Discuss the future of Web3 social: use tokens and incentives to solve income problems and create new social experiences

Author: PAUL VERADITTAKIT

Compilation of the original text: Deep Tide TechFlow

This article is the third in a series on decentralized social by Pantera Partner PAUL.

This series explores how today's 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 cite 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) Solve the cold start problem with an open social layer

(2) Use personal identification and cryptography technology to solve user identity issues

(3) Use the token economic model and incentive mechanism to solve the income problem

In this article, the author mainly discusses the third point, which is the way and examples of using the token economic model and incentive mechanism to solve the income problem.

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.

The problem with these "new social experiences," however, is that they are nearly 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 experience 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 on this path is Reddit's Moons program, which launched in May 2020 and offers rewards for user-posted and curated content on the r/CryptoCurrency subforum. Reddit Moons are an ERC-20 token issued based on Arbitrum Nova, and its circulation is based on the "reputation" that users earn on Reddit, which is calculated based on the likes and dislikes that users receive. Moons allows users to decide the future distribution and overall development direction of Moons in community votes.

Reddit Moons’ overall tokenomics strategy has also been appreciated by the community, with monthly issuance falling 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 of incorporating Web3 functionality (in this case tokenization of Moons) 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 "subforum" structure that allows these platform enclaves 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 the mechanisms of Web3. In fact, Moons is just one example of Reddit's innovative Community Points program, which allows sub-forums to launch their own ERC-20 tokens and provides an Ethereum-based wallet called the Reddit Vault to store these tokens. Besides Moons, r/FortniteBR's Brick token is another notable example of the initiative.

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.

It's a sobering statistic that reveals a fundamental problem with the X-to-Earn model: You don't make much money, or at least far less than the "life-changing money" that such programs sometimes advertise . In addition, income is often skewed to a small number of users, so ordinary users may not enjoy much of the "earn money" part, even if they participate in "X" activities. Ultimately, users can become disillusioned with these meager earnings, and in cases like StepN, push projects down the road to collapse.

Therefore, for a simple "social make money" project, too much emphasis on "making money" may not be sustainable in the long run. Instead, a novel social experience must be created for the end user, one that the user is willing to pay for, not pay to get paid for. This is highlighted by the recent buzz about the friend.tech project on the Base network. Friends.tech is essentially a "stock market for X (formerly Twitter) profiles," where users can buy and sell individual "stocks" of X (formerly Twitter) influencers. By owning an influencer's "stock," users promise increased access (such as through private chats and other exclusive perks), and users are free to trade those shares.

This novel social experience and ability to monetize an individual's X following generated over 6,000 ETH (or $11 million equivalent) and 230, 000+ transactions. However, there is some doubt as to whether friends.tech can maintain this early momentum and really pave the way by tokenizing influencer profiles, or whether it will evolve into another “RUG” project. Coindesk specifically pointed to the project’s lack of documentation of an effective privacy policy and data collection practices, as well as a lack of a roadmap or white paper. Furthermore, it is 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 turning tokenization itself into a new form of social experience.

Build the first social community of Web3

Rather than trying to add Web3 features like tokenization to an existing Web2 social platform for a completely different revenue model, an alternative to creating a "killer social app" in Web3 is to build it from the ground up, starting with a unique Launched in the crypto-native community and culture.

Phaver is a prime example of a "Web3 first" social community. Built on top of Lens' social graph (and recently integrated with Cyberconnect's social graph), Phaver has attracted the attention of the Web3-native community through its integration with other Web3 social identity technologies such as NFT communities and soul-bound tokens. It is a platform with a unique dual-token model, using a novel scoring system consisting of "reputation" and "points", allowing users to earn rewards and privileges on the platform by leveling up.

"Cred" is basically a user's reputation 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. Users are rewarded with "points" based on the quality and engagement of their own posts, which can eventually be redeemed for Phaver tokens. Importantly, the more "reputable" a user is, the more points they can earn on a post.

Because users must link soulbound tokens and specific NFT collectibles (such as Cryptopunks and Bored Apes) in order to earn "credibility," this provides a useful way to distinguish users from bots on the platform. In fact, it’s almost like a kind of “proof of stake” for social identity. As a result, Phaver suggests that the project could use its "reputation system" to prevent airdrop bots and ensure that users are human, not bots — without needing to scan any retinas.

As can be seen from the above, Phaver has created 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 don't have any Web3 experience and don't know what a Bored Ape or Soulbound code is. coins while giving these users a clear reason to use the platform. Although Phaver claims it follows a "web2.5" model, allowing users to sign up without a Lens profile, Phaver's "unique experience" relies heavily on Web3, which comes with an educational cost that could become Significant hurdle to widespread adoption.

Another notable project inspired by the subculture of the Web3 community is POAP, which grew out of the crypto space's unique "conference culture" and annual global event series, such as ETHGlobal. Basically, POAP is an NFT, or ERC-721 token, minted through POAP smart contracts to digitally represent users attending events or meetings and stored immutably on-chain. Since 2021, POAP has issued more than 6 million such NFTs, working with internationally renowned brands such as Adidas, Vogue, Github, and the US Open. Perhaps the most interesting part of POAP, however, is how it works as a social primitive, as a way to start a social network and find other people with similar interests and networks.

Also, events, conferences, and conventions are things that don't require specific knowledge of Web3 to understand -- it's easy to imagine Comic-Con, World's Fair, and the National Gallery implementing POAP-like mechanisms for various communities and subcultures. However, the central question is how to maintain the usefulness of these POAPs, whether by rewarding participants with loyalty programs, trading opportunities, or exclusive events, ultimately enabling the initiation of new types of social communities that create a new form of digital social experience.

in conclusion

So, how exactly 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 mechanism and calling it special just because it's "on-chain" and "tokenized." Instead, there needs to be a qualitatively new experience, specifically one that has Web3 as its inspiration and cultural roots — whether it’s the NFT community, asset tokenization, or crypto conference culture.

What’s more, while tokenization and other Web3 mechanisms open up many new app designs, for a “killer app” to scale beyond crypto-native audiences, there must be an understandable 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 individuality and personal preferences, any successful Web3 social media needs to have an open design space that allows users enough "blank canvas" to create their own use cases. Often, the reason why a social application "pops" is completely different from its original goal. For example, it’s impossible for TikTok as a company to anticipate all the different fads and challenges that arise 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, instead of focusing on financialization and on-chain imitation, can we really start to build a whole new "killer app" that expands Web3 social to become the only "social".