated many times, is that social/community tokens are going to be one of the biggest changes to global business models in history.” ~ Raoul Paul
In 2022, the total market cap of social tokens has surpassed $3 billion. The amount of addresses holding social tokens has grown by ~300% from 6,000 to 24,000 over the past 18 months. If one includes the launch of ApeCoin, social token wallet holders exceed 50,000. In 2021, Coinvise helped more than 400 communities and creators launch a social token. Meanwhile, Rally is seeing hundreds of its creators launch economies in the six figures.
Social tokens have potential to become the next ‘big-thing’ in crypto, yet there will be thousands of them. Investors of all sorts will need a curated list, and Forefront is best positioned to provide that service. Over the past few months we have been inundated with requests to provide an investment vehicle.
$SOCIAL is our response to that demand, offering investors with a professional product providing exposure to the social token sector. It gives them passive access to a vehicle which captures value-weighted upside from the most promising social token communities and projects.
In terms of user demand, here are two prominent voices from CoinDesk and the Real Vision Group commenting on the industry and index:
2.3 Differentiation
$SOCIAL is different from any product in the crypto ecosystem. $SOCIAL will be the first large passive-index opportunities for investors to get access to the Social Token revolution.
There is nothing comparable on the market.
With respect to the proposed DAO Revolution Index (DRI), the products will be quite distinct. Forefront’s $SOCIAL includes creator tokens, brand tokens, and social DAO tokens. It is a ‘pure’ play on the social token sector.
However, there will likely be some overlap as the DRI proposal indicates a focus on DAO infrastructure, DAO developers and creator DAOs.
2.4 Marketing support / distribution / partnerships
Forefront brings a strong reputation and expertise to the table and has an audience which represents many of the core personas this index seeks to serve. Forefront’s platform is the leading insight aggregator across the social token landscape.
$SOCIAL would not be launched in isolation. Forefront has developed an entire ecosystem providing industry-leading research for beginners and investors alike.
We have built a social token marketplace offering detailed breakdowns of each social token featured in the index, providing both on-chain and off-chain data.
Forefront’s media products consist of FF Daily, FF Journal, FF Podcast and FF Museum. Each of these offers unique insights, perspectives, and information about social tokens, their communities, and innovations in the sector.
Forefront is investing heavily across the sector, sponsoring Gitcoin rounds and social token hack-a-thons alike. FF Studio is helping new social tokens launch, grow and develop. While FF Labs is running bi-weekly experiments for builders, entrepreneurs or just anyone with a cool idea.
Finally, our FF Learn platform provides background information, educational material and deep dive case studies into some of the most successful social token projects.
2.5 Go To Market Strategy
IndexCoop will allocate a team to execute a typical go-to-market plan and will implement the lessons learned from previous launches. In addition to this, Forefront will employ a full suite of tools to sustain the launch and momentum around the product as time goes by. This will include:
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Frontend to Track $SOCIAL. Users will be able to track the index, its underlying tokens, and have access to a suite of on-chain and off-chain analytics.
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FF Marketplace. Forefront has built a best-in-class marketplace for the social token industry offering deep insights, analytics and research.
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FF Journal. Forefront consistently publishes high quality essays from internal and external authors about the industry, including the underlying tokens.
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Newsletter. Our weekly web3-focused newsletter has 7000+ subscribers at ~45% open rate, making it one of the most engaging in the space. We have already been including $SOCIAL updates and have received great feedback.
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Podcast. We host a weekly podcast covering ecosystem roundups and hosting high-signal members of the web3 community. We plan on mentioning the product in each of these episodes.
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FF Learn. We plan on publishing a guide on $SOCIAL and a tutorial for purchasing, providing liquidity, etc.
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Twitter. Following in the footsteps of MVI methodologists, we plan on publishing weekly Twitter threads to our 22k+ followers discussing the status of the social token market, performance of the index, and more.
3.0 Financials
3.1 Revenue
The below values were calculated using the profitability model and it assumes an index NAV in the first year equal to $850,000. Full analysis can be found here: https://docs.google.com/spreadsheets/d/1MGtmPNLRSwfDXF3dJhNVuYFKJC4mO-Ogbh7WYkJnjhM/edit#gid=1957695489
3.2 Streaming Fees
We propose a 60/40 streaming fee split with 60% accruing to Index Coop and 40% accruing to Forefront.
