How to build a Decentralized Social Network?

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In his latest essay, "Crypto-Bezos", Packy McCormick explains how Jeff Bezos, founder of Amazon, realized that whatever he would build needed to be something that could only exist online on the Internet.

Back in 1999, in an interview video, Bezos explained that "if you can do things using the more traditional method, you probably should do them using the more traditional method." Back in these days, Jeff Bezos already knew that he needed to leverage the Internet. He knew Amazon could only exist because of the Internet.

But being on the Internet wasn't the value proposition of Amazon. Nor being on the Web3 will be the value proposition of the next billion dollars companies. What's so exciting with Web3 is that it has the power to create completely new experiences and use-cases that have never been seen before. Comparable to what Jeff Bezos, founder of Amazon, did 20 years ago by completely reinventing the way people were buying books, we'll see Web3 companies reinvent things that we're doing today and 10x improve the experience. So what are some of the experiences that can be reinvented in Web3? What are the areas that really need to leverage this new technology to 10x the experience?

Social Networks might be a good place to start. Indeed, for the last year, we've seen the creator economy booming, and we see more talented individuals sharing content online and gathering knit communities. More individuals are collaborating toward joint projects. Last year has proved to us that generation Z now wants to live from their passion and is not ready to follow the work paradigm that has been shaped during the last 50 years. The future of work is being built now. And most of the collaboration happens through current Social Networks (Discord, Twitter, Slack et..). But with our society evolving, these social networks don't fulfill our needs anymore. Creators today need Ownership and efficient ways to collaborate.

Web2 social platforms won't solve these problems because they intrinsically can't. Resolving these would mean killing their business.

And that's when Web3 is coming. Decentralized Social networks have the power to solve these problems. Let me explain.

1/ The problems with Web2 Social Networks

From 00' to 10', we saw social networking and User Generated Content platforms rise. We saw the emergence of social media, which allowed everyone to have a voice on the Internet and express their creativity through their content. During the next decade, some users amassed millions of followers and started to monetize their content. Creators, also called 'Influencers' at this time, discovered they could monetize their audience through those platforms and that it was possible to earn a living from their passion. They were helping others (brands & businesses) to achieve their goals.

But the Internet and our society have evolved. After 10 years of working for brands, creators discovered they could now BE the brand, BE the product, and they could do for them what they were doing for others. Creators have new needs that current social media won't be able to solve.

Indeed, there are three main problems with current social media: Lock-in data, Centralized Power, and an Ads-driven Business model.

  • Lock-in Data - Our physical and digital lives are intrinsically linked, and online Reputation is more important than ever. However, for 99% of people on the Internet, the value of their digital identity is locked within platforms. Creators that have built an audience of 1 million followers on Instagram won't start in another platform like Twitter with 1 million followers. They will begin with 0. Amazon sellers who have built their Reputation for years won't start on other marketplaces with five-star reviews. They will begin at 0. When leaving a platform, users have to start from scratch, all over again, as there is no interoperability between platforms. The data are locked. It doesn't incentivize users to do their best or build long-term relationships as they know they will lose it when leaving the platform. Furthermore, we cannot keep locating our social connections and memories inside servers controlled by for-profit companies. The connections between people should be controlled by the people, not by companies. Decentralized Social networks must re-capture our social data in new ways.
  • Centralized Power - Today, social media is hyper-centralized. A handful of private companies control public discourse and earn profits off content they don't even create.
  • Ads-driven business model - This outdated business model forces current social networks to keep a walled garden around their content. Indeed, opening their data would mean killing their business model. Their main way to monetize is to sell those data to for-profit companies to target specific audiences. This business model prevents external developers from innovating or building apps on top of it. It also gives users and creators no choice but to continue using these apps as they have already created an audience on these platforms. On top of that, this business model creates a situation where creators who actually produce the content are underpaid, under-monetized, and don't fully capture the value they are making.

We're now entering the third phase of Social media. Today's Creators don't want to do the promotion of products to their audience. They realized they could build big projects with their fans, involving them in the process and sharing the upsides with them. It's a complete paradigm shift in the fan/creator relationship. Today, Social Networks can't provide the tools needed to develop this kind of relationship.

So, what are precisely the needs of those creators? How can we build decentralized Social Networks that really empower them? What can of use-cases would appear on those platforms?

The first step to answering these questions is learning from the past and seeing what social mechanisms worked in Web2 platforms.

2 - Social mechanisms of current Social Network

Before exploring the possible use-cases of decentralized Social Networks, it's essential to understand what makes a good Social Network. By analyzing the dynamics of the current Social Networks, we'll understand more the Human Social Mechanisms and better understand how to leverage crypto mechanisms to fulfill these human needs.

