Foresight Ventures: Web3 Social Protocol Monopoly & Soul Bound Tokens

特邀专栏作者

2022-07-23 07:00

This article is about 6662 words, reading the full article takes about 10 minutes

The accumulation of high-quality relationships and network effects needs to reach a critical point to form a qualitative change. The process is a spiral, and the uniqueness of products is the basis of competition.

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Author: Alice@Foresight Ventures

Article Summary:

The essence of social products is matching. Web3 maximizes the matching ability of applications and improves the efficiency of user information acquisition by building a unified data bottom layer.
The accumulation of high-quality relationships and network effects needs to reach a critical point to form a qualitative change. The process is tortuous and spiral. The web3 infrastructure just allows the fastest iteration of the new economic governance model.
The theory of "fat protocols and thin applications" is not necessarily applicable in social circles. Both protocols and applications face the pressure of homogeneous competition, and it is difficult to form a complete monopoly ecology. Uniqueness is the basis of competition.
Compared with the existing web3 identity protocol, Soul Bound Token (SBT) has stronger advantages in scenarios such as non-transferable reputation, governance airdrop, negative reputation, and wallet recovery. Before the large-scale implementation of SBT, there are many issues such as privacy, security and storage to be resolved. In the future, it is very likely that SBT will coexist with multiple identity solutions, just like the L1 expansion solution.

《Foresight Ventures: Breaking the "Walled Garden", Web3 Reshaping the Social Paradigmsecondary title

Web3 Social Evolution Path

Returning to the essence of social networking, we believe that the essence of all social products is matching, that is, matching of information and high-quality contacts. For example, people are willing to pay high prices to join offline high-end clubs to obtain better network resources; people are willing to spend more time on twitter instead of other platforms, because it can most efficiently push the knowledge you are most interested in & need most.

Compared with Web2 products, the core advantages of Web3 can build a high-performance, unified data bottom layer, and use composability to maximize the social matching capabilities of Dapps and improve the efficiency of user information acquisition.

As described in the previous article "Walled Garden", in web3 everyone's identity, relationship, social interaction, and content creation data should belong to themselves, instead of being separated in walled gardens, the return of data sovereignty will greatly improve Reduce the cost of data reading and use, and make everyone's identity and achievements on the chain open and transparent. Dapps can more efficiently discover and contact high-quality contacts and high-quality creators.

However, we are back to the question of which came first, the chicken or the egg: the accumulation of high-quality relationships and network effects needs to reach a critical point to form a qualitative change, and before that, web2 social networking will still be better for most users choose. Therefore, for a web3 startup, should it develop high-quality resource providers first, or develop c-end users first?

The author believes that the core should be to reward high-quality resource providers, that is, high-quality creators and high-quality personal connections. For example: Mirror attracted a group of high-quality kol platforms during its cold start, and Phaver used content pledge to select the best quality creative content; returning to the Web3 creator economy itself, the blockchain has natural advantages that can help high-value groups realize Reputation is realized, and the centralized platform commission is completely eliminated. Therefore, I am still relatively optimistic about the prospect of web3 social development.

From the perspective of users, we really cannot ignore the elephant in the room—everyone is used to using web2 social applications, and the giants have extremely high user stickiness. This does not mean that web3 has no opportunities at all. Just like Gamefi challenges traditional games and Defi challenges traditional finance, social networking can also attract users through tokenomics and rewrite the rules of the game. Furthermore, compared with defi and gamefi, the significance of SocialFi lies in lower entry barriers, a more universal reward mechanism (everyone can get rewards), higher user frequency, and more young people who are curious and watching People provide a web3 gateway, and social networking may be the track with the most potential to onboard next 1 billion users.

secondary title

Research on Web3 Social Monopoly

In August 2016, Joel Monegro of USV, an American fund, published an article called "Fat-Protocols". The "fat" protocol theory believes that blockchain and Internet value capture models are different, and most of the value in the Internet era is captured by the application layer, such as Google, Facebook, Amazon, Ali, Tencent, etc. The underlying protocols such as TCP/IP and HTTP that provide support for the Internet cannot capture value.In the blockchain era, the value will be concentrated in the shared protocol layer, and only a small part of the value will be distributed in the application layer, thus giving birth to the "fat" protocol and "thin" application theory.

For most blockchain-based protocols, two factors lead to this result:

1. Shared data layer - the underlying data and blockchain transactions have equal and free access rights, and the application will compete with low-cost and homogenization;

2. Token incentives - the protocol can use tokens for value capture to enhance system security (the higher the currency price, the higher the security), and realize commercialization.

