What Is Token Gating?

Everyone loves an exclusive experience: Whether it’s a real-life event or online community, gated events are often what makes a community so desirable. Do you think Soho House would be so attractive if it let everyone in? Of course not! 

But just like in the real world, the digital world has its own brand of exclusivity too. From online fan clubs to communities with a common purpose, there are countless types of communities that cater to VIPs and extra special experiences. And blockchain tech is just making it easier, and more exciting, to offer these types of experiences.

In fact, you might have come across some of these groups already.

Perhaps you know about a closed Discord community. Or, maybe you have attended an event open only to holders of a certain web3 project. But do you know what powers these exclusive web3 communities?

Well, the answer lies with token-gating. To explain, this token-gating offers a powerful way for founders to foster engagement, reward their holders, and create exclusive experiences.

But, what is token gating? And how does it work exactly? 

Let’s explore.

What Is Token Gating?

Token-gating is a way Web3 communities can create value for their community by giving holders access to exclusive content, events, and other benefits. 

Perhaps the most common example of token gating is ‘holders only’ Discord channels, with private channels within a public server. But actually, there are many other experiences that token gating can offer. This can include anything from token gated store fronts, to metaverse events, and even IRL experiences.

But before we dive into the use-cases, let’s explore how token-gating works.

How Does Token Gating Work?

Well, firstly, token-gating requires a token. While that may seem obvious, setting up a token is an integral part of the process. To understand how this works, let’s first dive into the tokens themselves:

Tokens are digital assets that live on a specific blockchain. Instead of having their own network, like coins, tokens are stored on other blockchains. Because they use a token standard, all of the tokens on a given blockchain are interoperable, as long as they come in the same format. Tokens come in two main forms; fungible (such as ERC-20 tokens) and non-fungible (NFTs).

Web3 communities will use a blockchain app and these tokens to token-gate their experience. To explain, blockchain apps operate via smart contracts. This smart contract is like the blockchain’s version of a computer program, and it executes using a predetermined set of conditions—conditions which can include the status or contents of a user’s wallet.

So, when a token holder connects their wallet to a blockchain app or dApp, it will prompt them to sign a gasless transaction. This essentially proves this person owns the private key attributed to that account. Then since the blockchain is transparent and public to everyone, the platform can also verify that a specific account holds the necessary token. 

Thus, the platform will only allow users to enter if they have a specific token. This allows Web3 communities to create online and offline experiences which are only unlockable using a specific token—be it fungible or non-fungible. 

Examples of Token-Gating 

So now you know what token-gating is, you might be wondering how communities are actively using this technology. Well, there are countless different ways to token-gate experiences, but some of the most popular include:

Closed Discord Communities

Discord offers the most popular use of token gating. Put simply, creators can create exclusivity and enhance engagement within their communities. However, in practice, this can work out a little differently on each server.

For starters, some Discord servers are completely token-gated, meaning all of the channels are only open to holders. This is a popular option for crypto trading groups, who may not have much to share with the wider crypto community. 

However, the majority of communities and projects have token gate channels within a public Discord. So, anyone can be a part of the community, but only holders can access the perks. These perks could include early access to NFT drops or Discord events.  They may even offer exclusive quizzes and games for prizes. In fact, token-gated channels can also be used to host Discord events like seminars or interviews. Basically, Discord is a place for community and connection, and token gating creates an extra level of exclusivity and value to your token holders.

Token-Gated Online Experiences

Next, it’s important to note you can also token-gate online experiences. There are many forms of token-gated experiences available; from token-gated metaverse spaces, to online seminars and community meetups.  For example, both The Sandbox and Decentraland metaverses have exclusive areas that only allow holders of specific tokens.

Another great example of a token-gated experience is Ledger Quest. To explain, Ledger Quest is an educational experience that helps you to upskill your blockchain knowledge to navigate Web3 safely through a gamified experience. And while you can access countless quests without a specific token, Ledger also offers partners and communities the chance to token-gate quests. 

These quests are created specifically for certain Web3 communities, and come with custom rewards and benefits. As such, these sorts of quests are token-gated, meaning they are only accessible to those specific community members.

For example, with Ledger’s Apecoin Quest, any holder of ApeCoin could access the experience. Once completed, holders had the chance to win a custom ApeCoin Ledger Nano! This is just one example of some of the exclusive extras you could offer to your Web3 community.

Real-Life Events: Exclusive Concerts and VIP parties

Of course, it’s also possible to token gate real-life events! 

This is a popular option for NFT communities, which often throw lavish parties that are exclusive to their holders. For example, Deadfellaz, an NFT avatar collection, held a token-gated party at the NFT NYC conference in 2022. In this case, attendees had to prove ownership of a Deadfellaz NFT to receive tickets to the real-life event.

They aren’t the only collection to use token-gating in this way though. Top NFT projects World of Women, Bored Ape Yacht Club and Cool Cats all have all used this method to create exclusive in-person events too.

And token-gating for real-life events actually goes much further than VIP parties. Industry giants Ticketmaster now have their own tool, which allows you to token-gate any event directly through the Ticketmaster platform. This means artists, musicians and event-organizers can now token-gate their real-life events—even without any previous crypto experience.

Why Should I Token-Gate Content and Experiences?

