Tokenization of social media engagements increases the sharing of false (and other) news but penalization moderates it

Some major social media companies are announcing plans to tokenize user engagements, derived from blockchain-based decentralized social media. This would bring financial and reputational incentives for engagement, which might lead users to post more objectionable content. Previous research showed that financial or reputational incentives for accuracy decrease the willingness to share misinformation. However, it is unclear to what extent such outcome would change if engagements instead of accuracy were incentivized, which is a more realistic scenario. To address this question, we conducted a survey experiment to examine the effects of hypothetical token incentives. We find that a simple nudge about the possibility of earning token-based points for the achieved user engagements increases the willingness to share different kinds of news, including misinformation. The presence of penalties for objectionable posts diminishes the positive effect of tokenization rewards on misinformation sharing, but it does not eliminate it. These results have policy implications for content moderation practices if platforms embrace decentralization and engagement tokenization.


S1.2 Where does the Monetary Value of Cryptocurrency
Come From?
The monetary value of some cryptocurrencies such as bitcoin and etherium comes from the fact that implementing the blockchain technology needs a computing infrastructure, which is costly (e.g. building facilities, electricity bills, and high-performance computers) [9]. The process of maintaining and securing the ledger through the blockchain technology is called mining [9]. Other cryptocurrencies earn their value based on a business behind them. For example, a new company can emerge for decentralized money exchange, in which users can send money to anyone in the world without relying on banks, and introduce a new cryptocurrency (i.e. coin) for a blockchain technology that supports its business. The process of converting a physical asset (e.g. a building or land) or a business to a cryptocurrency is called tokenization [9].

S1.3 What is NFT and How Does it Create Value?
A new form of tokenization, called non-fungible token (NFT), has recently emerged that tokenizes digital data such photos, videos, and audio. An NFT is a unit of data stored on a blockchain that certifies a digital asset to be unique and therefore not interchangeable, while offering a unique digital certificate of ownership for the NFT [10]. While initial NFTs were all part of the Ethereum (a decentralized open-source blockchain with smart contract functionality), more blockchains are implementing their own version of NFTs [11].
NFTs has been embraced by high-profile musicians, singers, and athletes, as well as digital art creators [10]. Each week, hundreds of millions of dollars of NFTs are being traded on online marketplaces such as OpenSea 3 . Though complex to grasp for many, NFT brings many advantages for digital art market: 1) solves the problem of ownership by storing the digital identity of the owner on a public-facing digital ledger (i.e. blockchain); 2) facilitates the transferring of the rights of use, 3) makes the market transparent by keeping the history of all trades; 4) and facilitates development of a highly-engaged community for digital artists (think it as a membership card).
In summary, NFTs are creating new markets based on new forms of ownership. The value of NFTs, in essence, is coming from the same core dynamics of cryptocurrencies, which is users' shared agreement [12]. In other words, an NFT value comes from the users community one builds around it, and the more this community attracts engagements from users and become part of their everyday life, the more the value increases.

S5 Regression Analysis of Study 1
In study 1, n = 1,022 American individuals from Prolific were presented with five statements about cryptocurrencies of which two were correct and three incorrect which they had to rate as either as 'right' or 'wrong'. In general, the results show that the more participants think they know about cryptocurrency or have more positive opinion about it, the less likely they answer correctly to questions. Table S.2 reports the results of our first study, which focused on knowledge regarding cryptocurrencies. In the survey, respondents were presented with five statements of which two were correct and three incorrect which they had to rate as either 'right' or 'wrong' . In the first column, the dependent variable is the share of correct answers, whereas in the second it is the number. In both models, the intercept shows the outcome for the reference groups. On average, respondents in the reference groups answered about 46% of the questions correctly, that is about 2.3 questions. We observe that there is little variation in correct response rates. The only significant differences, in a negative direction, are found for older respondents (65+, relative to 18-24 years old) and, interestingly, respondents who reported to be "extremely knowledgeable" about crypto (relative to those reporting to be "not at all knowledgeable"). Based on our questions, both groups have a poorer understanding of crypto than the corresponding reference categories. These results suggest that the understanding of crypto is, on average, mediocre, with little variation across most groups.

S6 Power Analysis
We preregistered a target sample of 1,500 participants based on a power analysis aiming to obtain 0.80 power to detect a small effect size of 0.02 at the standard 0.05 alpha error probability (Fig S.1). We also used a Bonferroni adjustment by dividing the nominal alpha level, 0.05, by the number of models tested, 15 (5 hypotheses, 3 outcomes), yielding an alpha of 0.003. The adjusted alpha level was used in the power analysis. The analysis revealed that we needed to recruit at least 730 participants.

S8 Treatments
Each participant is randomly assigned to either the control group (20% of the sample) or one of four treatment conditions (20% of the sample each). The four treatment conditions combine two factors: (1) whether users can only be rewarded for the content they post (Group 3 and 4), or also penalized (Group 1 and 2); and (2) whether the link between their behavior and rewards/penalties is clear (Group 1 and 3) or not (Group 2 and 4). We use simple randomization, not conditional on any observable characteristics of participants.