We also propose a streaming fee of 195bps.
4.0 Specification
4.1 Product Design
Token Inclusion Criteria
Forefront has a collection of criteria to determine which tokens will be included into $SOCIAL. The social token industry is evolving quickly, exploding with new business models, and growing fast. Forefront is uniquely positioned to track this growth and has developed the following criteria for inclusion
Token’s Descriptive Characteristics
- The token must be available on the Ethereum blockchain.
- The token must be associated with a decentralised social community.
- The token must be listed on Forefront’s Marketplace and adhere to Forefront’s Marketplace selection criteria.
Token’s Supply Characteristics
- It must be possible to reasonably predict the token’s supply over the next five years.
- At least 5% of the five-year supply must be currently circulating.
- The token’s economics must not have locking, minting or other patterns that would significantly disadvantage passive holders.
Project’s Traction Characteristics
- The project must be a clearly established social community operating towards a shared goal.
- The project must have at least 500 unique token address holders.
- The project must have a large community (2000+ Discord members and/or Twitter followers).
- The project must have been launched at least 30 days before being able to qualify to be included in the index.
- The token must meet the IndexCoop liquidity team’s minimum inclusion standards.
In terms of determining what qualifies as a social token, the Forefront team considers a combination of the following:
- Token-driven: the community coordinates around a commonly held token on a blockchain.
- Sustainable: the community would exist even if the token disappeared. Self-managing: leadership is distributed amongst roles, not individuals.
- Community governed: the community is governed by all token-holders. Mission-driven: the community is working toward a collective goal or upholding a shared set of values.
- Positive-sum: the community’s economic model is expansive, not extractive
4.2 Index Maintenance
ETH Position
- The ETH portion of $SOCIAL will gradually be depleted during reconstitution (or rare rebalancing) events as liquidity deepens and the market matures. This allows for an efficient and cost-effective development of $SOCIAL over the course of its first years.
Rebalancing
- $SOCIAL will not regularly rebalance. Token weights will be adjusted periodically via rebalance trades in order to maintain a diversified portfolio inline with the methodology.
Recomposition
- On a quarterly basis we will evaluate new tokens for potential inclusion or removal. Such tokens will be phased in or out gradually. The allocation will not necessarily use the original index weighting formula.
4.3 Metagovernance
Social Token communities are mission-driven, not necessarily profit driven. Nearly all of them are positive-sum, with an economic model that is expansive, not extractive. Therefore extra care is required to ensure large investors are not able to wield their voting rights to disrupt or negatively impact the missions of these communities in pursuit of some profit motive.
Forefront will establish a Metagovernance Council to provide this stewardship and oversee the majority of metagovernance voting and decisions.
IndexCoop will have the final call on any metagovernance vote, however the majority of the day-to-day metagovernance decisions will be taken by the Forefront Metagovernance Council (FFMC).
4.4 Access to Social Token Communities for Index Holders
$SOCIAL would be primarily geared towards investors seeking passive exposure to the growing social token market, not necessarily someone seeking access to the communities. As the index methodologists, we do not believe we are in a position to create new forms of access on behalf of tokenized communities, taking that autonomy away from the communities themselves. However, there is a possibility of communities providing benefits (including access) to index holders, and that is a conversation we are excited to raise with communities that end up in the index.
4.5 Example Composition
The current index composition, as of March 26, 2022 looks as follows:
| Token | Symbol | Weighting |
|---|---|---|
| ApeCoin | $APE | 25.00% |
| Rally | $RLY | 25.00% |
| Whale | $WHALE | 8.53% |
| Friends with Benefits | $FWB | 7.02% |
| Ash | $ASH | 4.44% |
| Global Coin Research | $GCR | 2.67% |
| Bankless DAO | $BANK | 2.00% |
| Metafactory | $ROBOT | 1.94% |
| Adventure Gold | $AGLD | 1.90% |
| Yup | $YUP | 0.86% |
| Forefront | $FF | 0.64% |
| ETH | $ETH | 20.00% |
Weighting = Sqrt Market Cap Allocation * Liquidity Factor * Community Score Factor
Forefront proposes using a square-root market cap weighting with a liquidity and social score multiplier.
