Discuss the future of Web3 social: use tokens and incentives to solve revenue problems and create new social experiences
Original author: PAUL VERADITTAKIT
Compilation of the original text: Deep Tide TechFlow
This article is the third in a series of articles on decentralized social networking written by Pantera partner PAUL.
This series explores how todays technologies and trends can solve a series of problems in decentralized social networks, and provides specific explanations and explorations for each problem.
In 2017, a group of MIT Media Lab researchers claimed in Wired that decentralized social networks will never succeed. In their article, they list three impossible challenges:
(1) The problem of attracting (and retaining) users from scratch
(2) Problems with handling users’ personal information
(3) User-oriented advertising issues
In all three cases, they argue, the incumbent tech giants, such as Facebook, Twitter, and Google, simply do not leave room for any significant competition due to their extensive economies of scale.
Now that the time has come, things that were once hailed as impossible no longer seem so far away, and we seem to be at the dawn of a shift in the concept of social media networks. In this three-part series (this is the third), we will explore how new ideas in Decentralized Social (DeSo) can solve these old problems, including:
(1) Use open social layers to solve the cold start problem
(2) Use personal identification and cryptography technology to solve user identity problems
(3) Use token economic models and incentive mechanisms to solve income problems
In this article, the author mainly discusses point 3, which is the way and examples of using token economic models and incentive mechanisms to solve income problems.
Create a “killer app”
The ultimate question of whether Web3 social as a vertical will succeed is whether it will be able to produce a new killer app that, like TikTok or Instagram before it, offers a truly novel social experience to engage users at scale. Without this killer app, all infrastructure developments such as decentralized social graphs and human identity protocols would lose a large part of their intended purpose.
However, the problem with these new social experiences is that they are almost unpredictable. Despite the mantra of “build a killer app” repeated over and over, no one knows exactly what form that app will take — after all, you’re essentially trying to predict where human behavior is headed. In this article, instead of trying to do the impossible, i.e. concretely predict what the next killer app in the social space will look like, I will try to explore two high-level strategies - augmenting Web3 by adding features existing social experiences, and creating a Web3-first social community, and describe some of the projects that are following these potential innovation paths.
Enhance existing social experiences through tokenization
The easiest way to build a Web3 killer app is to add some new functionality to an already existing mainstream social platform. The most common is to add extra Web3 functionality through tokenization, such as the X-to-Earn project.
One of the most interesting projects along this path is Reddit’s Moons program, which launched in May 2020 to reward users for posting and curating content on the r/CryptoCurrency subforum. Reddit Moons is an ERC-20 token issued based on Arbitrum Nova. Its circulation is based on the reputation gained by users on Reddit, which is calculated based on the likes and dislikes received by users. Moons allows users to decide the future distribution and overall development direction of Moons in community votes.
Reddit Moons’ overall token economic strategy has also been appreciated by the community, with monthly issuance declining by 2.5%, bringing the token’s annual inflation rate closer to 1%. As a result, the reputation-to-Moons ratio, the number of Moons a user earns through reputation, is thought to steadily decrease over time, making Moons more scarce in the long run, hopefully increasing their value.
Reddit is a particularly interesting case, integrating Web3 functionality (in this case Moons tokenization) into an already existing killer app. Of all the major social media platforms, Reddit is arguably the most decentralized and community-driven, thanks to its unique sub-forum structure that allows these platform enclaves to have a large degree of autonomy and self-management, while A traditional top-down approach to content management is not mandatory. Arguably, these design decisions make Reddit one of the most appropriate platforms to experiment with Web3 mechanisms. In fact, Moons is just one example of Reddits innovative Community Points program, which allows subforums to launch their own ERC-20 tokens and provides an Ethereum-based wallet called Reddit Vault to store these tokens. In addition to Moons, r/FortniteBR’s Brick tokens are another notable example of this scheme.
As of August 2023, Reddit Moons has gained some traction after being listed on several major centralized exchanges, including Kraken. However, despite the instant euphoria of these token “surges,” it remains unclear whether this simple “post and earn” mechanism will succeed in the long-term. According to the above data and August 12 price data, the Moons income of Reddit Maxers is about $4200, while the median income is only about $0.9.
Its a sobering statistic that reveals a fundamental problem with the X-to-Earn model: you dont make much money, or at least far less than the life-changing money such programs are sometimes advertised . Additionally, revenue tends to be skewed towards a small number of users, so the average user may not enjoy much of the “earning” part, even if they participate in “X” activity. Eventually, users may become disillusioned with these meager revenues, which in cases like StepN, pushes the project down the road to collapse.
Therefore, for a simple social money-making project, placing too much emphasis on making money may not be sustainable in the long term. Instead, a novel social experience must be created for the end user, a process that the user is willing to pay for rather than being paid to do so. This is highlighted by the recent buzz around the friend.tech project on the Base network. Friends.tech is essentially a stock market for X (formerly known as Twitter) profiles, allowing users to buy and sell personal stocks of X (formerly known as Twitter) influencers. By owning an influencers stocks, users are promised increased access (such as through private chats and other exclusive perks), and users can trade those shares freely.