So now you know what token-gating is and how it works in practice, what about some of the reasons you might use this functionality in the first place? Well, there are countless reasons you might want to token gate content or experiences, but these are the most popular:

Exclusivity

The exclusivity of any item makes it more desirable in both Web2 and Web3 spaces. Consider how many ticketing websites crash when a popular artist announces new tour dates, or a well-known brand drops a new line of clothing. In the same way, when you place desirable content behind token gated walls, this creates exclusivity.

In turn, this exclusive community brings the members closer together. By restricting the community to holders-only, the community is a small portion of the larger fanbase. Members can come together, socialize, and get to know one another in a tight-knit environment. Essentially, you create the ultimate fan club.

As A Reward For Holders

Token gating allows you to reward your holders in exciting ways. Firstly, you can create token-gated sites to access rewards such as merch. Or, as we have mentioned, you can token gate exclusive events. Rewarding community is key for any brand, and token gating provides a good opportunity to do just that.

Risks of Token Gating

Of course, there are downsides of token gating your content or experiences too. Before you implement this mechanism in your web3 community, you might want to consider a good strategy to avoid the following risks:

Lower Turn-Out at Events

One risk is a lower turn-out at events. By restricting your event to holders only, you risk non-attendance. However, many projects mitigate this risk by offering holders a plus one to their events, as is the case with Apefest. However, this doesn’t just affect real-life events, but online events too. If you token-gate an online event such as a seminar or metaverse party, its success will also be impacted by the turn-out. So, if you want as many attendees as possible, maybe token-gating is not your best option.

Potential Technical Difficulties

Token-gating requires the development of a blockchain app or smart contract, and there are the risks of technical difficulties. This functionality requires code, and if it is not set up or audited correctly, it may contain bugs. This could potentially leave your tokens at risk, so it’s important that you choose a trusted platform when you token-gate experiences. 

Potential Scams and Phishing Attempts

Finally, there is the risk of scams and phishing attempts. To access token-gated content, users will need to sign a gasless transaction. Although this may seem harmless, connecting your wallet to any platform also poses some level of risk. Yes, not all malicious transactions cost gas fees. You can lose assets even if you sign a gasless transaction, so make sure you know what you’re signing, before you click sign.

How To Token-Gate Content

So now you know the risk and rewards involved with token-gating content and experiences, you might be wondering how to get started yourself! Well, there are several ways to start token-gating content.

Hire a Developer To Make a Custom Token-Gating System

The first option is developing your own token-gating platform. This is the most complex option, but it also offers you the most control over the experience. As a result, many of the top Web3 projects choose to develop their own systems. One such example is PROOF Collective, which has its own dedicated portal designed by a blockchain developer. If you have complex conditions for your token-gating, or specific functions that existing platforms don’t offer, then hiring your own developer may be your best option

Token Gate Your Discord With A Bot For That Purpose

For token-gating Discord channels, or even whole servers, a popular option is to use Collab.Land. This simple app works via a Discord Bot, and it can essentially do the verification job for you. By setting up this bot, your holders can simply prove their ownership through Collab.Land’s existing interface. This is really simple, and can save you the trouble of hiring a developer and having the all-important code audited.

Token-Gate Your IRL or Online Event Using A Dedicated Platform

For real-life events, you can use a tool such as Tokenproof. To explain, Tokenproof allows users to prove ownership of their tokens online and in real-world events, without needing to connect to their wallets. Tokenproof is a trusted platform for token-gating, favored by many of the most popular Web3 communities today. The biggest pull of Tokenproof is it allows you to keep your tokens in cold storage while giving you access to a service or event.  To explain, many token-gating platforms force you to store your access tokens in a hot wallet to use their services. Tokenproof lets you keep your assets in a cold wallet, which means you don’t have to put your valuable assets at risk of online threats.

Another great platform for token-gating events, as earlier mentioned, is Ticketmaster! While it was once a place purely for tickets and events, Ticketmaster now offers an option to token-gate events using Flow blockchain—a godsend for non-crypto-natives. 

So, whether you want to token-gate a physical or digital event, there’s an increasing number of options. Thus, make sure you DYOR and find out which one is best for you.

Final Thoughts On Token-Gating

It’s clear to see why so many projects and creators use token gating within their community. Yet, while token-gating is an exciting feature of Web3, there is always a risk when connecting your wallet. 

While some platforms, like Tokenproof, allow you to store your digital assets in secure hardware wallets, others don’t offer that benefit. That’s because most token-gating platforms operate via hot wallets. So how do you stay safe when connecting a hot wallet?

Simply, the best way to keep your valuables safe is by segregating your crypto assets. To explain, if you open multiple accounts, even within a single hardware wallet, these accounts are secure and separate from each other. That means if you sign a malicious transaction with one account, it won’t affect the others.

So, if you have to connect a hot wallet to your token-gating platform, the best thing to do is segregate your assets; putting your most valuable assets in a vault account that never interacts with any platform or smart contract. Then, you can leave just the specific token you need—and nothing else—in the hot wallet you will use to connect to the platform. This means that should anything happen to your account connected to the token-gating platform, all of the assets in your other accounts stay safe.

So, however you choose to take part in token-gating, make sure you’re aware of the risks involved. Only you can decide how to protect your assets, because that’s exactly what self-custody is all about.