But I don't think fat protocol theory is a panacea, at least not necessarily so on the social track.

a. Data is not everything in competition

First of all, the shared bottom layer of data does not represent homogeneous competition. Data barriers are important, but not the whole story of competition. Looking back at web2's social product KSF (except data), the summary is as follows:

1. Wechat sends text messages at 0 cost

2. Telegram is anti-censorship

3. Twitter short tweets

4. Tiktok sliding matching

5. Snapchat burns after reading

In addition to data, product functions, user experience, matching efficiency, and community atmosphere are all soft barriers to social applications. web3 should also add tokenomics to these factors.

b. Competition theory also applies to agreements

In fact, the "fat" protocol described in the theoryThe low-cost and homogeneous competition caused by composability is also applicable to the protocol. Based on the decentralized and open source system, the protocol can also be easily reused, and then optimize products that are more popular with users. For example, when Compound was an open source protocol, Lendf reused their code for optimization. Then Lendf developed by leaps and bounds, and the amount of locked positions quickly entered the top ten in the industry; the same is true for social protocols. The collection, cleaning and presentation of data on the chain is not a monopoly resource. New players can still quickly access various databases and challenge the existing Industry pattern.

c. What is a reasonable value capture mechanism?

As pointed out in the "Fat Protocol Theory", token incentives are an important way to capture value. In fact, the design of many protocol tokens is unsatisfactory. The core problem is: social networking is a thing with a strong network effect. The issuance of tokens by the protocol is equivalent to the amusement park starting to collect tickets. A threshold of entry.

The superstructure theory points out that the ideal basic protocol layer should be free-to-use,At least it is imperceptible to use on the user side, and this kind of infrastructure can onboard next 1 billion users. The protocol layer shall act as an abstraction of theMinimum Value Extraction Coordinator（Minimally Extractive Coordinators), "The less the protocol extracts from the coordination exchange, the more user economic exchange will take place".

However, this vision has led to another problem: the demise of the web1 protocol is precisely because there is not enough commercialization capacity,How should the value creation and value capture of the web3 protocol be reflected.For this problem, I prefer to understand the social protocol as a to-b business and the application as a to-c business. Ideally, the agreement charges the project party and the application charges the user. It is worth noting that the agreement needs to achieve a sufficient business scale to start commercialization, and premature commercialization will hinder its development. From this perspective, the application layer may be easier to achieve value capture: they are closer to the user group than the protocol, easier to build trust and stickiness, and can gain user recognition through profit sharing.

Token value capture and commercialization trade-offs are a topic worth discussing. The scope of discussion is not limited to social networking. There are also multiple tracks such as public chains, Defi, Gamefi, and NFT. Maybe a special study can be published in the future.

d. Dynamic balance between social protocols and applications

The bargaining power of applications and protocols is dynamic. When an application accounts for most of the traffic of the protocol and must pay a large amount of fees to the protocol, the application will tend to fork the protocol to obtain greater benefits. Apps steal protocol value”, for example, large Gamefi games have opened exclusive App-chains.

e. Uniqueness is the basis of competition

In summary,The author believes that both social protocols and social applications are facing the pressure of homogeneous competition, and it is difficult to form a complete monopoly ecology. In such a competitive environment,Uniqueness is the foundation of blockchain protocol and application competition.The uniqueness of social projects is reflected in the following points:

Combination ability: In the gourmet competition, there are all kinds of top ingredients (storage scheme, data model, identity DID) on the table. Flavor and taste (core customers, community tonality), culinary skills (commercial landing ability), and innovation ability are all different, and the dishes presented in the end will also be ever-changing. Even if it is the same dish, ordinary people and state banquet chefs have different effects. Moreover, the ingredients are changing dynamically (data accumulation, technology upgrading), how to capture the best state of the ingredients for your own use will also determine the final quality of the dishes.

Token Design:If tokens are an inevitable choice for web3 applications to compete with web2 giants, then our focus should be on how to design the x2earn model more reasonably. Just like the Internet platform subsidy war, what we need is not flooding but subsidizing core high-value users and early participants; on the other side of the coin, how should we design the token model so that the token captures the value creation of the community, Rather than a Ponzi fund that simply applies the "governance + utility" dual-currency model. Combined with the idea of the game, random equipment drop, extension of game externalities, etc. can be used to weaken the simple to earn attribute, and use tokens as a tool to design a more reasonable reward mechanism, so that users can return to the fun of social networking itself, being accepted Recognized sense of accomplishment, community builder sense of honor, etc., you can also refer to the Ethereum Foundation to do offline networking to enhance the bonding between members.

Community Atmosphere & Product Performance: As an open bilateral platform, user data and relationships may be easily copied, but community atmosphere, product experience and first-mover advantages are more difficult to copy. Unlike Gamefi, if the game’s earning efficiency becomes low, some users will choose to imitate the disk, and the two-sided platform naturally has user stickiness-developers may not have such a good user-base if they change the protocol ecology, and ordinary users change one Community does not have such a good community atmosphere and such high information matching efficiency.

Team Executionfirst level title

Soul Bound Token (SBT)

a. What is Soul Binding Token SBT?

