Tokengated Commerce
A very special issue with Packy McCormick & Not Boring
Hey everyone! Hi! I’m here!
I hope you’ve all had a great start to the year, and please excuse my absence for a good long while. I’m back quickly to say hello, and share what I’ve been working on with my team at Shopify. It’s called Tokengated Commerce, and it’s… exciting, to say the least. I wrote it with one of my dear newsletter pals, Packy McCormick of Not Boring:
Tokengated Commerce | Not Boring, by Packy McCormick, with Alex Danco
As we talk about at length here, I’m a huge believer in collabs as a force multiplier at cultural frontiers, and there’s no one I’d rather collab with for this piece than Packy. I mean, here’s Packy explaining Tokengated Commerce in a single, perfect sentence:
So that’s exactly what we talk about. We cover a lot of things:
Shopify’s purpose, and finding that purpose in the blockchain world
What is tokengated commerce and why is it such a big deal
Tokens as “files” that make composability competitive again
What making Shopify wallet-aware means
Oh, and so much more
Our full post is here:
Here’s a quick preview of what we talked about:
Let’s open with a question. It’s a very big question. You ready? Here it is:
When you make a bet on crypto, what is it you’re betting on?
When we bet on crypto “happening”, we’re betting on two things:
Wallets change how people behave,
and:
Over time, this behaviour will win.
Since you’re my guest here, I’m going to let you go with all the extra “u”’s. Behaviour. Classy. But yes, I like this answer because it incorporates both the social and the technical, and how computers and people interact. “First we shape our interfaces, and then our interfaces shape us.”
I think it covers it kinda nicely, don’t you think? It gives something for everyone. There’s something for the Sound Money folks (our wallets and cryptographic key pairs change the behaviour of how we save and spend, and that behaviour in the long run will outcompete the old behaviour), there’s something for the dapp builders (wallets change how people create and consume software), there’s something for communities (wallets change how people collect and present pieces of their identity).
I like this starting point because it brings us together on something we can all agree on. Crypto is fundamentally a kind of behaviour, just as much or arguably even more than it is a kind of technology.
There are many facets to this behaviour, but it starts from cryptography; and it starts in our wallets, when we sign something. And it starts at one moment, and that’s the magic moment where our wallets open a door into a new world and we step inside.
We’re working on some cool stuff inside that world. We call it tokengated commerce.
Tokengated commerce starts with an observation: that there’s a new kind of internet user out there in the world, called people with wallets.
I love this framing: people with wallets. Descriptions of what crypto lets people do are common, but I haven’t seen any that describe what crypto lets people become.
That’s exactly it. Forget what you can do for a second, let’s talk about who you can be. And I’ll tell you the answer: you’ll be someone with a wallet.
Let’s talk about these people with wallets. Who are they? They’re owners. Maybe they own some NFTs that signify community membership, an ENS name, an ETH or USDC balance, maybe a smart contract they’re associated with. They can sign things all over the internet.
These people behave in an interesting way: they really want to connect their wallets to things. They’re always connecting their wallets to get into discord channels, connecting their wallets to dapps, connecting their wallets to NFT marketplaces.
How come? Because the things we own through our wallets mean something. When we show up with our wallet, we show up as us. And when we connect our wallets, and feel that magic moment where suddenly the world changes - it sees us, and opens up - that’s a pretty awesome feeling. It feels like this:
What’s going on in this picture? This is from Doodles’ event at SXSW this past march, a pop-up world created by the web3 community Doodles.
The event was open to everyone, but if you were a Doodle holder, all kinds of experiences in this world - from the entry all the way through to the Shopify-powered gift shop - “opened up” to you in delightful ways. Lights flashed, bubbles blew, special gated merch dropped down on a hand-built roller coaster cart; and your Doodle showed up on a huge screen, announcing to the world: “Welcome, Doodle holder 3125!” And one after another, guests’ faces lit up in the unmistakable joy of being recognized; of successfully entering this new world.
This moment is what tokengated commerce is all about. It’s the moment where you realize, “Ah. I get the relationship between NFTs and commerce now.” NFTs aren’t an output of commerce; they’re an input for commerce. NFTs aren’t a kind of product; they’re a kind of buyer.
Two things I like there:
1. The idea that experiences can be open to anyone, but more special for NFT holders. I think music NFTs are really good at this: anyone can listen, a few can be visibly big supporters and get access to special tracks and meet-and-greets, etc…
2. Here it is again. What crypto lets people become.
It’s good to be a non-fungible buyer. You arrive at the storefront, connect your wallet, and suddenly the storefront changes based on an NFT you hold. Maybe a special product gets unlocked, or you get early access to a drop. Maybe you connect your wallet that unlocks a high-quality art print or 3D model of your NFT. Maybe you gain access to a special collab: for this limited-edition drop, your NFT opens a new door into another community. The more you explore, the more doors you find.