2.1 - Proof of X

Julian Lehr developed the proof-of-X mechanism in his famous "Proof of X" essay. In this essay, he argues that, at their core, social networks are primarily about one thing: Building social capital through signaling. People are going on Instagram to prove they are creative (Proof-of-creative-work), on Wikipedia to prove they are knowledgable (Proof-of-knowledge), and on Strava to prove they are athletic (Proof-of-Physical-activity). As Julian mentioned in his essay (talking about Strava), "While the status game that initially got you into the app might be zero-sum, the actual physical exercise you have to put in to compete has a very positive, compounding effect."

Creating a Social Network with a strong positive feedback loop will make sure people will come on the platform because it is actually good for them. They will come back repeatedly because it makes them feel good and because it's actually good for them. And the more you use the app, the more likely you are to do the atomic behavior. That's what a positive-sum game is all about. No one needs to lose for someone else to win. We can create Decentralized Social Networks that are viable and actually good for people.

The question is: What kind of social networks could have similar positive feedback loops? An exciting model explored is the play-to-earn model, where users have to do specific tasks to get rewarded.

For example, we could think of a Social Network that incentivizes its users to set up challenges and inspire others to do "sustainable life hacks (e.g. eat one vegan meal a day). Users could document it via short-form video and getting points related to their in-app activity: the number of actions/challenges completed, how many users they inspired to do the challenge etc.. Impactr is a community that is already exploring these mechanisms.

2.2 - Status-as-a-Service

In his famous essay "Status-as-a-Service," Eugene Wei argues that "People are status-seeking monkeys" and "People seek out the most efficient path to maximizing social capital."

To create a successful social network, it's essential to consider its utility and the Social Capital it can provide to users. Can I use the social network to accumulate social capital? How is it measured? And how do I earn that status? What kind of features can be implemented to reinforce this Social Status?

Users are going on Snapchat to discuss with friends, but then keep talking to not lose their "streaks" (number of consecutive days you're talking to someone). People are going on Twitter to post their journey but then try to get the "official" stamp.

It's crucial to understand that status must be earned the hard way. Otherwise, it wouldn't be worth anything. Value is tied to scarcity, and scarcity on social networks derives from proof-of-X. As explained right before, the proof-of-physical activity on Strava rewards users who are achieving impressive training sessions. The longer the bike ride you're doing, the more social capital you're gaining. Status isn't worth much if there's no skill and effort required to have it.

2.3 - Social Asymptote

Social Asymptote is a term I first heard in the "Status Monkey" essay by Packy McCormick. He explains that not everyone can do what it takes to gain social capital on any given social network, which creates an upper limit. There are only so many people you can convince to do the atomic behavior. Indeed, a lot of people nowadays have a TikTok account, but only a few of them are actually making videos on the platform. This is explained by the fact that it's not that easy to get familiar with all the tools the app allows. Most users are unwilling to put in the work to get good at whatever the TikTok algorithm requires. While it's impossible to have all the users of a platform actually publishing content and doing the atomic behavior, it's interesting to think about the mechanisms that can be put in place to encourage anyone to do it.

2.4 - Come for the tools, stay for the network.

In his famous essay "Come for the tool, stay for the network," Chris Dixon explains his idea to initially attract users with a single-player tool and then, over time, get them to participate in a network. The tool helps get to the initial critical mass. The network creates long-term value for users and defensibility for the company.

For example, Strava is attracting users by letting them track their sport activity easily (tool) and then publish the activity automatically in the profile of the users where other users can see, like, and comment on it (network).

Through these four examples we've just seen in the first part of this essay, we know understand that to create a successful Decentralized Social Network, we need to create a platform that effectively:

  • Let users earn status the hard way.
  • Makes users come back repeatedly because it makes them feel good and because it's actually good for them.
  • Allows its users to do the atomic behaviors easily, and that actually encourages anyone to do it.
  • Provides tools that make the life of the users more effortless, and therefore hook them.
  • Solves the existing problems in Social Networks of Lock-in data, Centralized Power, and Ads-driven Business model.

The best Social Networks have succeeded in reinventing the way people communicate together, reinventing the medium, and effectively leveraging human psychological behaviors. People first got hooked in those socials because it was new and allowed complete new behaviors. I think Web3 platforms will hook the next billions of social media users by creating a completely new experience, providing a way of communicating together and collaborate. Snapchat allowed people to communicate through ephemeral photos, TikTok through short videos, and Clubhouse through audio. So what kind of new experience can the future Web3 platforms allow?

