What is Token Gating?

Token gating restricts access to digital resources and participation in offline or online events to holders of specific digital assets. Token-gated resources can be protected by fungible or non-fungible tokens, where holders are automatically allowed access according to the provisions of the tokens they possess.

Key Takeaways

• Token gating uses NFTs or cryptocurrencies to regulate access to events, resources, or participation in the former. One must hold the required cryptographic token in their wallet to use token-gated platforms and resources or participate in token-gated events.

• Token gating leverages an immutable and automated system to create more value for creators and hosts by ensuring that only the right people can access their facilities and resources. Its exclusivity also creates more value for holders of the specialized digital asset.

• A token gating system consists of a design for token issuance and verification systems that ensure that foul players cannot bypass access.

• Mainstream firms like Shopify, Discord, and Doodle are integrating token-gating features on their platforms alongside traditional cryptocurrency and blockchain projects like Lens protocol and The Block.

For music streamers on Spotify, some playlists and albums are out of reach for users who do not own a certain type of NFT. These include songs selected by Grammy-nominated Steve Aoki and The Wombats as part of Spotify’s token-enabled playlist feature.

This feature employs token gating technology, and similar systems are being adopted by other resource and service platforms. Now, let’s look at how token gating works and why mainstream brands are also looking to incorporate it into their offerings.

How Does Token Gating Work?

Token gating is an access control and resource security technology that limits access to contents, platforms, and events to holders of a special token. It utilizes the immutability of records on the distributed ledger of blockchain networks and the uniqueness of fungible and non-fungible cryptographic tokens to restrict access to exclusive content and services. This token could be regular cryptocurrencies or non-fungible tokens (NFTs), where the uniqueness of cryptographic tokens is used to gate content access.

To access token-gated resources, one must undergo an asset-verification stage that screens their wallet to ensure one holds the required digital asset. Users have to connect their blockchain wallets to the platform and grant access to it to read their wallet data. They then connect to an authentication system to screen the wallet’s assets and verify if the user holds tokens or NFTs with the required identifier. It can also ascertain the number of tokens each user holds if a tiering system is in place.

NFT token gating is more popular than token-gating systems that use fungible tokens (like ERC-20). This is because NFTs are more specialized and customizable, as NFT token gating systems can limit access to holders of NFTs with certain attributes. In this case, restrictions might apply to users whose NFTs do not have the said attribute, even if they are from the same collection.

Token gating has the potential to turn NFTs and cryptocurrencies into portable membership tickets, passwords, vouchers, and authentication codes. As further proof of its potential, established mainstream brands like Spotify, Discord, Shopify, and even real-world events like VeeCon, are integrating token-gating into their platforms as a community management and marketing tool.

Always remember to do your own research before granting wallet access permissions.

Benefits of Token Gating

Token gating benefits creators and also users to a great extent, creating more tight-knit communities through:

Exclusivity

To drive exclusivity for token holders, creators and hosts can ensure that only a specific set of people can access an additional layer of their content and events by integrating NFTs and cryptocurrencies into their authentication systems. 

This benefits both creators and token holders:

• Creators can generate more revenue, as interested users will buy the required tokens to access premium content.

• Token holders enjoy preferential access to exclusive content based on their level of support.

In some cases, this may function like a paywall, where users have to purchase the required tokens to access content; in others, it’s an additional benefit, like a curated playlist of songs on Spotify. 

Security

As token ownership is verified through the blockchain, there is no way to create fake event passes, reducing the likelihood of scams. In the case of community channels like Discord, token gating also improves the group’s security, as it restricts public access and (ideally) keeps spammers at bay. 

Value for Digital Asset Holders

The value of your membership ticket depends on what your organization can offer. This is also the case with crypto assets used in token-gating systems: NFTs and cryptocurrencies will grow in value when the project they gate becomes more sought-after. 

Issuing tokens and NFTs for authentication creates stakeholders, just like those seen in traditional cryptocurrency projects and mainstream shares. Users, therefore, enjoy two privileges; access to the content or event and a possible financial benefit from the growth in value of their NFTs or cryptocurrencies.

Examples of Token-Gated Projects

Now, let’s look at some token-gated projects and how they’re implementing token gating to improve their value-add for users. 

