What is 'Token Gating' and How Does it Work?

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NFT stands for “non-fungible token”. A “fungible” asset refers to something that is interchangeable with another unit of that same asset. A good example of a fungible asset is the US dollar. If I exchange my $1 bill for your $1 bill, nothing really changes. Both bills represent the same exact value. That’s fungibility. 

Conversely, a non-fungible asset refers to something with distinct value. There are no two that are exactly the same. A good example of a non-fungible asset is a house or a car.

A non-fungible token is where things get really interesting. Blockchain technologies allow us to implement many radically new ideas that weren’t before possible. A non-fungible token allows us to create a digital certificate that represents a unique asset. We can attach these tokens to pretty much anything, including digital files—say, a photo, a video, an audio recording, or even this article.

This allows us to create proofs of authenticity for digital content that can be owned, bought, sold and traded. Because these tokens are stored on an open and distributed blockchain (such as Ethereum), their embedded metadata and transaction history are completely verifiable by anyone in the world with an Internet connection. That means we can all know what digital wallets own what tokens at any given point in time. 

The implications of this are truly infinite, and we’ve just begun to scratch the surface of possibilities. Token gating is one example of how projects and companies are giving NFT ownership more meaning.

What is Token Gating?

Token gating is a common tool used by NFT project teams to create value for community members. Essentially, token gating allows projects to reward people who hold their NFTs by creating exclusive content, events, and other benefits available only to token holders. One of the most popular uses of token gating is ‘holders only’ Discord channels. While some NFT projects may have open Discord servers, there are certain channels that are available only for those who hold the NFT.

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How Does Token Gating Work?

Getting access to token gated benefits is typically a simple process. Usually projects require you to connect or sign a message with your crypto wallet, proving ownership of a certain NFT. Once you complete this step, it’s easy to claim whatever benefit is being offered.

Some token gating systems are built in-house, created by the team of a specific project. For example, the PROOF Collective uses token gating to provide exclusive content to its membership card holders. They built a portal on their website where token holders connect their wallet to gain further access. 

On the other hand, both PROOF and Yuga Labs are collaborating with a company called Tokenproof which specializes in safe token gating solutions. Tokenproof allows NFT projects to offer token gated benefits without having their holders connecting or carrying their crypto wallets.

Why Do NFT Projects Use Token Gating?

NFT projects use token gating for a variety of reasons. The overarching purpose is to create value for their NFT holders. Token gating assists with distributing exclusive content, event tickets, airdrops, and merchandise. 

Here are a few additional examples of how popular projects have utilized token gating to benefit their community members:

VeeFriends: Airdropped VeeCon tickets to VeeFriends Series 1 holders. Only people who had a VeeCon ticket in their wallet could enter VeeCon at U.S. Bank Stadium.

Creature World: Allowed holders to claim a customized Creature World varsity jacket. 

Stoner Cats: Lets NFT holders vote on story elements for emerging show episodes.

Things to Consider About Token Gating

From a holder’s perspective, the most important thing to consider about token gating is wallet security. In most scenarios, you are required to connect your wallet in order to gain access to token gated benefits. It’s always a good practice to triple check links before connecting or signing anything with your wallet. 

Additionally, if a project announces an event or claim involving token gating, always take your time to check multiple sources and official projects channels before interacting with any sites. Most projects will never conduct any surprise mints or claims. Be cautious and take your time!

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