What is Token Gating & How Does it Work?

NFTs, or non-fungible tokens, are a new type of digital asset that is unique and non-interchangeable. NFTs are stored on a blockchain and can represent ownership of digital assets such as art, music, and other digital media. 

They have already seen widespread adoption in the digital art world thanks to their many benefits, including the ability to easily transfer ownership of digital assets, verify ownership of an asset, and create scarcity of an asset. In fact, such was the NFT mania that it touched a whopping $25 billion in sales in 2021.

Besides the usual use case of NFTs as digital collectibles, they can also provide access to exclusive communities and platforms through a token-gating verification system. So, what exactly does token gating refers to? Well, that is something we will explore in this article. So, let's dive straight into it.

What is Token Gating: Exclusive Access

Token gating is a way to grant or control access to exclusive content, clubs, events, tickets, software, merch, crypto airdrops, and more. This can be done by requiring users to possess a specific token to gain access. 

The token contains information about the user's identity and the permissions to access resources. When a user attempts to access a resource, the token is evaluated to see if they have the necessary permissions. And if they do, they are allowed to access the resource, and if they don't, they are not allowed to. 

This way, only those who meet the criteria set forth by the host can get access to the exclusive content. Access to resources can be controlled on an individual or a group basis or even based on the user's location. 

The process of token gating requires token holders to link their crypto wallets with the platform or exclusive server to gain access and participate only with supporters of the exclusive group, such as individuals or brands. 

This system can be used to create tiers of access or to give certain users special privileges. For example, a project might release a limited number of NFTs and require that holders of these NFTs also hold a certain amount of the project's native token to be able to trade or use the NFTs.

Using token gating to give certain users with special privileges or use it to create scarcity is a powerful way to manage access to content and create value. And when used properly, it can help ensure that only those truly interested in a project or its assets can access them.

It also acts as an innovative way for creators and brands to take advantage of their community by rewarding those who make meaningful contributions with exclusive products and content.

A Growing Trend: The Perfect Example

As the internet becomes increasingly saturated with content, people are looking for ways to filter out the noise and find the information they want. That's where token gating comes in.

Token gating is a way to restrict access to content so that only people willing to pay for it can see it. This model is becoming increasingly popular, as evidenced by the 6500% growth in search volume for the term over the past 24 months. 

Collab.Land is a perfect example of this meta-trend, where token owners can enjoy exclusive access to the community and its accompanying perks, such as content and gratuitous rewards. It is an automated community management tool that helps community managers keep track of community members, their activity, and their engagement. 

Collab.Land also includes features to help with community moderation, such as automated flagging and reporting of community members. This community management tool is for DAOs, NFT communities, and brand/creator projects. 

The tool automatically verifies whether prospective members possess the required tokens to join each community and follows up to make sure that members continue to meet the requirements. The platform is popular for enabling creators and admins to easily configure rules for token-granted access in its web portal. 

Additionally, it supports token-granted access on more than 20 different L1 and L2s using fungible tokens and NFTs. Besides offering a dedicated support team, Collab.Land also ensures members can join new communities without having to sign a message for each community they join.

Collab.Land has verified over 6 million wallets and serves over 41,000 Discord and Telegram communities. This free-to-use platform features a wide range of prominent crypto communities, including Fox Entertainment, NFT-based Play-to-Earn (P2E) game Axie Infinity, NFT marketplace NBA Top Shot, identity-management project POAP (Proof Of Attendance Protocol), and TIME Magazine that have been using Collab.Land for community management.

The platform will soon be launching the Collab.Land Marketplace for developers with an app that serves tokenized communities.

A New Way to Monetize 

Token Gating has emerged as a new way for creators to monetize their content. With this relatively new method, creators can charge a small fee for access to their content. This fee can be paid in any currency, including cryptocurrencies. 

Through NFTs, creators can remove the intermediaries and enjoy all the profits. For instance, the “Kings of Leon” band made $2 million from selling their album, ‘When You See Yourself' as an NFT.

Creators can also use token gating to create a subscription-based model for their content, where users must purchase a certain number of tokens to access the content regularly. 

Another benefit of token gating is the buzz you generate for your content. Besides the growing popularity of token gating, FOMO (fear of missing out) can help your project go viral.

Token gating can even be used to help protect an organization's data by requiring users to have a valid token before accessing data. This helps ensure that only authorized users can access your data. Besides this, token gating can also help improve performance by reducing the amount of data that needs to be transferred between systems.

With tools like Collab.Land, one can easily ensure that only those who meet the token requirements are granted access to private chats. This way, brands or creators can monetize their content and ensure they are rightly compensated for their work.

Besides monetizing their content, creators can use token gating to reward their most loyal customers with exclusive access to products, events, and communities and allow them to acquire ownable assets in the form of NFTs.

What to Consider When Token Gating?

Token gating is a mechanism whereby a project can restrict access to its tokens to only those individuals who have completed certain actions or requirements. 

There are a few reasons why NFT projects might use token gating. Firstly, ensuring that only those genuinely interested in the project can obtain its tokens can help increase demand for the tokens. At the same time, it helps ensure that the project's community comprises individuals with a vested interest in its success. 

Another reason token gating might be used is to help fund the project. As such, by restricting access to the tokens, the project can create a situation where individuals are willing to pay a premium to obtain them. This helps raise funds which can then be used to finance the project's development.

Token gating can therefore be seen as a way of ensuring that only those truly committed to a project can obtain and hold its tokens, making for a strong community of token holders.

Today, there are a growing number of projects that are using token gating as a way to control access to their content or services. For instance: VeeFriends airdropped VeeCon tickets to its holders, and only those who held them could enter VeeCon in the U.S. Bank Stadium. 

Another example is the Stoner Cats project which lets its NFT holders vote on story elements for upcoming show episodes. Creature World is another one that allows holders to claim a customized varsity jacket. But there are a few things to keep in mind when considering using token gating to control access to data or resources. 

First, token gating only works if the client requesting access has a valid token. If the client does not have a valid token, they will not be able to access the data or resource. Second, token gating can control access to data or resources on a per-user basis. This means that each user will need a token to access the data or resource.

From a holder's perspective, wallet security is important, as in most cases, one must connect their wallet to gain access to token-gated benefits. Given the number of phishing scams and frauds permeating the crypto industry, it is wise to always check links before signing anything with a wallet.

Final Word

So, as we saw, token gating is a specific type of token economy that gives token holders access to exclusive products, experiences, and events. This ensures that no one takes advantage of the community and brings value back into it by thanking those who make meaningful contributions.

As the world increasingly adopts crypto, NFTs, and metaverse, token gating offers an excellent way for brands and creators to control or grant user access. While still in its early stages of adoption, token gating has the potential to revolutionize the creator economy through its secure and efficient verification process.