Conversation with Variant Fund Lianchuang: How can the encryption world save traditional social networks?
Arrangement Compilation: Shenchao TechFlow
Perhaps now is the perfect time to build the social space, as we have a new business model—ownership, a new computing platform—cryptocurrency, and a new generation of users who are frustrated and resentful of the existing social paradigm. They crave new things, and these factors combine to prepare us for when new things emerge.
Over the past decade, one of the most important invisible forces shaping our world has been engagement algorithms. We move from social networks to social feeds, and it’s all happening without us even realizing it. How much autonomy do we have? Is this the promise of the internet? Can cryptocurrencies solve these problems?
This episode of the Bankless Podcast invites Eugene Wei and Variant Fund co-founder Li Jin. Eugene Wei is one of the smartest product people we know in the Web 2 social field. They will discuss the above issues together.
Hosts: David Ryan, Bankless Podcast
Speaker: Li Jin, Variant Fund Lianchuang, Eugene Wei
Podcast: Bankless Podcast
Original title: Li Jin Eugene Wei on How Crypto Saves The Internet
Column:Link
Air date: October 30
Ad-Subsidized Web2 Social Network Model
Eugene Wei pointed out that the advertising-subsidized social network model has had a profound impact on the development of Web2 society. The main advantage of this model is that it allows social media products to remain free, thereby attracting more users and bringing more traffic and data to the platform. With the development of Web2, advertising has become the main source of revenue for most social media platforms, not only providing free services to users, but also providing a platform for enterprises to display their products and services.
Although the advertising model was very successful in the early days, Wei noted that over time, the model began to show its limitations. Attention is a scarce resource in this economy, resulting in a zero-sum competition between social media platforms, each trying to attract and retain users’ attention.
The advertising model limits other possible directions in which social networks can develop. For example, since advertising revenue is the source of revenue, social media platforms may be less willing to try new business models or innovations; in order to attract users attention, content often becomes more entertaining and frivolous; in order to maximize advertising revenue, platforms may Display ads excessively and disrupt the users browsing experience.
Eugene Wei points out that as social media platforms grow and the number of users increases, the flow of information shifts from deterministic to probabilistic. Because of this probabilistic flow of information, people see themselves as media figures. To stand out among the algorithms, users began posting higher quality, more engaging content. Everyone hopes that their content can be seen by more people and pays more attention to the development of their own IP.
Eugene Wei believes that the Web2 society has reached its end due to the strong position of existing companies and the limitations of the advertising model. Web3 and encryption technology may provide a way to return to a different social model. By changing the business model of social media, Web3 may provide a way to return to more real and deeper social interactions. Its decentralized nature also makes Users have more control over their data and content, providing a better user experience.
Web2 social media is homogenized, and the business model encounters bottlenecks?
Eugene Wei mentioned that people rarely adjust or reset their social networks. When people join a new social network, they may choose to follow different people or not follow all the same people. But on Facebook, Twitter, or Instagram, you rarely see people unfollowing or unfriending on a mass scale, which results in a kind of graph lock that limits how we interact with each other.
Advertising as the primary business model limits the number of UI variations you can build into your product. Messaging apps are another new area were seeing social building out of, but theyre not very profitable, in part because their UI isnt feed-based, so its difficult to insert ads.
Eugene Wei observes that as Instagram is trying to imitate TikTok, Twitter is trying to imitate TikTok, and TikTok is trying to imitate Facebook, the differences between the large social networking platforms are diminishing and new ideas and innovations are becoming less common.
Li Jin mentioned that network effect theory means that the utility of a network increases as the number of users increases. But as the number of users increases, network effects can become negative and more users can reduce the effectiveness of the network. For example, people may post content in small social groups rather than on large social platforms.
Li Jin believes that new computing platforms may provide a new direction for social media. For example, VR, AR or cryptocurrencies offer different user experiences and ways to interact, potentially providing new opportunities for the future of social media.