With the explosion of innovation in the sector, we thought it was important to offer investors greater diversification and exposure to newer projects (relative to a pure market cap weighting). Furthermore, each token’s respective weight will be capped at 25% (at launch and during token additions). Excess weight for a given token will be redistributed to the remaining components of $SOCIAL on a weighted basis. This will provide stability and ensure a diverse portfolio.
Liquidity is an important consideration in the nascent social token sector. We implemented a liquidity factor to discount the weighting of low liquidity tokens that might adversely affect the performance of the product. Similarly, the social score multiplier enables Forefront to use its industry expertise to discount the weighting of an underlying token if there are questions or issues surrounding its community.
A reserve of $ETH will be included in the launch of the product to serve as a ballast and provide much needed liquidity depth. This will allow $SOCIAL to launch with a reasonable cost and provide a reserve from which to slowly add new tokens and diversify the index (in a cost-efficient manner) as the sector matures and liquidity deepens for the underlying tokens.
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ApeCoin ($APE)
A token made to support the evolution of art, gaming, entertainment, digital and physical events, storytelling, and everything else web3 dreams up.
Rally ($RLY)
Rally is a platform for creators and their communities to build their own independent digital economies.
Whale ($WHALE)
$WHALE is a social currency (cryptocurrency) that is backed by tangible and rare Non-Fungible Token (NFT) assets, while embodying scarcity through definitive limited issuance.
Friends with Benefits ($FWB)
Friends with Benefits is the ultimate cultural membership powered by a community of our favorite Web3 artists, operators, and thinkers bound together by shared values and shared incentives.
Ash ($ASH)
$ASH is a social currency backed by curated extinction. The value, the utility and the identity of $ASH is balanced by its users.
Global Coin Research ($GRC)
Global Coin Research is a social currency (cryptocurrency) for the Global Coin Research community of readers, writers, investors and community members.
Bankless DAO ($BANK)
Bankless DAO is a decentralized community focused on driving adoption and awareness in bankless money systems like Ethereum, Bitcoin, and DeFi.
Metafactory ($ROBOT)
MetaFactory is a community-owned culture studio and marketplace focused on the creation and sale of digi-physical goods that celebrate crypto. Artists of all types are invited to create products that promote their art, community, project, protocol, token, etc.
Adventure Gold ($AGLD)
Loot is randomized adventurer gear generated and stored on-chain. Stats, images, and other functionality are intentionally omitted for others to interpret. Loot DAO is a community initiative of Loot Project to govern $AGLD.
Yup ($YUP)
Yup rewards valuable likes across the web. Curate anything, earn rewards for accuracy, and gain status in topics that interest you. It integrates with every site and platform, providing a universal influence score for every user, content, and URL.
Forefront ($FF)
Forefront is the launchpad empowering web3 explorers to create at the frontier of tokenized communities. Forefront strives to empower and serve the Web3 world-builders of tomorrow via 1) literacy, 2) tribe and 3) tools.
4.6 On-Chain Liquidity Analysis of Underlying Tokens
An on-chain analysis was made by the liquidity pod and the results were published in this link $SOCIAL Models - OA Analysis.
5.0 Product Liquidity
Forefront is actively working on solutions to liquidity constraints for the underlying tokens in these early days of the social token sector. We look forward to continued discussions with the Index Coop community around appropriate liquidity thresholds (eg. acceptable slippage per trade size) for this index product.
With respect to liquidity for the trading pairs of the proposed index, we envision a combination of Forefront, Index Coop and external partners providing initial liquidity.
6.0 Author Background
Forefront is an insight aggregator across the social token landscape. Forefront is built as a tool to aid in the curation of resources, data and insights on how to navigate the ever-changing social token landscape. It’s the home for exclusive content on social tokens, a weekly newsletter, and profiles for 20+ projects and counting.
Copyright
Copyright and related rights waived via CC0.