3.1 - Solving the lock-in Data problem

Decentralized social networks are unlike traditional social networks in that they're interface-agnostic. Indeed, one of the main advantages of Decentralized Social networks is the Interoperability they allow. In Web3, every transaction is taken on-chain (meaning send through a blockchain and verified by other people) and therefore accessible in an open ledger (all transactions happening in a blockchain are visible by anyone else). With its open data model, Crypto allows any Web3 platform to use those accessible data and, therefore, recover the user's Reputation from other platforms. A creator with 1M followers on a decentralized platform will bring them on any other Web3 platform. They are tied to their Crypto Wallet (Online identity) and not to a specific platform profile. Creators that have built an audience of 1 million followers on a Web3 platform won't start in another platform with 0 followers. They will begin with 1 million. Amazon sellers who have built their Reputation for years won't start on other marketplaces with 0 reviews. They will bring their Reputation across platforms and retrieve all their 5-stars reviews. It's a complete paradigm shift, and I admit it can be a difficult concept to understand. But similarly that you can access your email inbox from any computer in the world because it's tied to login and a password, not the computer itself, you'll be able to access your followers from any platform in the world because it's linked to your Crypto Wallet, not the platform itself.

Creators won't have their community's attention funneled through one platform but will be split up between interfaces. The sum of engagement across all interfaces will be greater than if it was a centralized platform.

To create a successful Decentralized Social Network, it's fundamental to allow Interoperability.

3.2 - Tokenized communities

The "holy grail" for Social Networks is creating a platform with Social Capital and Utility Simultaneously.

As shown in the graphic below, the more users coming on the platform, the more useful the platform becomes with the traditional network effect. No one would go on Instagram if there weren't the photos of their friends published there, on Uber if there wasn't any driver. With this model, any new platform needs to attract many users before the platform has any real utility...

On the other side, there's a new variable with the Token Network effect: The Financial utility. Indeed, even though there isn't much "application utility" initially, first users are incentivized through Social Tokens to use the platform and make it grow . A very high financial utility will drive new users to reach the inflection point where application utility will surpass the economic utility.

In decentralized social networks, users participate in the economic upside of the Network. They are rewarded for the time invested in building the product and Network. With the platform's utility increasing over time, more people will want to participate in its digital economy. The social token will gain value, rewarding early contributors for their hard work.

Decentralization is about profit-sharing and revenue tokenization. It combines utility (earning money) and social status. Users will come back and participate because it's actually good for them to participate in open economies. They will reach financial freedom and will gain social status within their tribe.

Decentralized Social Networks, in creating a token, will also play on the Proof-of-X mechanism. Users will do missions to earn the bounties (a single-player tool with multiplayer social feed), and the more the users use the app, the more likely they are to do the atomic behavior (more involved → more responsibilities → more missions → financial freedom).

Tokens will allow anyone to prove they are part of a community, prove that they've helped grow the community, and prove they were there since the beginning.

3.3 - Ads-driven problem

To succeed, a decentralized social network also needs to get rid of the old ads-driven business model.

In the end, brands are enterprise versions of creators. Today, one hundred advertisers drive 80% of Facebook's revenue. These are mega fortune 500 companies like P&G or Coca-Cola. They are doing that because it's (almost) the only solution to reach an audience, but they do not like what they have to do. They don't enjoy the game Facebook is playing with their billions of dollars and squeezing them for every penny.

These major brands feel the same pain as individual creators, and the next Decentralized social platforms need to solve this problem.

A great ads campaign is when you meet people where they are and understand what they need. Young people are not on Facebook anymore. If brands want to reach them, they have to be on Web3 and understand the trends. That's why Budweiser purchased the domain name "Beer.eth", VISA bought an NFT, and Arizona Ice Tea bought a Bored Ape. It's because they want to be part of this movement and reach the "cool kids."

Big brands like Arizona ice tea already understood that. They can't just show up to the party. They have to be invited and think very carefully about who they align with and how they grow together. There has to be a strong values alignment. It's more than ever crucial for brands to develop their brand and product so that Web3 communities will invite them in. Otherwise, those brands are going to be outsiders.

In building the next decentralized social Network, it's essential to understand these dynamics and align users' and brands' incentives. It seems like there is finally a viable business model that can suit both users and brands.

3.4 - Centralization problem

Maybe the next decentralized Social Network won't constitute one giant graph (similar to Facebook or Twitter) but constitutes many subgraphs around shared topics.

We're already seeing many communities and platforms collaborating, creating a Social network of many subgraphs. This seems to be a positive direction. It would be much harder to own, regulate, and moderate one giant decentralized Social Network.

The decentralization must also come within these sub-graphs. With the tokenization of these communities, the voting power (that comes with holding the token) will be split among many contributors and therefore limit the risks of a small group deciding for a whole community.

