Token Gating is an aspect of Web 3.0, the next generation of the Internet. Since future systems are going to be built on decentralized networks, applications and other businesses are going to have to find ways to monetize content or services.
The idea is an extension of the subscription model that became so popular under Web 2.0. Here people made recurrent payments, usually monthly and charged to a credit card (or some other Visa card). With decentralized networks, things work a bit differently since accounts might not be under the control of the company.
Tokenization is opening up a host of possibilities, with access tokens becoming popular. These are basically coins or tokens held in a wallet that provides some benefit when interacting with a particular website, group, or application.
Non-Fungible Token
Unlike fungible tokens such as Bitcoin, where each is the same as another, non-fungible tokens are unique. This is ideal for use as an access token.
If a user has it in his or her wallet, the system unlocks the benefits. There could be certain parameters tied to the NFT, such as a time allotment.
The idea of token gating is the token is what opens the gate to the enhanced features the user is going to receive.
Blockchain Technology
Non-Fungible Tokens are housed on blockchains. This is a distributed ledger which run on many different unrelated nodes. Unlike a company server system, no individual or group controls the network.
Each runs the same software and all are alerted to updates. The ledger is maintained in totality, with the different nodes having to operate in consensus. Any node that moves outside of that will have its transaction rejected.
Blockchains are immutable and transparent. This means the data cannot be altered once it is validated and make irreversible. It is how trust can be built in a trustless system.
Wallets tied to the blockchain can be read by any application or website set up to do so. With token gating, this is an ideal way to verify and grant approval.
The process is rather simple:
- the user links the cryptocurrency wallet
- verification of the NFT is undertaken
- access is granted to the benefits offered by holding the NFT
This is not required under Web 2.0 where the servers are controlled by an individual company who is also responsible for account management. With a blockchain, the accounts are decentralized and run by the code at the base layer. This means those companies that are accessing the information are only reading it.
Token gating allows them to manage the different services provided on their platform while integrating with a decentralized account management system.