Network Effects, Cryptosocial and Ownership
Definition: Network effects theory states that the utility of a network increases as the number of users increases. When more users join a platform or service, the value of the platform or service to each user increases.
Li Jin mentioned that the Internet of Web2 can be regarded as a feudal system, in which a few platforms (i.e. lords) own all the land that we as participants, users and farmers farm on, but the ownership of the land belongs to the lords. Users must share a portion of their income with the platform in accordance with the platform’s regulations. In Web2, there is no user ownership and the core may be about engagement and distribution rather than ownership.
Li Jin also mentioned that ownership may be a new business model that can go beyond advertising and allow social networks to more carefully differentiate between different user groups and provide them with different values. This model can make small social networks and content creators more successful.
Li Jin believes that Web3 or encrypted social is a way to move towards capitalism and realize capitalism in the digital realm. It can realize the private property system on the Internet and anyone can own capital online. In this model, cryptography makes us, as users and participants, owners of online capital.
Li Jin emphasized that the definition of encrypted social is that social platforms use encrypted ownership as the core of user experience. This is in sharp contrast to Web2, where there is no user ownership. In a social context, ownership as the core of the user experience can be presented in a variety of ways, such as a simple profile picture in the form of an NFT or a social network entirely on-chain.
Li Jin mentioned that we are still building for people in the crypto world. People are complex actors whose decisions are driven by emotions and psychology, not just economic or rational utility. In order for people to truly care about financial ownership, they first need to feel ownership.
Web3 and the future path of social media
Li Jin mentioned that as a social product, you must satisfy users’ desire for love or fame. Either as a love product, deepening the relationship between users and known creators, existing friends and contacts; or as a reputation product, helping people gain more attention and fame.
Li Jin believes that Web3 provides a new direction for social networks, which is no longer just about participation and distribution, but about ownership. In Web3, users can truly own their data and content.
Eugene Wei mentioned that social networks and social media can be seen as two ends of a broad and deep spectrum. While social networking is more about deepening existing connections, social media is about expanding your reach and gaining fame. One challenge currently facing Web3 is that it is still at a very low level of abstraction, similar to a computers command line interface, which makes Web3 unfriendly and difficult to use for most users.
Eugene Wei believes that financial capital and social capital are two different forms of capital, but in Web3, the two are combined. This combination can lead to issues of trust, as financial incentives can lead people to behave inappropriately for short-term gain.
Li Jin believes that the problem with Web3 is not user experience, but product market adaptability. Currently, most encrypted social products only meet users’ income needs, but do not meet other human needs such as belonging, community, and entertainment.
Li Jin hopes to see more crypto-social products that are not just for money, but to meet people’s other needs. She believes that the future of cryptosocial will depend on how we innovate and provide users with truly valuable experiences.
Eugene Wei mentioned that Web3 innovators should think about whether their products really require encryption technology. Will the experience of the product be different if the encryption part is removed? If the answer is no, then encryption may not be a core part of the product.
Eugene Wei hopes that Web3 developers can provide different ways of social interaction, not just to attract users attention. He believes that we can build higher-resolution social graphs and understand the relationships in our lives in more detail.
Ethereum social network
Li Jin mentioned that the encrypted social field has the opportunity to create new products based on completely new networks that are not based on interests or real life, but are based on the on-chain economic graph, which can utilize all information on the chain, such as asset ownership, product usage etc., as the basis for the new network.
David suggested that Ethereum could be a social network. Although it doesnt have the look or feel of a social graph like a Web2 application, it begins to organize humans in a social context. Li Jin expressed unity, adding that Ethereum, the PFP community, or FWB tokens held in wallets can all be considered social networks.
Li Jin believes that Web3 provides the opportunity to create a new social network based on the economic graph on the chain. All information on the chain, such as asset ownership, transaction history, etc., can be used to build new social relationships. This kind of social network on the chain can reflect the real economic activities and interactions of users.
