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What is social capital for token communities?

Updated: Oct 18, 2023

Social capital is a key concept for any organization looking to grow and get incorporated into larger ecosystems. It can be defined as the advantages and disadvantages that entities derive from their social relations and positions within social networks. Tokenized communities, because of their inherent collaborative aspect and the growing social integration happening in Web3, are no exception to that rule. A tokenized community with strong social capital will experience better flow of information, the emergence of more creative ideas and strategic positioning relative to similar organizations. To achieve these goals, web3 communities should look to expand two major components: bonding capital and bridging capital.

What is bonding capital and how to maximize it?

Bonding capital is the level at which individuals within a shared network, such as a token community, are connected to each other. It is manifested through the number and strength of the ties formed between members of an organization. To illustrate the concept, let’s look at the social network below that represents a community of 9 individuals.

We can see that at least 6 members in the visualisation are fairly connected to each other. Assuming these relationships are strong because of their belonging to the same organization, we can infer that this network enjoys high bonding capital. Such a structure is ideal for communities that seek to enforce norms, values, and specific behaviors amongst their members. For example, an impact DAO that is committed to a specific cause would benefit from such a configuration. Strong and numerous connections empower members to feel as part of a collectivity and therefore, build trust within the entity. When trust is installed, rules and norms are greatly expected to be enforced. This is because it gives members the incentive to avoid deceiving their peers, in order to be still considered in the community. Coming back to our impact DAO, if everyone is well-connected to each other, it is likely that they act in a way that aligns with the organization’s mission and contributes to advancing its cause.

The best ways to maximize bonding capital for a token community are effective communication and transparent reputation. Using Web3 platforms that allow managing tasks and assigning customized roles perfectly fits that purpose. Collaborating with productive tools is crucial to building engagement from members, increasing the internal flow of information and boosting the quality of ideas circulating in a token community. These ideas will be communicated faster and with credibility. They will naturally need to be peer-reviewed and polished before being voted on, which is why enforcing reputation through roles assignment is a highly valuable feature to have within a tokenized community.

What is bridging capital and how to increase it?

Bridging capital looks at the influence a Web3 community holds with larger networks. It aims to connect groups through filling structural holes. A community can derive multiple benefits from having one of its members situated in a structural hole. Such a position in a network structure allows for a group to operate as broker between different institutions. The central dot in the illustration below illustrates what is meant by a structural hole, with this time, every dot representing a different organization.

The central positioning of the token community presented here provides it with a monopoly on the flow of information between the other organizations. This situation puts it in a considerable advantage. Evidence, from Donald Burt's famous paper on structural holes and good ideas, shows that members of this community are more likely to come up with high-value ideas because of the versatility of information they are exposed to. Let’s pick up our previous example of the highly connected impact DAO described. We have shown that they were enjoying high bonding capital, which presents the risk of being exposed to redundant knowledge since only members who are already highly connected to each other are coming up with ideas. Now, by being placed in a structural hole, they are likely to benefit from the various pieces of information that flow on each side of the network, increasing their overall awareness and creativity in attempting to solve problems that relate to their cause.

To increase bridging capital and position themselves in structural holes, tokenized communities should once again build up strong reputation systems as well as possessing secured ways of gatekeeping members. These points aim at building the trust other groups hold towards that specific organization. By making sure that every member within a community holds a specific token or NFT as a membership check, it is likely to be seen as a secured network which will be trusted by others to handle the flow of information. Also, knowing that this community collaborates with different sets of roles to ensure the safety of its stored data is likely to provide it with the necessary trust to operate a structural hole.

Web3 productivity platforms and tools are, to this day, the most effective medium to build habits that will enhance social capital for token communities.

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