The name "Soulbound" comes from the game World of Warcraft. Soulbound items mean that the item cannot be traded with other players, cannot be mailed or given to other players, and can only be used by the player himself. Soulbound token is a non-transferable token bound to your wallet (account). Any online or offline institution or individual can issue SBT to a wallet, such as the school you graduated from, the company you work in, the non-profit organization you have participated in, the DeFi platform that took loans or participated in liquidity mining, and the DAO organization you have participated in deeply, etc. Wait, your wallet can receive all kinds of SBT.

SBT is non-transferable and non-tradable. This feature weakens the speculative attributes of NFT, and returns more to the essence of social interaction, proving people's identity, experience and reputation. Its original intention is to help users obtain persistent identities, trust and cooperation models in the Web3 world that lacks personal credit, reduce the possibility of sybil attacks (referring to a single user forging an identity to attack), and improve the efficiency of capital utilization.

b. What are the application scenarios of SBT?

Identity credentials without application scenarios are of no value to users. Compared with other web3 identity solutions, SBT has advantages in the following scenarios:

Non-transferable reputation: SBT cannot be transferred by trade. In contrast, Lens NFT and Poap medals can be sold on OS, and OG status can be obtained for a few tens of dollars. SBT has higher gold content and authenticity.

Governance & Airdrop:Through SBT, the core early contributors are selected to give higher governance voting rights, making community governance more fair, returning to the essence of democratic governance, and no longer a pure capital wrestling field. Real experience and identity verification will help the project party to accurately issue airdrops and efficiently match more real, effective, and high-value community contributors.

negative reputation: If someone does evil on the chain or has a high loan default, he will receive a negative reputation SBT, so that SBT can become a "Sesame Credit", users can use social reputation to make loans, and the agreement can background the user before lending Investigation, such as using zk zero-knowledge proof, to verify that the customer has at least no record of default or excessive leverage.

Wallet recovery:If the wallet private key is lost, it can be recovered by obtaining the approval of most SBT community members, similar to the logic of WeChat account recovery. In contrast, the common wallet recovery method (in fact, most wallets do not have one at all) is to designate several wallet guardians, and there is a single point of failure risk.

c. Do all user identity data need to be uploaded to the chain?

Of course, our ideal state is that an identity protocol contains all identity information, like the metaverse in the number one player. However, there are many problems in implementation:

1. Data storage difficulty:It is very difficult to store all data on the chain. Possible solution: only upload the hash

2. The problem of information deletion and modification:In social scenarios, users need to change information and delete historical information at any time, which is impossible for blockchain

3. Excessive publicity:The data on the chain is open and transparent without privacy, especially the negative reputation involves a lot of sensitive information of users; solution: zk zero-knowledge proof, for example, an SBT can prove that you participated in the 14 rounds of Gitcoin donations, but will not disclose the specific donation amount, project, and time and other information.

4. How to encourage data providers to access:Not all traditional web2 institutions are willing to go on the chain, which involves their core competition barriers + user privacy leakage

To sum up, SBT identity data is still highly likely to be usedOn-chain + off-chainStore in a mixed manner.

d. Will the Ethereum Foundation do SBT in person? What is the competitive landscape between SBT and existing identity protocols in the future?

On the off-chain identity track, identity standards such as W3C Verifiable Credential have been promoted for five years, with mature technical solutions and high institutional recognition. On this standard, a number of identity solutions with excellent performance and cross-chain support have emerged, such as Unipass , Disco; on the identity track on the chain, different projects are also implemented from subdivided scenarios to establish their own communities, such as Project Galaxy, Poap.

Although there are many new projects on the SBT track, such as Firstbatch, Marry3, but the end is far from conclusive. The Ethereum Foundation has not yet announced an official solution, and there is a high probability that it will take action, and it is likely to become a market hotspot in the future. However, the foundation has always been slow in doing things, and many problems need to be solved before large-scale implementation, such as storage solutions, institutional cooperation, zk privacy issues...

Foresight Ventures bets on the innovation of cryptocurrency in the next few decades. It manages multiple funds: VC fund, secondary active management fund, multi-strategy FOF, special purpose S fund "Foresight Secondary Fund l", with a total asset management scale of more than 4 One hundred million U.S. dollars. Foresight Ventures adheres to the concept of "Unique, Independent, Aggressive, Long-term" and provides extensive support for projects through strong ecological forces. Its team comes from senior personnel from top financial and technology companies including Sequoia China, CICC, Google, Bitmain, etc.

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https://jacob.energy/hyperstructures.html

https://www.placeholder.vc/blog/2019/10/6/protocols-as-minimally-extractive-coordinators

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https://jacob.energy/hyperstructures.html

https://www.varunsrinivasan.com/2022/01/11/sufficient-decentralization-for-social-networks

https://www.panewslab.com/zh/articledetails/D99422028.html

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https://www.youtube.com/watch?v=TbyVyVNsyys