Unlike traditional centralized social networks, Ethereum provides a decentralized platform that allows users to interact directly without the need for middlemen. This decentralized social network can provide higher privacy and security, while also Reduce platform monopoly and control. In Ethereums social network, the token economy plays a key role. Users can participate in social interactions by holding and trading tokens. This token economy can encourage users to participate and contribute more deeply.
Li Jin believes that the current era provides unique opportunities for the construction of social products. A new generation of users is dissatisfied with existing social platforms. They are no longer content to passively consume content, but want to participate and contribute more actively. They long for a platform that truly represents their voices and values, rather than being driven by algorithms.
Li Jin believes that the real promise of Web3 social lies in its inclusivity and diversity. In the world of Web3, different types of creators have the opportunity to succeed and are no longer subject to platform restrictions and censorship. Additionally, Web3 allows for the creation of new communities and connections that are based on real human connections and shared values rather than algorithms.
Cryptosocial lacks psychological ownership
Li Jin refers to her article “Psychological Ownership” in which she explores the difference between psychological ownership and legal ownership. Psychological ownership refers to peoples emotional sense of belonging to something, while legal ownership refers to peoples legal ownership of something. Li Jin believes that the lack of psychological ownership of many crypto applications is one of the reasons why they have not succeeded.
Li Jin mentioned that psychological ownership is about the emotional connection between users and what they own, and this connection can be strengthened by meeting the users needs and expectations. In the cryptocurrency world, although users own tokens, they may not feel a strong affinity for the product. To enhance users psychological ownership, developers are advised to allow users to invest time and effort, give them more control, provide in-depth product knowledge, and ensure that the product is consistent with the users self-image.
Li Jin lists several factors that can enhance psychological ownership:
User Engagement (Ikea Effect): When users invest time, effort, and energy into creating or assembling something, they develop a stronger sense of belonging and ownership of it. When people assemble IKEA furniture by themselves, they develop a special emotional connection to the piece of furniture because they were personally involved in the making process, even though a machine can do the same task.
Personalized experience: Users feel a stronger sense of ownership when they are able to customize or have decision-making authority over a product or service. On some platforms, users can customize the interface, select specific features, or set parameters, which makes them feel that the platform is theirs and can be adjusted to their liking.
Education and training: Users also feel a strong sense of ownership when they have a deep understanding of a product or service, especially its advanced functionality or hidden features. A power user who uses a piece of software regularly may know many tricks and techniques that ordinary users dont. This makes them feel more connected to the software.
Self-object congruence: Users also feel ownership when a brand, product, or service is consistent with their self-image or values. For example, a person who considers himself or herself to be optimistic and cheerful might choose a brand that represents happiness and positivity.
Advantages of psychological ownership:
Increase user loyalty and satisfaction.
Increase user engagement and activity.
Promote word-of-mouth marketing and attract new users.
Increase long-term value and lifetime value of users.
Price and psychological ownership
In many cases, there is a close relationship between price and psychological ownership. When users pay for a product or service, they are likely to feel a stronger sense of belonging to it. This is because their monetary investment makes them value and care about the product more.
In the crypto space, users acquire some kind of equity by buying and holding tokens. Although they legally own the tokens, they may not feel a strong psychological ownership of them unless they have a deep emotional connection to the project or community.
How to increase psychological ownership through price:
Meaningful prices: Users are more likely to develop psychological ownership when they believe the price they pay for a product or service is fair and meaningful.
Sense of participation: Allowing users to participate in price decisions, such as by voting on the price of a product, can increase their sense of belonging.
Reward mechanism: Providing users with rewards, such as discounts or tokens, to encourage their participation and investment can enhance their psychological ownership.
While price can increase psychological ownership, a price that is too high may deter users from purchasing or using the product. Therefore, finding the right price point that both attracts users and increases their psychological ownership is crucial.
