Community building is a central focus for Web3 projects, onboarding and growing a user base that drives revenue and awareness. Despite this, most NFT projects still operate without a dedicated marketplace for their community. We believe this will all change as we look to the future of Web3. Customized and branded NFT ecosystems will drive brands within this space and help NFT businesses seize control of their business models.
These dedicated marketplaces will fuel revenue and engagement and empower communities through financial incentives, one of which can be explored using a community wallet. This concept is not new in Web3, as some very clever businesses incorporate community wallets into their acquisition and retention strategies. The promise of passive income inspires much activity, and community wallets are a great example.
Community Wallet 101
NFT Marketplaces are home to Web3 commerce, which requires cryptocurrencies to transact and pay fees. Most blockchain natives understand the role of a wallet in this process, connecting to dApps and facilitating buying, selling and trading. A community wallet is a function developed into marketplaces that allow participants to share in platform revenue generated based on their contributions to the ecosystem.
Community wallets financially reward users for their activity, while fees accumulate in the wallet with each and every transaction. Traditionally this revenue is used to fund the project or reward founders. Still community wallets flip the dynamic to payout those engaged with the platform.
A now classic example of this functionality can be found at the NFT marketplace, LooksRare. The 2% platform fee collected with each transaction is redistributed to platform users that stake the LOOKS token. This model incentivizes staking by enabling passive income to be earned by active community members. The advantages of this strategy are already significant, and as the technology develops, more potential will undoubtedly be unlocked.
Why Deploy Community Wallets?
There are three distinct advantages to deploying a community wallet, community engagement, user acquisition, and user retention. These benefits are critical components of running a successful Web3 business, making community wallets so powerful.
A variety of interesting strategies are emerging that engage community members, a challenge that all Web3 businesses must tackle. Community wallets serve as a strong engagement tool, financially rewarding platform users. While LooksRare applied their focus to staking, projects can target and reward specific activity such as minting or trading.
Appealing to Web3 users at this stage of adoption often requires some financial incentive. Passive income earned through a community wallet is a very attractive value proposition for users. If executed properly, this functionality can drive marketing campaigns and onboard long-term users that believe in the project and the earning potential.
Retaining users is even more challenging than acquiring them. This is especially true for new technology that is still advancing rapidly. As new competition pops up and alternatives arise for your community, developing differentiators like a community wallet can help cut through the noise. So long as your users see the value in remaining involved and prioritizing your platform, they will remain loyal.
How to Implement a Community Wallet
The key to incorporating a community wallet is deploying a dedicated NFT marketplace. This will allow your project to set the terms of engagement. It is only through this approach that Web3 companies can truly capture the full potential of revenue share.
You might be asking yourself how to create an NFT marketplace. The answer is fairly simple when you develop and deploy using trusted NFT infrastructure. At Liteflow, we empower brands and creators to confidently build, launch and manage NFT marketplaces with both end-to-end and modular solutions. This includes the implementation and customization of a community wallet, and a number of other robust features.
You can take ownership of your Web3 storefront by deploying a branded NFT marketplace dedicated to your assets and community. The benefits of this approach go beyond the ability to integrate a community wallet, increasing revenue, elevating your brand and improving user experience.
The community wallet strategy is starting to gain momentum, especially given the benefits it can unlock. Most recently, Rarible V2 launched, delivering rewards to users for listing and buying NFTs. Using their $RARI token and a community wallet, Rarible incentivises trading NFTs and locking up their token. This enables them to increase platform activity, provide utility to their token, and reduce the circulating supply using lockups. Variations of this strategy will proliferate over the coming months and years as Web3 companies look to future-proof their business.
This is all made possible via a dedicated marketplace for your community and managed by your company. Liteflow provides a suite of pressure-tested NFT infrastructure and tooling built for this very purpose. Our solutions are accessible to businesses of all sizes, so you can deploy confidently. If you’d like to explore how to bring your ideas to life, reach out to us at Liteflow, and schedule a call with one of our experts.