The technological foundation, application pitfalls, and future evolution of decentralized social networking

Original authors: Shaun, Yakihonne; Evan, Waterdrip Capital

While the concept of decentralized social protocols (hereinafter referred to as SocialFi) is no longer new, products in this field are constantly undergoing iterations.

At the beginning of the year, Kaito made "attention" quantifiable and tradable for the first time, and then used it to serve Web3 project operations after acquiring C-end users through incentives. More recently, the popular application FOMO in the European and American crypto circles binds real transaction behavior and social relationships on the blockchain. Users can intuitively observe the connection between smart money's on-chain behavior and their social accounts, thereby triggering strong resonance and generating the "FOMO" effect.

However, behind the continuous emergence of innovative application-layer features, the true upper limit of the industry still lies in three dimensions of the underlying product structure of decentralized social protocols: identity system, data storage, and search and recommendation mechanisms. Against this backdrop, this article will analyze the technological evolution and structural pitfalls of decentralized social protocols by dissecting SocialFi's product structure; and predict the future development trend of SocialFi.

Technological Maturity: Three Core Dimensions of Decentralized Social Protocols

Whether it's the centralized social networks of Web2 or the decentralized social protocols of Web3, their underlying structure is built around three dimensions:

1. Identity system (Account / ID)
2. Data storage
3. Search and Recommendation Mechanisms

These three dimensions determine the degree of decentralization of a protocol and its long-term evolutionary direction. While the industry has made significant breakthroughs in identity systems and data storage layers, it remains in the early stages in search and recommendation mechanisms. These are key variables determining the future explosive potential of social protocols.

1. Identity System (Account / ID)

Different protocols employ different technical approaches in their identity systems:

• Nostr employs a cryptographic structure, local storage, and does not rely on any client or server, achieving a completely decentralized account system. Although the early experience was not user-friendly, it has since been improved through username binding and other methods.
• Farcaster uses on-chain DID (decentralized identity) and relies on a specific Hub for data storage.
• Mastodon / ActivityPub's account system relies on domain names and is bound to specific servers. Once the server goes down, the corresponding account will also become invalid.

These designs show that the account systems of different protocols exhibit varying degrees of decentralization in terms of whether they are independent of the client/server and whether they support cross-client login.

2. Data storage

Web2 data storage relies entirely on centralized servers, while decentralized social protocols typically use distributed nodes or relay networks.

• Farcaster achieves efficient storage through a limited number (approximately one hundred) of Data Hubs and distinguishes between on-chain and off-chain data.
• Mastodon relies on its own independent servers, and although it is open, it lacks cross-server data communication.
• Nostr allows anyone to deploy a Relay, and data can be synchronized across Relays. Even if some Relays are offline, the content can still be discovered.

Key analytical metrics include: data storage location, discoverability rate after node failure, and data tampering verification mechanism.

Currently, Nostr effectively alleviates the loading and redundancy issues of distributed storage through the online/offline model. YakiHonne is also the first client to launch an offline publishing model, enabling users to publish content and automatically synchronize even in weak network environments.

3. Search & Recommendation

Search and recommendation algorithms are the most difficult and crucial issues.

• Early versions of Nostr suffered from poor search performance due to their complete reliance on a public key system; however, they have since been optimized through username mapping.
• Bluesky (AT Protocol) uses a partially centralized algorithm for recommendations to improve the user experience.
• Nostr is currently attempting to build a decentralized search and recommendation mechanism from the Relay layer.

Therefore, the algorithm layer remains the biggest challenge for decentralized social networking at this stage, but once it is solved, it will mark the beginning of a period of large-scale explosion in the entire field.

Overall, current decentralized social protocols have addressed approximately 2.5 issues across three core dimensions: the identity system is fully decentralized and increasingly user-friendly; distributed storage mechanisms are mature and effectively solve loading and search experience problems; recommendation algorithms are still in the exploratory stage and represent a key breakthrough for the next step; mechanisms like Kaito's Yaps use AI algorithms to quantify and reward users for high-quality crypto-related content posted on social platforms, measuring users' "attention" and influence within the crypto community, rather than simply likes or exposure. From a technological evolution perspective, this will be a critical point determining the widespread adoption of decentralized social networks.

Pitfalls encountered during the emergence of SocialFi applications

Since the emergence of the SocialFi concept, numerous products have appeared in the industry, including representative projects such as Lens Protocol, Farcaster, and Friend Tech. However, most applications have inevitably fallen into structural traps during their development, struggling to maintain user engagement after the initial enthusiasm fades. This explains why many SocialFi projects are often short-lived and unable to sustain long-term growth.

The trap of feature replication: Many Social Fi projects directly copy Web2 social modules, such as short push notifications, long articles, videos, and communities. This does not provide sufficient motivation for migration, nor does it create differentiated content value.

The pitfall of lacking a strong niche user base: The success of early social protocols often hinges on having a large, influential niche user group. Take Nostr as an example: although a niche protocol, it boasts a strongly cultured Bitcoin community; the activity level of just one client, yaki, surpasses that of Farcaster's Warpcast. Therefore, Social Fi products lacking a cultural foundation or a clear scenario typically have short lifecycles.

The Pitfalls of Misusing Token Incentives: Many projects mistakenly believe that "token incentives" can replace product logic. For example, some early, wildly popular Web3 social applications were merely short-lived phenomena—they quickly disappeared due to a lack of specific user ecosystems and sustainable scenarios. Similarly, when projects pile on DID, Passport, various Web2 functionalities, and then add token issuance and payment modules, they may seem "comprehensive," but in reality, they fall into a complex and unsustainable trap. This is because any single module is a very deep, vertical application.

Application models will continue to be restructured: we are currently in a transitional phase of "protocol maturation → application restructuring". Future social applications will not be extensions of Web2, but will generate entirely new interaction structures. In five years, the application layer will be completely different from what it is now.

Once the core issues at the underlying protocol layer are completely resolved, upper-layer applications will inevitably emerge in entirely new forms, rather than being a simple extension of existing social models.

The Resource and Narrative-Driven Trap: Social protocols hold a specific strategic/political position within the industry; whether the social protocol itself is backed by a particular power is also crucial. While Nostr and Bluesky don't issue tokens, they are both backed by powerful resources or factions. Resources and narratives are often insurmountable hurdles for Social Fi.

Possible future directions: The next evolution of SocialFi

Most social tokens fail to generate long-term value primarily due to a lack of genuine transaction logic and user retention incentives. Compared to traditional SocialFi incentive models, two directions hold greater potential for the future:

Social Client as a Payment Gateway (based on payment needs)

Social clients naturally possess identity binding, relationship chains, and message flow structures, making them ideal as entry points for scenarios such as cross-border payments, small-amount settlements, and content monetization.

Social Client as a DeFi Gateway based on transaction needs

Social networks and asset behavior are naturally related. When social relationship chains are integrated with on-chain asset flows, a new generation of "socially driven on-chain financial behavior entry points" may be formed. The explosion of Fomo (the linkage between social behavior and transaction behavior) is actually an early manifestation of direction 2.