S8.1 Background Information
Participants in the treatment groups will be asked to read the following text, explaining that social media platforms are increasingly considering implementing a system which provides an opportunity for their users to gain monetary rewards for the engagements that their content attracts.
"[An image of a news headline titled 'Twitter Fully Incorporates Ethereum Tipping and Wallet Support'.] There have been some recent developments in social media companies to provide an opportunity for their users to gain monetary rewards for the user engagements (number of likes, shares, comments, and video views) they receive. For example, Reddit announced its plan to convert "community points" to digital credits, which users would be able to sell in an online market. When social media platforms such as Facebook, Instagram, TikTok and Twitter will introduce this new feature, users will be able to convert their engagement points to actual money with a one-click button in their profile. To make these features more concrete, imagine a scenario in which you can earn money as a result of the amount of likes, shares, comments, and video views you receive from your activity on a social media platform (e.g. Facebook or Reddit). Here is what is going to happen in that hypothetical world for you: 1. First, you have to be patient and build a reputation for yourself by posting content and attracting likes, shares, comments, or video views from other users. This may take a few months. 2. After the above warm up period, you start earning "reputation points" from that platform based on the engagements (e.g. likes, shares, comments, or video views) you received. Generally, the more engagement, the more points you receive. 3. Your reputation points will be shown to others in your profile. The more points you have the more trustable and attractive you will appear to other users. Also, the more points you have, the higher the probability that your posts will be shown to other users by the platform's ranking algorithms. 4. Once you have enough reputation points, there will be an online market where you can sell all or part of them. Like in the stock market, the price for points in that market is variable: it might go up in the future, go down, or stay the same."

S8.2 Four Treatment Groups
Moreover, participants in the treatment groups will asked to read one of following texts: S8.2.0.1 Group 1: "Imagine a scenario in which you have the possibility to post a link to a news article on your social media timeline. In this hypothetical scenario, you also have the opportunity to earn "reputation points" which can be converted into a digital currency (cryptocurrency). More particularly, you will receive one reputation point for every ten likes, shares, comments, or video views you get. This means that the more engagement your post attracts, the more reputation points you will receive, and therefore the more money you can make. However, posting a link to a news article containing misinformation or hate speech, will cost you half a reputation point.
On the following pages, you will be shown a number of headlines. Keeping in mind that the popularity and content of your post determine how much money you can make, for each headline, please indicate whether you would consider posting it on your timeline. First, however, answer the question on the next page."

S8.2.0.2 Group 2:
"Imagine a scenario in which you have the possibility to post a news headline on your social media timeline. In this hypothetical scenario, you also have the opportunity to earn "reputation points" which can be converted into a digital currency (cryptocurrency). The number of reputation points you receive depends on the amount of likes, shares, comments or video views you get. This means that the more engagement your post attracts, the more points you will receive, and therefore the more money you can make. However, the exact formula that the platform use to compute your reputation points based on the user engagements you received in unknown. In addition, posting a news headline containing misinformation or hate speech will decrease your reputation points.
On the following pages, you will be shown a number of headlines. Keeping in mind that the popularity and content of your post determine how much money you can make, for each headline, please indicate whether you would consider posting it on your timeline. First, however, answer the question on the next page."

S8.2.0.3 Group 3:
"Imagine a scenario in which you have the possibility to post a link to a news article on your social media timeline. In this hypothetical scenario, you also have the opportunity to earn "reputation points" which can be converted into a digital currency (cryptocurrency). You will receive one reputation point for every ten likes, shares, comments, or video views you get. This means that the more engagement your post attracts, the more points you will receive, and therefore the more money you can make.
On the following pages, you will be shown a number of headlines. Keeping in mind that the popularity of your post determines how much money you can make, for each headline, please indicate whether you would consider posting it on your timeline. First, however, answer the question on the next page."

S8.2.0.4 Group 4:
"Imagine a scenario in which you have the possibility to post a news headline on your social media timeline. In this hypothetical scenario, you also have the opportunity to earn "reputation points", which can be converted into a digital currency (cryptocurrency). The number of reputation points you receive depends on the amount of likes, shares, comments or video views you get. This means that the more engagement your post attracts, the more points you will receive, and therefore the more money you can make. However, the exact formula that the platform use to compute your reputation points based on the user engagements you received in unknown.
On the following pages, you will be shown a number of headlines. Keeping in mind that the popularity of your post determines how much money you can make, for each headline, please indicate whether you would consider posting it on your timeline. First, however, answer the question on the next page."

S9 Debriefing
All participants will be presented with the following debriefing note: "Thank you for your participation in this research study. Now that you completed or have ended your participation, we will provide you with some additional information about the purposes of this study.