4 - Concrete use-cases

As mentioned at the beginning of this essay, decentralized Social networks will succeed only if they allow to do things that can only be done on the Blockchain. It has to completely reinvent the user experience. It doesn't make sense to build a feed of photos and text "on the blockchain." It already exists on centralized social networks. In my opinion, even allowing users to "control their data" is not a strong enough selling point because users don't really see the advantages of their day-to-day use. For Web3 Social Network to succeed, the experience needs to be magic that is only possible on the Blockchain.

So what kind of experience is only possible on the Blockchain?

4.1 - Use case 1: The future of Media.

I think Media should leverage Web3 capabilities. A Magazine could create its own social Network. Indeed, it would imply a lot of advantages for the magazine and the users.

  • Check the sources - With all the content now on-chain, it would be easy for anyone, even in ten years from now, to check the sources and double-check the information mentioned in an article.
  • Impossible to censor - It will be impossible to censor someone as it's impossible to remove something from the Blockchain.
  • Raise funds easily - The magazine could embed directly in their platform NFTs to raise money. Instead of going on another platform and creating an account, it will be easy for users to just click on the "Buy the NFT to support our work" button.
  • Track biggest fans - It will also be easy for the magazine to track who helped the project and offer them special perks. We could imagine people buying the NFT receiving the ability to have access to exclusive content. As everything is on-chain, the NFT holders won't have to do anything. By signing up with their crypto wallet and, therefore, proving their identity, the platform will see they are the owner of the NFT and will unlock the content just for them. Even if they send the private link to their friends that don't hold the NFT, those friends won't be able to access it as the platform won't unlock the content.
  • Involve the community - The magazine could also involve more of their community with democratic decisions by letting them vote through SnapShot.

Use case 2: Building trust and empowering the next billions of curators.

Another interesting use case with decentralized Social networks is the ability to build a Social graph.

Again, as everything is on-chain and tied to someone's identity, it's easy for any web3 platform to access the data and create a Social Graph. That's something we've been working hard on at Coinvise. On every Coinvise creator profile, you can see the Social Tokens a creator owns and see which community they believe and participate in. Coinvise's creators also have a reputation score tied to their online identity and created based on their actions in other decentralized platforms.

Now imagine when there will be hundreds of creators and communities jumping into Web3. Any Coinvise user will have access to an on-chain social graph of the relationship between creators, their community, their work, their friends, etc...

It's a whole new world of possibilities for anyone wanting to discover new niches. Everyone will be a curator. Suppose you like a sport creator, for example. In that case, you'll be able to see directly in which community they believe in, in which ones they are participating in. All the information will be curated automatically. No need to do it manually. With an open-data model and every transaction happening on-chain, the curating work will be done automatically.

A decentralized Social Network could also solve the problem of trust. Today when selling on Facebook Marketplace or receiving DMs from people on Instagram, the only way to know if the person is legit is to trust weak social signals such as the number of followers, the profile picture, if the account is certified etc.. In web3, there will be the reputation score. Reputation score will serve to establish trust for creators, not because they're high-signal on Twitter but because they've probably built and grow a high-value community.

Closing thoughts

We're already seeing successful decentralized social Networks leveraging psychological mechanisms saw in this essay and solving some of the most pressing problems with Web2 platforms. I can think of Showtime that allows its users to own their content through NFT (solve the lock-in data problem) and leveraging the Proof-of-X mechanism (by collecting rare NFTs, Showtime's users can prove their good taste (Proof-of-good-taste)). The platform also leveraged the "Investment-as-a-Status mechanism." It allows people to show that they have invested in a creator early, that they have been there since the beginning, and that they are the day 1 fan.

Rabbithole is also an interesting Web3 Platform that has implemented a "Proof-of-education" mechanism, letting its users prove they invested their time early in crypto. That leveraged the "Token Network effect" by rewarding its users with tokens when completing a quest.

I've also recently discovered two promising decentralized Social networks:

  • XMPT - Breaking communication out of walled gardens and enabling messaging between wallets
  • DeSo - DeSo is a new layer-1 blockchain built from the ground up to scale decentralized social applications to one billion users.

Web2 Social Networks will slowly lose all their users because they won't intrinsically solve the most pressing problems they are currently facing.

I think the next big social Network may start out not looking like a social network at all. There won't be one main social Network. There will be several social networks, all composable. Indeed, composability is a big part of crypto.

As Cooper Turley mentioned recently, NFT composability is already here.

We’ll use daily several Web3 platforms and will bring our data to every one of them. There won’t be a centralized power anymore, nor Lock-in data or ads-driven business model.

Crypto will be the native token for unlocking experience in these platforms and might be the native token for the Great Online Game.

And what if the next decentralized social network was simply the Metaverse?

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Thanks for being here!

Special thanks to Jenil Thakker for his thoughtful feedback before publishing.

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