Spotify’s Token-Enabled Playlist

In the first quarter of 2023, Spotify started experimenting with token-enabled playlists. Spotify’s token-enabled playlist allows only users who hold specific NFTs to access an exclusive playlist. The playlists are curated by renowned artists such as Steve Aoki and NFT brands like Overlord and Kingship. To access this feature, users will have to connect their wallets to Spotify, which will then verify that it holds one of the required NFTs before they are granted access to the exclusive Spotify playlist. For now, this feature is only available for Android users in specific countries.

🌎 Thrilled to “explore” with you!

— Spotify (@Spotify) February 22, 2023

The token-regulated playlist is the first in mainstream music streaming platforms and could pioneer similar features on competing applications. Daniel EK, Spotify CEO, has been vocal about the potential of blockchain technology and cryptocurrency in the creator economy, and we could see more token-gated features to improve creator and user experience on the platform.

Other future uses of token-enabled access on the music front could include early access to new releases and potentially even a new way of selling music, where an NFT grants access to an artist’s album, along with preferential rates for tour tickets and even merchandise. 

Shopify Token Gated Merchandise and Partnerships

Shopify is an eCommerce platform that powers online stores. In 2022, it announced its partnership with illustrative art creation software – Doodle – to create NFT-gated collections that can only be accessed by holders of the Doodle NFT. Doodle NFT holders, via the ShopDoodles program, gained exclusive access to the Doodle merch and other retail items, utilizing Shopify’s point-of-sale facility to purchase these items at SXSW.

Source: Deeplocal

In addition, Shopify has also introduced token gated collections, which are a list of items curated by merchants and accessible to holders of the required NFT. Through this feature, merchants can integrate token gating applications into their Shopify stores to authenticate access to these limited collections.

Discord’s Token-Gated Channels

Discord’s token-gated channels are only available to holders of certain NFTs. To access such channels, the platform requires users to connect their blockchain wallets, and using third-party authentication services, Discord verifies ownership of the NFT before the channel is opened to the user.

Token gating features on Discord include exclusive roles to holders of certain NFTs and other special privileges. In some cases, the required NFTs can be purchased on NFT marketplaces, so users who wish to gain access to the gated channels will have to first buy them on the marketplace where they are traded. 

VeeCon’s Token-Gated Forum and Conference

VeeCon is a community-building platform with discussion forums and other pre-designed tools that helps users build collective communities. VeeCon communities are powered by NFTs and the platform integrates token-gating to allow access to communities or exclusive privileges to users who hold NFTs from a selected collection or NFTs with certain attributes.

As part of the community-building program, VeeCon hosts a “multi-day Superconference” exclusive to Veecon NFT ticket holders. The Superconference features renowned speakers from the NFT, cryptocurrency, and mainstream sectors. The conference includes iconic keynote speeches, innovative and educational talks, panels, Q&A sessions, along with many collaborative experiences. The conference is hosted by Garry Vee, creator of VeeCon and its related NFTs, and ticket holders can sell their tickets if they don’t wish to attend the event.

Access Protocol 

Most of the token gating instances mentioned above use NFTs to regulate access to resources. Access Protocol is a content monetization protocol that utilizes its ERC-20 token, the Access Protocol token (ACS), to enable creators to gate premium content. In order to access premium content from publishers like The Block, users are required to own ACS tokens and lock them up in a creator ‘pool’, which grants users access to gated content until they decide to unlock their tokens. While a token is locked in the pool, creators and users receive ACS tokens based on their input daily. 

Besides The Block, you can also stake your ACS tokens in CoinGecko’s pool, which grants access to the Premium Gecko Ramblings newsletter. 

Final Thoughts

The popular assumption is that content creators, event hosts, and utility platforms, especially ones hosted on the Internet, are getting returns on their content. However, a good percentage of creators’ returns are carted away by illegal and uncontrolled access to their resources, such as back-door access to online tutorials and unapproved event streaming.

These issues not only prey on creators but also users who access these resources in the right way. This is where token gating comes in. Besides controlling access to these resources, it is also a marketing strategy for Web3 projects and their ecosystem tokens or NFTs, as exclusive access to special content creates more value for asset holders and the asset itself. When used to control access to a facility or event, the blockchain’s immutability and transparency give token-gated projects an edge over most other access-control systems.

Token gating is an emerging technology as more projects are likely to explore the positives of adopting this system, with mainstream brands like Shopify, Discord, and Spotify jumping on board. The use cases and the shortcomings (if any) will be learned with time and the applications could benefit mainstream projects just as much as it benefits traditional cryptocurrency projects. 

As always, please note that all information contained in this article is only for educational purposes and should not be considered financial advice.