This novel social experience and the ability to monetize an individual’s 000+ Transactions. However, there are some doubts about whether friends.tech can maintain this early momentum and truly pave the way by tokenizing influencer profiles, or if it will evolve into another RUG project. Coindesk specifically cited the project’s lack of documentation of an effective privacy policy and data collection practices, as well as the lack of a roadmap or white paper. Additionally, it’s unclear how the platform and the influencers within it will fulfill the promised “access” to “shareholders” to truly create a new form of social experience. Still, friends.tech is an impressive experiment in transforming tokenization itself into a new form of social experience.
Build Web3’s first social community
Rather than trying to add Web3 features like tokenization to an existing Web2 social platform geared toward a completely different revenue model, another approach to creating a “killer social app” in Web3 is to build it from the ground up, starting with a unique Launched within the crypto-native community and culture.
Phaver is a prime example of a Web3 first social community. Phaver is built on Lens social graph (and recently integrated with Cyberconnects social graph) and has attracted the attention of the Web3 native community through integration with other Web3 social identity technologies such as NFT communities and soul-bound tokens. This is a platform with a unique dual-token model that uses a novel scoring system consisting of reputation and points to allow users to earn rewards and privileges on the platform by upgrading.
Cred is basically the users credibility on the platform. Users can increase their credit by linking soul-bound tokens or NFTs to their accounts, as well as through daily interactions on the platform. Based on the quality and level of interaction of users own posts, users will be rewarded with points that can eventually be redeemed for Phaver tokens. Importantly, the higher a users credibility, the more points they can earn for a post.
Because users must link soul-bound tokens and specific NFT collectibles (such as Cryptopunks and Bored Apes) to gain credibility, this provides a useful way to differentiate between users and bots on the platform. In fact, it’s almost like a “proof of equity” for social identity. As a result, Phaver suggested that projects could use their reputation system to prevent airdrop bots and ensure the user is a human, not a bot — without having to scan any retinas.
As can be seen from the above, Phaver creates a novel token economic system to create a Web3-first social community. But for Phaver, like many web3-first social apps, the main challenge is expanding beyond the native Web3 audience to users who dont have any Web3 experience and dont know what Bored Ape or Soul-Bound Code is. coins, while giving these users a clear reason to use the platform. Although Phaver claims that it follows a web2.5 model, allowing users to sign up without a Lens profile, Phavers unique experience relies heavily on Web3, which comes with an educational cost that may become Significant barriers to widespread adoption.
Another noteworthy project inspired by the Web3 community subculture is POAP, which stems from the crypto spaces unique conference culture and annual global event series such as ETHGlobal. Basically, POAP is an NFT, or ERC-721 token, minted through a POAP smart contract that digitally represents a user attending an event or conference, and is stored on-chain in an immutable manner. Since 2021, POAP has issued more than 6 million such NFTs, working with internationally renowned brands such as Adidas, Vogue, Github, and the U.S. Open. Perhaps the most interesting part of POAP, however, is how it serves as a social primitive, as a way to initiate social networking and find others with similar interests and networks.
Additionally, events, conferences, and conventions are things that dont require specific knowledge of Web3 to understand—its easy to imagine Comic-Con, Worlds Fair, and the National Gallery of Art implementing POAP-like mechanisms for various communities and subcultures. However, the core question is how to maintain the usefulness of these POAPs, whether through loyalty programs that reward participants, transaction opportunities or exclusive events, ultimately enabling the launch of new social communities and thus creating a new form of digital social experience.
in conclusion
So, how should we create that “killer app”?
Ultimately, the long-term success of Web3 social must lie in creating a new form of social experience, rather than copying some Web2 mechanics and saying its special just because its on-chain and tokenized. Instead, there needs to be a qualitatively new experience, especially one that is inspired and culturally rooted in Web3 - whether it is the NFT community, asset tokenization or crypto conference culture.
What’s more, while tokenization and other Web3 mechanisms open up the possibility for many new application designs, for a “killer app” to scale beyond an audience of crypto-native users, there must be a well-understood use case. (such as event attendance), rather than being flooded with Web3 terms and concepts. Essentially, Web3 social must take advantage of the distribution and abstraction techniques of traditional social media (like TikTok or Instagram) to go viral.
Since social media is ultimately a way for users to express their personality and personal preferences, any successful Web3 social media needs to have an open design space, giving users enough blank canvas to create their own use cases. Often, the reason why a social application becomes popular is completely different from its original goals. For example, TikTok as a company could not possibly have predicted all the different fads and challenges that will emerge on the platform. The power of such a platform lies precisely in the open creativity platform it unleashes for such an application. Only when Web3 adopts this design decision, rather than focusing on financialization and on-chain imitation, can we truly start building a new killer app that extends Web3 social to become only social.