Later on, we talk about something I’m personally very excited about, which takes me all the way back to my days playing in the band: tokengated collabs.
We should ask: how does a community endorse another up-and-coming community on the internet? With collaborative tokengating: when two brands get together, and flip exclusivity into reciprocal inclusivity.
What are tokengated collabs? When The Hundreds does a collab with Deadfellaz, and you can unlock limited edition merch with an NFT from either of their collections, that’s a tokengated collab. When Superplastic does a collab with Gucci that’s gated to holders of a secret SUPERGUCCI NFT, that’s a tokengated collab.
Here’s where the magic starts to happen: I belong to my community, you belong to your community, but when we do a collab together, I can invite you in; and you can invite me in. Tokengated collabs flip exclusivity into reciprocal inclusivity. A century-old brand like Gucci gets to endorse a really hot brand like Superplastic, in a way where their fans are both inviting each other into this shared experience, and this shared community they now have together.
So there’s this obvious question: why does tokengating make this better, why is this different from a loyalty program or a promo code?
Loyalty programs, promo codes, or any other kind of “account-based” gating system can work for reciprocal inclusivity mechanics - of course they can - but here’s the catch. It’s that your gating rules will exist as dependencies that refer back to accounts and permissions, which get complicated fast if you try to introduce any kind of interesting multiplayer mechanic at all.
Imagine gating a pop-up storefront across four different brands’ fans, with multiple tiers of access, that get you early access to a merch drop. Where do you “sign in,” and as who? What if you’re a member of multiple communities - do I need codes from each? How do you prevent promo code abuse, which gets more complex the more variables you throw in? I mean, you can do it, but social gating rules built on dependencies break under complexity pretty quickly, and when the fourth wall breaks and the “exclusive community vibe” is spoiled by buggy software, it’s not a good community experience at all.
In contrast, a token is a bearer instrument - (remember the bearer bonds in Die Hard?) - it is much more like a file, or like a physical ticket that you hold in your hand. The NFT does not “link back” to anything, it’s not a reference to a reference to an account entry on one or more merchant databases; it is the ticket itself.
In, let’s call it “single player mode” - so a single merchant gating to a single list of customers - it’s hard to see the advantage. But as soon as you enter multiplayer mode - multiple merchants gating to multiple sets of fans, through a set of social rules - the ticket being a bearer instrument that does not link back to anything and therefore brings no dependencies with it - but can still be trusted by the gate even though it doesn’t link back to anything (more on this later, this is the “why do you need a blockchain” part) is a radically simplifying mechanic. Because now, the tokengating rules can get super complicated, but they won’t break under the weight of dependencies because there aren’t any.
Reading this is a little lightbulb moment for me. Some of crypto’s killer use cases might be big and wild and impossible-to-imagine, but there’s also part of it that’s just, “This just makes the same thing so much easier that now a lot more of it will happen.” Stablecoin rails are in this camp.
When we look back ten years from now at 2022 and ask, “What was really obvious and in front of our faces that whole time?” I think one answer will be that collaborative gating will be the mechanic that dramatically simplifies how brands collaborate and endorse each other. Community commerce is about to get a lot more multiplayer.
Finally, we wrap up by talking about my big mission at Shopify: to Make Shopify Wallet-Aware. What does that mean?
We want to make wallets a new input for developers building on top of Shopify’s platform. An NFT in your wallet is much more than “have NFT, or don’t.” That NFT is information; it is a smart contract, and that’s significant.
Here’s what we mean when we say, “Making Shopify wallet-aware.”
When a buyer shows up to a storefront, then if they show up with a wallet, all of the stuff that their wallet can sign for, and all of its public, social significance that the buyer wishes to put forward, should be accessible to the storefront and to third-party developers.
Those developers can take all that relevant state and build all kinds of apps and mechanics that can assume that state as an input. There is going to be a generation of very successful apps built on Shopify that give storefronts new kinds of powers, and today we have four amazing tokengating apps live - PERC Engage, Manifold, Shopthru, and Lit Protocol - powering tokengated commerce for merchants now, with several more behind the scenes that we’ll get to see soon enough.
To read the full piece, head over to Notboring.co and enjoy our conversation in full:
Tokengated Commerce | Not Boring, by Packy McCormick, with Alex Danco
Hope you enjoy it! There’s a lot in there, and I bet some of you will love it and some of you might be still pretty skeptical, which is fine too. It’s all a big adventure we’re in the middle of figuring out.
Until next time,
Alex